As CMOs continue to navigate economic challenges brought on by inflation, they must be mindful of the goals set forth by their CFO counterparts, which are currently focused on efficient growth investments.
We recently sat down with Jason McNellis, Senior Director Analyst in the Gartner Marketing practice, to discuss how CMOs can defend their own budgets and align marketing investments towards growth despite the presence of economic headwinds.
Members of the media who would like to speak with Jason regarding this topic can contact Matt.LoDolce@Gartner.com to schedule an interview.
Q: CMOs are entering the 2023 budget planning season. When it comes to their budgets, what should CMOs be aware of in this economic environment?
A: CMOs must quickly align with their C-Suite counterparts by 1) aligning on growth strategies for digital investments; 2) bolstering their quantification of the impact of marketing in ways that the CFO will understand.
CFOs and CEOs are now focusing on growth investments within emerging technologies in the face of economic headwinds, which differs from the more uniform cuts across most departments at the beginning of the pandemic. The majority of finance leaders want to increase spending on digital technology. Concurrently, labor costs and demand are both rising, and CFOs and CEOs are both looking to protect and prioritize their workforce investments, or at least cut them last, to remain competitive in a barren labor market. CFOs and CEOs are also looking to automation to increase workforce efficiencies.
Q: Given CFOs’ continued focus on digital investments, where should CMOs look to align their growth strategies?
A: CMO’s may be getting mixed messages from their CFOs when it comes to the use of, and investment in, marketing technology. For example, while long-term digital growth sounds like great news for adtech and martech budgets, it needs to be tempered based on what those same finance leaders think about key marketing tools, mainly martech solutions, due to underutilization and ROI challenges.
CMOs can combat this perception by investing in additional funds in martech training to drive better utilization and business value. A Gartner survey of 130 CEOs and CFOs conducted in April and May 2022 showed existing training budgets were relatively safe, and business leaders were looking for skills to come from within the organization, rather than from consultants or contractors.
With CFOs facing acute margin pressure, CMOs should be prepared to be asked to prioritize training spend from within their existing budgets. However, CMOs who are prepared with a clear business case for growth and measurement plan have a good shot to receive funding.
Q: Overall, how can CMOs defend their marketing budgets in ways that resonate with the rest of the C-Suite?
A: There are three key ways CMOs can influence the strategic budget decisions in their organizations, especially as they enter 2023 planning season:
- Strengthen value calculations to demonstrate marketing’s importance. CMOs should have a clear idea of the overall value of every marketing dollar spent. If they cannot verify that “for every $1,000 dollars we invest in marketing, our company can generate or create or produce or yield…” then an assessment of the marketing department’s analytic maturity may need to be considered. These aggregate measures reinforce that marketing drives demand and, in turn, drives business value.
- Move beyond ROI and evaluate budgets based on multiple metrics. Measuring ROI on its own may result in unintended consequences that actually harm a CMO’s ability to deliver against enterprise goals and thus risk further eroding investment. Maximizing ROI generally leads to smaller marketing budgets that drive less sales. CMOs need to rationalize across multiple metrics as ROI is likely less important here than gross margins attributable to marketing.
Enterprise success is reliant on complex decision making across a range of goals, such as market share, profitability or sustainability. Consider the broader concept of return on objectives — how marketing investments deliver against a diverse set of goals. Avoid cherry-picking the results that promote the largest marketing budget in order to promote a data-driven dialogue around prioritizing trade-offs such as revenue vs. margin growth or growth across certain product lines.
- Establish investment triggers that signal the need for marketing spend. To avoid losing competitive positioning, define and monitor a set of market signals or “investment triggers.” These could include a noticeable loss of share of voice, decreases in product perception, or increased costs for newly acquired customers. As marketing budgets are scrutinized and adjusted, investment triggers will only help improve planning and spark opportunities for budget increases.
Gartner clients can read more in “How CMOs Defend Marketing Budgets During Inflation and Economic Uncertainty” and “CMOs: Navigate Executive Concerns to Advance Your Company Through Inflation and Economic Uncertainty”. Additional information is available in the Recession Playbook for Marketing Leaders and complimentary webinar on How to Prove the Value of Marketing to the Enterprise.
If you are a member of the media who would like to speak further on these topics with Jason, please contact Matt.LoDolce@Gartner.com. Members of the media can reference this material in their articles with proper attribution to Gartner.