How to Justify a Marketing Budget

Steuart Henderson Britt, a renowned psychologist and author of Psychological Principles of Marketing and Consumer Behavior, encapsulated the importance of marketing by saying that, “doing business without advertising is like winking at a girl in the dark. You know what you are doing but nobody else does.” Despite this sentiment, detractors of the importance of marketing abound. Many in the c-suite regard it as an expense center rather than investment in the future of the business.

To a certain extent it is a self-inflicted wound. More than their counterparts, marketing professionals struggle to clearly communicate the business impact of their work. There is a tendency to focus on top-of-the funnel vanity metrics such as social media followers, likes, impressions, page views, website visitors etc. because there is a direct relationship between the content they produce and the interaction they should garner. It gets murkier involving other factors and other people to determine if this effort is eventually going to translate into increased sales. It reminds me of a situation in baseball. Let us say the first hitter of an inning gets a single. The second gets another single which sends the first hitter to second base. The next hitter gets another single which scores a run. In terms of production, the first hitter gets credit for a run scored and the third gets an RBI. What does the second hitter get in terms of run production — nothing. Marketers are sometimes analogous to the second hitter.

So, the marketers need to convince CEOs and CFOs that these top-of-the-funnel statistics are not superfluous or just a self-congratulatory ploy. There is a direct relationship between ascending vanity numbers and customer interactions into ascending revenues. Undervaluing these numbers is tantamount to missing the big picture.

But, for us COVID-19-weary marketers, there is some good news. According to Gartner, marketing budgets rose in 2022, as 75% of CMOs saw their budgets rise from about 6.4% to 9.5% of revenues from 2021 to 2022. This still lags pre-pandemic marketing budgets which were closer to 12% of revenues.

So, what should marketers do to show the value of their work and justify their budgets? The answer lies in being seen as a profit center and not a cost center by the upper management. Implementing the following steps will help them convince them that you are an indispensable link in the value chain.

1. Use key performance indicators (KPI) to show ROI

Utilize technology to track KPIs across the buyer’s journey. Use historical data to estimate revenue expected to be generated as numbers improve for major performance indicators such as:

• • Increased market share
  • Enhanced customer retention rate
  • New target markets
  • Lifetime value

Ideally, management wants to see a clear budget-to-revenue relationship, i.e., this number of dollars invested in marketing initiatives would result in so much return. This demand is bordering on being unfair because the only people I know that can predict the future with much accuracy are meteorologists. All others make educated guesses and marketers live in a world of unpredictability and managed chaos. So, if a marketer sticks his neck out on such a demand, it must be done with a lot of caveats and with humility. They can try to connect controllable vanity metrics to the bottom-of-funnel dollars by showing a clear conversion path from historical data:

a. Percentage of website visitors that become prospects
b. Percentage of prospects that progress to qualified leads
c. Percentage of qualified leads that become customers
d. Revenue generated per customer

2. Study competitors

Sometimes invoking actions of a successful competitor convinces doubting minds about the soundness of a strategy. There must be a reason intelligent people chose a certain path which led to satisfactory results. It can be replicated and further enhanced to produce impact. The following source of information is readily available:

• • From links on their website, find what social media channels they use, what they post, and how frequently
  • Subscribe to their email list to determine how they use email marketing to acquire and keep their customers
  • Read their content for inbound marketing (blogs, videos, case studies, virtual events, webinars etc.)
  • Study their graphics and ad content

3. Utilize cloud-based SaaS competitive tools

For a modest cost, a great deal of information about can be gathered about competitors’ social media content, ads, remarketing, influencers etc. from SaaS (software as a service) apps on the internet. Data can be collected at a granular level about the domain, organic and paid searches, best keywords by country, copy of ads, frequency of publishers, top competitors, branded vs. non-branded searches, positions on organic and paid searches, reach etc. SaaS tools like SEMrush, Ahrefs, SpyFu specialize in certain types of information and can be valuable resources to gather intelligence about competitors.

4. Study market trends to display knowledge of business conditions

One way to do this was described in Point #3. Being knowledgeable about how competitors are investing their marketing budgets, statistics about their assets, and what is and is not working for them gives credibility to tactics you may be proposing. This should be supplemented by keeping a finger on the pulse of the business arena. Knowing how many and which channels are being utilized and their relative impact would be valuable and deemed impressive. For example, according to HubSpot’s 2022 Industry Trends report, B2B marketers value multichannel marketing using an average of four different channels to spread the word. Social media is the most popular channel and used by 42% of marketers and expected to grow significantly this year. About 33% are using blogs on their websites and SEO to improve organic rankings on SERPs, while 32% use email marketing. Blogs, social media shopping tools (allow brands to sell their products to customers through social media platforms rather than directing them to their own eCommerce site, e.g., Instagram and Facebook Shops) and influencer marketing are neck and neck for producing the highest ROI. Ability to find, measure, track, and adapt to market forces will help you sell your ideas.

5. Collaborate with the sales team

There is mutual dependence among sales and marketing teams as they pursue a common objective: to create customer value, generate revenue, and meet company goals. However, their perspectives may be quite different leading to finger-pointing and misaligned priorities. Since marketers design strategies, they often focus on analytics and process. Salespersons meet customers face-to-face with pressure to meet sales quotas, so they focus on relationships and results. Marketers tend to think of customer segments, salespeople think of an individual customer. Marketers think of evolving customer needs, sales are more interested in short-term quarterly goals. Sales want lower prices to facilitate the sale, marketers worry about brand equity.

There needs to be active collaboration between sales and marketing teams to develop shared goals, alignment of approach and purpose, and agreement on what constitutes a win. It must be a win-win environment for the two groups to have constructive collaboration and live in harmony.

Defending a budget proposal

Defending a budget proposal starts by changing some perceptions. The idea is to be seen as a profit center and not a cost center by focusing relentlessly on ROI. It is vital to shift your mindset from intentions to outcomes, from having visions or a perspective of a theoretical genius or a strategic mastermind to someone who is focused on delivering tangible results and putting points on the board. This is the language that c-suite understands and appreciates.