The Essential Guide to Crafting a Marketing Budget

As volatility becomes the new normal, CMOs must price disruption into their annual marketing budget. Here’s how.

Marketing Budget

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What the state of marketing budgets and strategy means for CMOs

The annual Gartner CMO Spend and Strategy Survey results are in: CMOs face budget constraints again this year — as enterprises contain expenses to weather inflationary pressures. Budgeting effectively in this challenging environment takes skill. Download the eBook to:

  1. See how CMOs are allocating their budgets
  2. Benchmark your budget against peer priorities across channels and resources
  3. Get actionable insights and advice to create or adjust your annual marketing budget

Stay alert to 3 critical areas of spend in any marketing budget

When marketing budget growth stalls, CMOs must do more with less — especially with these three line items: technology, talent and multichannel.

Optimize the marketing technology budget and utilization

It can be a struggle to assess the proper funding levels, relative to current use, for marketing technology investments. When evaluating a martech ecosystem, or establishing a business case for new martech purchases, proper funding and full utilization are critical elements of a successful martech foundation. CMOs struggle to demonstrate the return on this spending, which is one of the largest line items in any modern marketing budget. Gartner research shows tumbling levels of productivity for tech investments in marketing, with utilization rates falling from 58% in 2020 to all-time lows of 42% in 2022.

Our research suggests CMOs aren’t keen to tackle the operational reasons these technologies aren’t being used, or address the known flaws in their existing stack. Rather, they are hoping to acquire new, pristine solutions to capture the proven ability of martech to streamline marketing operations and improve efficiency. 

From a budgeting perspective, CMOs should focus on developing elements of the technology stack that can demonstrably improve marketing outcomes and drive the stated marketing strategy. Martech strategy more broadly will need to focus on optimizing the use of both existing and new marketing technology to boost ROI. Decide if new tools should be purchased or additional features used within existing tools by mapping existing technology to accomplished and desired business outcomes.

Develop a sustainable talent pipeline for the marketing function

Marketing talent is the lifeblood running through all CMO priorities, and will determine their success or failure. Talent impacts return on investments from martech to media. This vital resource is strained by the current talent environment and new ways of working. Fierce competition for strategically important marketing roles continues to push up the cost of talent — a line item compounded by persistently high inflation. Labor costs typically account for 24% of every CMO’s budget, so even if some CMOs are planning to reduce those costs amid squeezed budgets, the imperative remains to make the most of talent as a resource.

Under heavy budget scrutiny, savvy marketing teams must let go of their traditional degree requirements and focus instead on getting the most skilled talent to meet their goals and beef up their core competencies. The best ideas and insights may come from outside their industry and creative, nontraditional approaches should be encouraged to recruit top marketing talent.

Align investments to the right channel to generate the best ROI

Following years of accelerated digital spend, marketing’s allocations to digital channels have leveled off. In 2022, digital channels accounted for 56% of total marketing channel spend, little changed from last year. Multichannel marketing spend is an essential component of any marketing budget. With so many different channels and platforms to choose from, CMOs must make informed decisions about which media investments will generate the best ROI — for customer awareness, consideration, conversion, and loyalty and advocacy.

CMOs must be very strategic to align the right channel, be it digital or traditional, to the right journey point in an effort to deliver a customer experience that changes the customer in some way and makes them feel more confident about their choices. According to Gartner, CMOs are up to the challenge: More than half (50.5%) of CMOs’ channel budget is allocated to consideration and conversion.

The burning question: Is this the right allocation? Balancing complex, multichannel journeys cannot be answered by simple broad-brush benchmarks. CMOs must first start with a view of goals and the prevailing market condition, as well as previous performance.

Make good trade-offs when building the marketing budget

CMOs need a rigorous process to craft an annual budget that properly prioritizes spend for key marketing activities and initiatives in a way that allocates marketing resources to achieve strategic objectives. Here are three key steps in an effective process:

Step 1: Plan

You must ensure that all participants understand their responsibilities, process timelines and desired outcomes. Using Gartner’s State of Marketing Budget and Strategy, anticipate changes in the business environment and create a closer link between marketing and finance to accurately reflect business strategy.

Step 2: Build

Understand the budgeting process and create a draft marketing budget. Ensure you identify the right marketing model to adopt, identify timelines and calculate resources required. It’s critical to modify for strategic priorities and historical variance, and build for cost-efficiency and cost reduction. Then communicate the budget to stakeholders affected by marketing’s budget decisions.

Step 3: Monitor

Assess your budget’s effectiveness and get feedback from key stakeholders. Compare spend with costs and reallocate resources if necessary to maintain funding for key initiatives. 

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