If you are in a really large company with solid data gathering and a mature marketing analytics process, this might not apply to you. If, however, you are in a small or mid-sized firm where marketing budgets and the associated payoff are less understood, this article is for you.

Most companies lack marketing measurement, so marketing budgets can range from profit-taking money pits to starved categories that are the first to get slashed in hard times. I’m not an expert at mathematical modeling, but I’ve developed some guidelines and opinions from years of wrangling with marketing budgets and return on investment (ROI) in companies both large and small.

Agree on how you’ll be measured

This is how marketing ROI is measured in simplest form:

(Gross revenue from marketing campaigns – Marketing investment) / Marketing investment

The problem is, it is more complicated than that. You may have business objectives from marketing spend that are less easily translated to dollars, like media impressions or PR share of voice. Call that ROBO, or “return on business objectives.” Gross revenues can be misleading—you may want to apply a contribution margin or percentage margin instead, especially if you aren’t a cash-rich firm. Lastly, if you are in a service business like I am, you will want to think about the lifetime value of a customer (CLV), not just one-year revenues.

Here’s the point: Spend time with your CFO and CEO to gain agreement on your measurement stick for non-financial (ROBO) and financial outcomes, making sure the information is easily obtained. Don’t be afraid to use “rules of thumb” and rough estimates for more complex concepts, like discounted cash flows for CLV. Working together with your finance team, you can find a yardstick that’s reasonable.

Know your real marketing investment

Come to an agreement on what goes into the marketing budget, and what doesn’t belong. It’s easy to underestimate real spend when other areas—like product groups or branch offices—have their own marketing dollars. I make a strong argument that if the expense isn’t controlled by your marketing department in some fashion (approval limits, for example) those expenses don’t’ belong in the marketing ROI calculation. When marketing spend is spread everywhere, there’s no way to control costs or drive returns. How much marketing spend should sit outside of your budget? Every company is different, but if it’s more than 20 percent, I’d be worried.

Use it or lose it

I can’t tell you how many marketers I’ve heard complain about their budgets, but then don’t even use the full amount because of poor up-front planning and management. Your budget should tie to a plan that breaks out ongoing costs (your web host, your PR firm, wages, etc.), major initiatives and campaigns, along with work assigned to your team members, agencies, and so forth. Credible marketers have the facts and are organized to deliver. As you are executing your plan, you should use the data and measurement you are gathering to make improvements and adjustments—or kill a bad idea. Banner campaign not working? Tweak your message and see how it performs. Big events with weak attendance and lackluster results? Kill it.

One of my favorite tricks: Keep track of how often each piece of your collateral is produced and used by sales, so you can eliminate the unnecessary costs associated with an ungoverned collateral system. Take it from me, the best way to be a credible manager of a large marketing budget is to show that you know how you will use it, and you are disciplined enough to hold yourself accountable for a responsible spend.

Communicate early and often

When people see the line item “marketing,” it can look big and squishy. Make sure you are providing the voiceover about your spend and how it supports the business. Know what your percentage of marketing spend is, relative to revenues; industries vary, but 3 percent is considered a mature company/low spend, and growth companies typically spend over 10 percent. In addition to your annual marketing plan, develop clear plans for every launch or campaign with specific success measures—near and long term. For instance, if you are launching a digital marketing newsletter, early measures could include an “open rate,” “click-through rate,” subscriptions or return readers. Later you can measure how many prospects were generated, leads converted, and so on. Basically, the more you can measure and educate the business about your marketing plans, the more support you will have in your organization for what you do.

Beware of the “money pit”

We’ve all done it: Fallen in love with the most creative, super cool idea. I once worked on a dazzling guerrilla marketing campaign where the CMO claimed she would gain a million new clients… She lost her job instead. I’ve been swayed by enough of the latest and greatest gimmicks—including a DM piece with embedded video that won me an industry award—to find that old fashioned, simpler campaigns produced better results.

In addition to excessive spend on individual campaigns, there are other money pits including: lavish client appreciation events, print advertising that makes you feel good but rarely draws business (if it doesn’t tie to a much larger effort), and expensive “swag,” or giveaways. On occasion, other senior people will be pushing you with a big idea that takes a big bite out of the budget. Just be sure to take the time to identify clear objectives, size your spend adequately and provide an ROI estimate that you are willing to live up to. Presented with the facts about marketing, you, your team and your business partners will all make better decisions.