‘Prove It Or Lose It’ Budgeting Is Good For Marketing

Matt Nitzberg"Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Matt Nitzberg, chief growth officer at ThinkVine.

I started my career in brand management at a major CPG company, where marketers lived in a use-it-or-lose-it budget environment. Failing to spend their annual marketing budget was akin to admitting that they didn’t need it all. And that meant it was going to be a battle to get full funding in future budget cycles.

In more recent years, budget discussions have changed dramatically. Rather than use-it-or-lose-it, marketers now must “prove it or lose it.” Constant upward pressure on growth has become paired with downward pressure on budgets. Without evidence of business impact and ROI, marketers may lose funding.

Some marketers subject to this kind of scrutiny may grumble, but a surging focus on measurability is actually an opportunity for marketing to educate and influence the company as a whole and to improve their own performance.

Communicate At The Highest Level

It would be easy to demonize a CFO who challenges marketing expenditures, but that’s the wrong perspective, and one that can further distance marketing from an important executive peer and potential ally. Only 43% of CFOs had close relationships with CMOs in a recent EY study, compared to 60% of CEOs who were close with their CMOs. One of the limiting factors: a lack of clear KPIs that the CFO could rely on from the CMO.

The good news in this? Marketing activities and impacts have never been more measurable. This includes multiple steps in the customer decision journey across widely varied media channels and platforms.

McKinsey wrote about this trend in a recent article, noting that “organizations are seeking greater precision by measuring and managing the consumer decision points.”

Now is the time for marketers to embrace accountability as best as they can at a time when they are the growth engine for their business. As the ambassadors for the customer, marketers can define wider company success metrics and can help ensure growth and profitability.

Marketers should work with their executive team to identify clear KPIs that they can objectively assess across the majority of their activity, ranging from customer service and media to pricing and packaging. A focus on sales, customer behavior and brand health can then expand to all parts of the organization.

Simplify With A Top-Down Metric Mandate

Every new channel and platform, including Facebook, apps and chat-based customer service, has a different list of data points to measure. The social media team measures likes and engagement, for example, while the brand team measures reach and frequency. The call center is looking at time and velocity while the website team is looking at clicks and conversions.

Marketers with so many channel-specific KPIs risk spending money based on trends that are totally disconnected from business value. Just 11% of marketers in a recent survey showed have quantitatively proven the value of social media, despite the fact that they are continuing to increase spend on that channel.

To win in a prove-it-or-lose-it environment, marketers need to focus on high-level metrics that make sense – and are persuasive – to the executive team, the board and their marketing partners. Marketers can then mandate that individual teams work to connect their own metrics to these key metrics so that everyone is running in the same direction.

Double Down On What Works

Prove it or lose it doesn’t just uncover opportunities; it also validates success and allows marketers to control their destiny. For example, marketers are often pressured by other executives (and agencies) based on popular trends.

If the CTO’s teenager is using Snapchat, why isn’t the brand advertising there? If consumers are cord cutting, why is the TV advertising budget stable? These commentators and critics might have good intentions, but without solid metrics, marketers have a hard time resisting their suggestions.

Marketing is all about taking informed risks to win with customers. Any good marketer should have the guts to use metrics to understand which gambles fail and which pay off.

While Coca-Cola shuttered a content program called “Journey” after it failed to drive engagement that could be linked to short-term sales increases, for instance, the company dramatically increased advertising around its “Share” campaign featuring people’s names on cans, which had been linked to increased sales.

With clear measurement in place, marketers can take bigger risks and gain more support, while companies can more confidently increase the role that marketing plays in a consumer-driven future.

Follow ThinkVine (@ThinkVine) and AdExchanger (@adexchanger) on Twitter.

 

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