by Jim Lenskold
You work with your team to design a well-integrated marketing plan that you believe is the best approach to the market. Sure enough, upper management demands a budget cut that disrupts your plan. The budget cutting process puts marketers in a defensive mode where you may lose key tactics that have strategic value in the marketing mix or scale back the overall marketing to the point where you question the potential impact. During this exercise, marketers need to be prepared to articulate their strategy in terms that are relevant to executives.
There are three steps that may help your case.
Cutting budgets is relative easy and painless for the finance group. Cutting future profits and cash flow is not. The better you can link marketing initiatives to financial outcomes, the better position you will be in to defend your strategy.
Marketing objectives are often tied to the customer response in terms of actions or perception changes. You can map out the expected outcomes by repeatedly asking the question, “And then what happens?”
Marketing impact will follow one or more of these patterns:
• Drive incremental sales. Mapping your outcomes is pretty straightforward if your marketing directly generates sales.
• Feed prospects into the sales cycle (alternatively viewed as the customer funnel). This is where you are generating interest and demand that other marketing and/or sales activities will drive to a completed sale. As you map the impact that follows your marketing, you’ll benefit by showing integration of the target audience, message and timing.
• Improve a problem area in the sales cycle or customer funnel. This approach to assess your impact is appropriate if you have analyzed the customer funnel for your business and can detect significant “leakage” points where the company fails to convert prospects to the next stage of the funnel. You may find that the leakage point is beyond the stages that marketing manages, such as your retail partners recommending a competitive solution or your sales force struggling to get management approval to complete the sale. A strategy that addresses these leakage points can show clear outcomes.
• Improve effectiveness throughout the sales cycle or customer funnel. Some marketing initiatives are intended to move more prospects through all stages of the funnel. You raise the brand profile and build a strong reason for choosing your solutions and it will show up in increased prospects entering the customer funnel, more progressing further along their buying process and more buying from you. Your outcomes need to show up as incremental performance of other metrics and should be coordinated with the groups managing those stages of the customer funnel.
• Repositioning the Brand. Marketing that is intended to have long-term impact on the brand position, without making any impact on current buying decisions must be viewed differently. Changing your brand position to gain new competitive advantages can take time. The investment will take time to have an impact but the expected impact on incremental sales that will come in future years is usually significant enough to justify the business case. This approach requires long-term buy-in from company executives that should not have the same budget cut threats.
After mapping out the expected outcomes, you must then quantify the impact and determine the key metrics that will let you know you are on track. Even without perfect information or previous measures, use your best assumptions to estimate the contribution. This gives more validity to your strategy, shows thorough thinking and sometimes generates a constructive dialogue to refine the assumptions.
Marketing is highly scalable in that you can run a marketing program with just about any budget amount. But executives need to know that the impact does not scale consistent with the budget. Half of the right budget does not necessarily deliver half of the expected results. So the starting point for your budget will influence how you defend your strategy. If you have room for discretionary marketing that can enhance your impact but is not critical to the core strategy, you will justify those initiatives on their own. If your budget is tight and any change threatens the core strategy, you’ll need to have the frank discussion with your executives.
Some key points that you may want to reinforce with your CEO or CFO:
• Marketing requires critical mass to make an impact. A single marketing contact may have negligible impact on its own while the collective impact of multiple contacts is highly effective. Cutting marketing tactics in half does not necessarily mean you get half of the impact. You need a good share of voice in the market and a good understanding that the marketing you have planned can be effective at your desired level of intensity.
• A solid marketing strategy is only effective when it moves prospects through the entire customer funnel. Gaps in marketing that allow prospects to “leak” from the funnel will undermine the entire strategy. This includes leakage that occur in your sales organization, retailers, channel partners, or any other role that resides between your marketing initiatives and generating revenue.
• Budgeting for measurement and analysis is critical to delivering expected outcomes.Without insight to guide planning and monitor performance in progress, marketing cannot validate its assumptions or make necessary adjustments.
• Selectively running small-scale testing accelerates growth. Marketing measurements on recent initiatives provide insight that can be used to modify and improve the marketing initiatives that follow. However, limited scale market testing provides the opportunity to take more significant departures from business as usual and identify high growth opportunities.
Want to show the executives your confidence that funding the complete integrated plan is necessary for success? When they ask to cut a critical part of your integrated marketing plan, suggest that they take more budget and wipe out the balance of that integrated initiative since it is not likely to be effective enough to make a substantial impact.
When all else fails and the budget gets trimmed, do what you can to re-construct the same strategy on a smaller scale. That may mean going to a smaller target audience or spending the majority of your budget in a very short time period. With good measurements in place, show that the intensity of marketing or the integration of multiple marketing initiatives can deliver greater impact. It is a better alternative than spreading your budget too thin and not delivering the desired impact (that may only lead to further questions on marketing effectiveness and budget cutting).
The goal is to build executive confidence in your strategy with clear financial expectations and measured success. We cannot control all corporate decisions but need to be better prepared so that marketing is not at a disadvantage relative to other divisions.