ANALYSIS
Make the most of your budget

The good, the bad, and the desirable

Investments vs costs

If you want your team to become a lean, mean marketing machine, you need to weigh the costs of skills, processes, and technology in the context of their returns.

Cutting costs without undermining marketing performance and the push for greater content can feel like a delicate, if not impossible, balancing act. But spending less can turn out to be a catalyst for achieving better results - as long as you prioritize effectively. When budgets are healthy, marketers can spend more on exposure across channels. Spend on message exposure is referred to by some as "working budget". and seen as desirable spending.

The myriad of costs associated with producing the content that receives the exposure falls into the category of "non-working budget". This includes everything required to plan, make, and distribute assets to the given channels.

Advertising expert David Meikle, argues these terms are misnomers: "First off, 'non-working' suggests that this money doesn’t work, but of course it does." As such, Meikle suggests a different set of categories to frame marketing spend ➡

Indirect costs often inflate when processes and ways of working cause errors or inefficiencies

David Meikle, seasoned advertiser and author of How To Buy a Gorilla

Direct investments: spend on the exposure of your messages.

This covers the cost of appearing on a given channel,a sponsored email promotion, a newspaper ad, link building for SEO, or an influencer promo. Calculating the ROI on these types of investments is relatively straightforward to assess for exposure on digital channels and at events. Less so for out-of-home media (OOH) and print circulation.

Indirect investments: spend that affects the amount of return seen from that exposure.

So these are the investments that help you to make the biggest impact on viewers when your message is in front of them, by making sure it's the right message, delivered in the right way, etc.

Indirect costs: spend that doesn't bring more exposure or more return but is needed to get the job done.

This is your undesirable spending; it has no meaningful impact on the reach or efficacy of your messages. Indirect costs often inflate when processes and ways of working cause errors or inefficiencies, which includes those born from a lack of insight or expertise.

Desirable spending goes beyond "working budget"; you need exposure and impact.

Paying a design agency thousands for what boils down to 'copy, paste, repeat' is not desirable or optimal. That process cost will not help you see value in agency partners.

Auditing your spend

Some costs and poor investments will be straightforward to identify and cut, like the mediocre agency you've been trialing, the remarketing campaign that's not converting, or the software no one's using. But once all of the obvious cuts are made, you need to think bigger picture, rather than flinching at price tags, if you want your function to shine.

Underpinning the current execution of your marketing strategy you'll find investments with high returns, investments with mediocre returns, and zero-gain costs. When cutting spend, you want to concentrate on the latter two, but first, you need to find them. There are generally four buckets to assess: agencies, technology, people, and media spend.

Analytics and insights remain the most strategically important marketing capabilities

Gartner, CMO Spend Survey 2020

Elsewhere, agencies are employed to fill the gaps when processes or people power fall short. Paying a design agency thousands for what effectively boils down to copy, paste, repeat kind of job – that's not desirable spend; it doesn't move the needle and it's not an optimal way to use your agency partners. You just don't currently have a better, faster, cheaper way of getting that job done. This is where improvements can be made to ways of working, upskilling your people, or investing in better technology can bring down total costs of growth or market share retainment.

Being smart about how you cut costs involves evaluating how each item on your team's P&L relates to your processes and performance and making investments and cuts accordingly. This could indeed result in increased investment in one category, like technology or people, if doing so cuts away a greater net value of expenses born from inefficiencies elsewhere.

Nowadays, software designed to be used by generalists has democratized certain capabilities across marketing and advertising that were previously reserved by agencies, including aspects of design, development, and distribution. The agencies worth their salt are those who have since focused on delivering tangible value to their clients through specialized expertise or skill sets that require extra creativity or human touch (like brand consulting or ad copywriting) or through their network (like in PR or link building). The quality of each third-party relationship will determine whether you see high or mediocre returns from the investment you're making.

MarTech and AdTech have democratized capabilities that were previously in the exclusive domain of agencies.

Gartner's CMO Spend Survey for 2019-2020

Know your returns

A good place to start is making sure you understand the returns you're getting in the first place, so you can make investments based on goals and audience data, not assumptions.

Gartner's recent survey saw analytics tied with competitive insights as the most vital capability supporting marketing strategy. Investment in analytics lets leaders achieve greater accuracy in their evaluation of activities, improve performance, and more effectively forecast results. This is a required area of investment across the marketing function if you want to know which efforts work towards your objectives, so you can predictably grow the brand and drive more revenue opportunities. Take stock of any gaps you have in your ability to evaluate performance and understand your audience, as these are precisely the types of investments that let you improve the results and returns you see over time and prevent you from wasting money on the wrong kinds of tactics and tools.

Equipped with analytics, quantifying performance can still seem daunting given the variety of channels and metrics it's possible to track, as well as the various different goals your programs and campaigns feed into. This is where creating performance scores come in handy – a scoring out of 10 of the relative impact of an initiative on delivering the marketing strategy based on whichever metrics are plausible for the given tactics.

Most vital capabilities supporting marketing strategy

But when it comes to returns, the performance score of your programs, content, and campaigns only tell half the story. You need to view them in the context of their resource intensity – the time, budget, and energy that went into executing them. You might be surprised by how some of the cheapest, least scrutinized executions have delivered some of the best results due to factors like relevance and timeliness.

You don't need complete data accuracy here for this kind of plotting to be useful, so it's worth doing even with estimations.

Start with the initiatives you derive the clearest results from and take stock of the skills, time, and budget that goes into them. Speak to your teams about their experience:

What are the biggest time sinks?
Where are the greatest risks for delay or unbudgeted spending?
Which parts of the process cause the most stress?
What skills or tools would make the output better, cheaper, or faster?
How have results been improving over the past years of executing the particular initiative? Why?

Poorly devised or broken processes are a breeding ground for time waste, sunk costs, and role frustration.

43%

of marketers said one of their top challenges is knowing if content is actually influencing and engaging audiences

Source: CMO council

Then move on and do the same for the most costly initiatives that you aren't deriving top results from. Why are these so costly or ineffective?

Finally, investigate the initiatives you're unsure about when it comes to ROI. Why is ROI so unclear? How can you resolve that moving forward so you know that you're not wasting your budget?

Take the holistic view

Poorly devised and broken processes are a breeding ground for time-wastage, costs, and frustration. If your aim is to build a marketing engine that delivers reliable and scalable revenue, even in the face of budget cuts, you need reliable and scalable ways of working. This means empowering your team to operate with greater autonomy from the interference of stakeholders elsewhere in the business, but also from the holdups and limitations caused by relying on agencies or other internal teams who have split priorities.

When your budget's been cut, it's more important than ever that you know exactly how every penny is delivering value for both your business and your customers. If in doubt, invest in your audience. Invest in understanding them better, in reaching them at the time and place that best works for them, with the information, ideas, and sentiments they care about the most. This is how your voice cuts through. And to grow your market share, you need to grow your voice.

Grow your share of the market by 0.5% by reaching 10% excess share of voice against your market.

Source: IPA, How Share Of Voice Wins Market Share