Despite three years in a row of marketing budget increases, 43% of marketing leaders in 2016 expected their budgets to fall or flatline. However, marketing's mandate and accountability have grown significantly during this time. Technology, innovation, customer experience and digital commerce now live next to more traditional areas of marketing responsibility. As a result, marketing leaders need to develop high performing budgets and optimize costs to deliver clear benefits to the business.
How should marketers budget for changes to a company’s agency roster based on their needs for new expertise? Should they continue to pay for redundant or abandoned marketing tools used across divisions? Do they really need all those tools? Marketers could easily cut campaign and media spend but how could they tackle the significant fixed costs of marketing operations? Most importantly, how do they ensure their budget reflects critical future growth activities and not just past assumptions?
The Gartner CMO Strategy Survey, CMO Spend Survey and Marketing Technology Survey conducted across 2016-2017 explored the impact of budget cuts or constraints on marketing programs. Three recommendations emerged from the analysis of survey results that help ensure marketing leaders get the most from their marketing investments and budgeting:
Create high-performing budgets incorporating zero-based budgeting techniques
Budget pressures aren’t destined to result in reduced marketing performance. Adopt a zero-based budgeting (ZBB) approach to build high performing marketing budgets. Zero-based budgeting means building a budget anew annually, with each line-item based on a business case for delivery of future value, not a mark-up of past year’s line items.
Unilever and Diageo are adopting ZBB methods to build accountability and foster a data-driven approach to marketing investment with Unilever reporting that ZBB is expected to help contribute approximately $1.1 billion in savings by 2018.
Harmonize in-house capabilities and agency resources
Gartner's 2017 Marketing Strategy Survey found a misalignment between the services that agencies want to sell to clients and the services that clients want to consume. Marketing leaders indicated a shift toward a model that builds strategies using in-house talent and expertise. They would rely on agencies and third parties to either fill resource gaps (the desired state of 29% of marketers) or for basic program execution (the preferred state for 31% of marketers).
Cost-effective operations require marketing leaders to find the right balance between in-house capabilities and agency resources to benefit from external scale and expertise and the category and industry know-how from internal resources. Audit your agency roster over the longer term and map an agency's unique skills against your strategic priorities. Consider a mix of agencies, from global players to niche providers and focus on quality of output and deliverables and cost-effectiveness over agency brand name.
Sharpen marketing technology investments
Marketing technology now accounts for 27% of the marketing budget. According to Gartner's Marketing Technology Survey 2016, marketing organizations have an average of two digital marketing analytics systems, making digital marketing analytics the highest reported redundancy out of 29 categories surveyed. Redundancy and abandonment now need to be a part of the conversation when it comes to technology planning.
Establish governance around managing marketing technology investments and spend the time upfront to specifically define what the potential solution will deliver to the organization. Also assess how it will integrate with the rest of the technology in your organization and how prospective solutions can grow with changing customer and organizational needs.
“Effective marketing cost optimization requires a robust, data-driven appraisal of marketing's programs, shining a light on the investments that deliver value to the business and cutting away long-cherished programs if they don't deliver against marketing’s objectives and business goals,” McIntyre says.
Gartner for Marketers clients can read more in Survey Analysis: What Marketing Leaders Should Learn From Marketing Spend Patterns by Ewan McIntyre.
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