CMOs: How to Get Your Budget Back

December 7, 2017 Jon Dome

You have big plans for growth—customer experience improvements, increasing digital investment, creating an integrated martech stack that provides a holistic view of customer....

When all of a sudden:

 

Okay, it's not quite that bad. But for the first time in the past several years, CMOs are being asked to tighten their belts. According to Gartner's recent CMO Spend Survey, this is the first year in the recent past that budgets have fallen.

"Following three consecutive years of growth, marketing budget growth has stalled, slipping from its peak of 12.1% of company revenue in 2016 to 11.3% in 2017." —Gartner  

This is due largely to the fact that marketers are struggling to show return on the investments they have made in various forms of media and marketing technology (martech). As Gartner puts it, "The time has come for marketing to show its financial management credentials." 

Ken Bernhardt, Regents Professor of Marketing Emeritus, Georgia State University, agrees that one of the biggest changes in marketing over the past several years is increasing accountability of the CMO to the CFO:

So, with reduction in budget and increasing accountability to the CFO and to ROI, CMO's must improve their financial and budgeting skills (as Gartner recommends). But there are other steps CMOs can take make the most of limited budgets while improving their clout with the rest of the C-Suite for future budget planning.

Start with Strategy

We've discussed these issues in a variety of recent articles, and what it all boils down to is making sure that your organization has the right marketing strategy and that your spend in all areas, including media and martech, aligns with that strategy—and that you can report on its return. Otherwise, you run the risk of wasting money on chasing the wrong customers, buying wrong or unnecessary tools, etc.

A similar issue was raised a few months ago when Proctor and Gamble cut a sizable portion of their digital ad spend—and said they saw no impact on their performance. Other companies began asking, "is digital actually low return?" We posed the same question to several members of our Marketing Advisory Board, all of which emphasized that, like any channel, a solid strategy and the ability to measure success on a variety of levels is required to perform well in digital marketing (check out their responses here). 

While the earlier Gartner CMO Strategy Survey reported that about one third of businesses are looking to bring all strategic planning in-house, it's important to make sure that your team has the strategic chops to do this on their own. As Kim Whitler, Assistant Professor, University of Virginia, Darden School of Business, explains:

"Not all CMOs have the same training, skill, expertise, and competency. Some CMOs started in consulting and have had predominantly backgrounds that focus on engineering solutions to problems. Other CMOs have worked predominantly on the selling or commercialization side of marketing, focusing on promoting, through traditional and contemporary vehicles, a company’s products or services. And some CMOs have primarily a General Management background, responsible for the P&L of the business. As you can imagine, if one CMO doesn’t have training, experience, and skill in setting strategy, then they wouldn’t be prepared or equipped to step into a strategy role." —Kim Whitler, Ph.D.

Harte Hanks CMO Frank Grillo therefore advises, "CMOs need to do some reflection as to their true expertise and capabilities before deciding to bring all strategy in-house. I can understand the drive to do so, but I would advise a careful balance between partnering with professional strategists and gradually bringing strategic planning in-house—should you ultimately decide to go that route."

Get Segmentation Right

A critical aspect to any successful marketing strategy is effective segmentation—which ensures you're focusing your limited marketing budget on your best opportunities. But Gartner's CMO Spend Survey indicates that CMOs’ budgets have become heavily skewed toward retention, with retention budgets dwarfng acquisition budgets by a ratio of 2-to-1.

This appears to make sense on the surface—after all, it costs less to retain a customer than to acquire a new one. But the report goes on to explain that "Valuable marketing budget may be diverted to nurturing the wrong customers—those that are a long-term drag on profitability because they buy low-margin products, buy only when they’re offered promotional pricing or have high servicing costs." Additionally, focusing only on retention may hurt the long-term financial health of the business.

It's therefore important to ensure you get segmentation right, focusing your budget on the customer segments and sub-segments that best align with your go-to-market strategy and your capabilities. We've outlined a step-by-step process here: The World is NOT Your Oyster: How to do Market Segmentation.

Secure Martech Skills

Gartner Spend Survey states that "Martech spending has fallen by 15%, as CMOs pull back on last year’s high spending commitment amid concerns over marketing’s capability to acquire and manage technology effectively." The earlier CMO Strategy Survey reported that only 51% of CMOs believe they are “somewhat” or “very” effective at acquisition and use of marketing technology. Then there’s another 49% of respondents that say they are “neutral,” “somewhat” or “very” ineffective at acquiring and using martech. In other words, a huge chunk of CMOs don’t have the necessary expertise to fully own the martech stack.

49% of respondents that say they are “neutral,” “somewhat” or “very” ineffective at acquiring and using martech.

When it comes down to it, most marketing leaders are not technologists at heart. To make effective decisions around martech acquisitions and to deploy those acquisitions to the brand’s advantage, brands should consider bringing on a martech partner that brings together both marketing and technological expertise while also understanding the timeline that CMOs operate under. 

If you choose to plan, build and manager your own technology stack, it's important to remember the customer—the human on the other end of your brand conversations—and keep them front and center in your martech strategy. After all, one of your top martech goals is to deliver on customer experience expectations. Check out How to Build a Humanistic Marketing Ecosystem to see how we're working to achieve this. You might also want to dive into this white paper: CRM 3.0: Using Technology to Bring Human Interaction Back to Marketing.

Focus on Becoming a Heavyweight CMO

The failure to plan, execute and accurately report on an effective strategy for revenue growth has left CMOs in a difficult spot.

Mohanbir Sawhney and Robert C. Wolcott report on MarketingJournal.org that "According to a 2012 report from the Economist‘s Economic Intelligence UnitOutside Looking In: The CMO Struggles to Get in Sync with the C-Suite, CMOs feel constrained because marketing is not viewed as strategic, whereas the C-Suite believes marketing has not earned the right to be strategic because of its inability to demonstrate the value of its investments."

This jives with Gartner's view that "...CMOs are either being too nearsighted to be strategic or too visionary to deliver against marketing’s objectives. The result? A lack of focus on the metrics that really matter to CMOs and to the business—how overall marketing activities deliver ROI and profitability to the organization." Gartner goes on to explain that "Fiscally mature CMOs speak the same language as their C-suite peers and hold their own in budget discussions and decisions." 

The solution for CMOs is to focus on rounding out their skill set in areas of strategic importance to the C-Suite. Sawhney and Wolcott outline these key components of a "Heavyweight CMO" in their article A New Charter for Chief Marketing Officers. They include things working with the CEO to drive corporate growth and stewarding activities that affect the customer experience—of which technology plays a big role.

Those that have strategic background should jump into these Heavyweight projects now. As Harte Hanks CEO Karen Puckett explains, "They need to start showing up and being recruited by those savvy boards that appreciate the value a Heavyweight can bring to the table. This will solidify the importance of the role while others continue to add to their experience and fill their gaps."

Earn Your Budget Back

Get a solid strategy in place. Focus on your best opportunities. Enable it all with a humanistic marketing stack that can deliver on customer experience expectations and help you report clear ROI. Can't do it all yourself? Find partners to help you as you fill in your skill gaps. Then you will be on your way to a Heavyweight role that commands respect from the rest of the C-Suite—and quite possibly earns you some budget back.

 

About the Author

Jon Dome

Jon Dome, Director of Customer Experience, specializes in marketing strategy and customer experience management. He has a strong track record building and sustaining high performance client satisfaction teams. Jon leverages the Jobs-to-be-Done methodologies popularized by Tony Ulwick and Clayton Christensen to underpin new frameworks for marketers to optimize buyer’s journeys. A motivational team leader and an articulate communicator, Jon has a talent for driving customer-centric cultures.

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