You know it’s true. Marketing almost always sits in the most vulnerable position when it comes to budget cuts. The farther we get into the year, the more we begin to hear the hallway whispers, “Expense freezes or cuts are in the pipeline”. The marketing team immediately shifts into allocating as much of that budget as possible to be designated as “committed” dollars, while also preparing to “present and defend” their budgets. We’ve all been there; an age-old battle that many have simply accepted as an inevitable outcome. I’ve never been a fan of simply accepting status-quo simply because it seems pre-determined. It’s time to change.
Before solving the problem, let’s drill down a bit and explore the “why” behind the practice.
When our execs look across the organization, especially our friends in finance, their first assessment in determining the amount of the reduction is to run a revenue and expense forecast (based on trends) to understand the potential variance between budget and goal. When an unfavorable variance appears to be imminent, the next step is to identify where reductions can be made with one guiding goal: limit the impact to the operations of the business, as much as possible. Because marketing is frequently perceived as undefined and low risk, the decision isn’t difficult.
This always seemed puzzling to me, where’s the discussion about mitigating the unfavorable trend line with accelerated revenue?
The finance teams will tell you marketing is too murky and unreliable. And this is the real heart of the problem. It’s not that finance doesn’t see value in marketing; they simply cannot directly tie all marketing initiatives to revenue in order to understand exactly what marketing is contributing to the revenue goals. Without that clarity, reducing the marketing budget seems to offer the least amount of operational disruption.
Understanding the “why” let’s us re-frame marketing’s “present & defend” argument.
There’s only one way marketers can change this on-going paradox: quantifiably prove the loss of revenue as a result of the expense reduction. But it will take a new approach to how we plan and manage our initiatives. Using the following 5 step process we can begin to build a case that can change the inevitable:
- Validate: Don’t assume this perspective reflects the sentiments of your organization. Schedule a meeting with your CFO, COO and anyone else in your organization that influences the final decision when it comes to budget cuts. Your organization may have a clear understanding of how much marketing contributes to revenue. But if this isn’t the case, follow the remainder of these steps.
- Quantify Everything: As each campaign is developed, quantify the revenue impact of each initiative, and make sure you can clearly see the revenue contribution at both the tactical and campaign level. Keep in mind some tactics are response generators (lead generators) and some tactics are intended to convert those responses to a sale. It’s the aggregated impact of an integrated campaign that establishes the whole.
Tactic A + Tactic B + Tactic C =
Revenue Goal for that time frame
- Track Everything: This step is critical. Marketers don’t have a Magic 8 Ball (we often wish we did), but if we can see which initiatives are working and which are not we can course correct an under-performing campaign. Track as close to “real time” as possible. This affords you the precious time needed to understand what changes need to be made to insure the campaign meets the planned revenue objectives.
- Trend Everything: One of the most commonly missed steps. Once your campaign is in market for at least 12 to 14 days, ask an analyst to trend the revenue impact until the scheduled “end date” of your campaign. This is the “secret sauce” that signals your team to react, if necessary. This process lends the much needed transparency to provide assurance to your peers that the campaign is on track to meet the objectives or that changes are in progress to reverse the trend lines.
- Don’t Tell a “Story”, Present an Unambiguous “Truth”: Walk into every operations review with a clear and concise review of how your campaigns have performed. Tell a quantified story by comparing the assumptions made during planning and how the campaign actually performed in market. Don’t panic if some initiatives under-performed, but be prepared to talk about the changes that will be/have been put into place; positioning your team as “in-control”.
We’ve effectively used this process for over 5 years. The structure and discipline of the approach moved marketing’s budgets out of the first line of fire when it came to expense reductions; primarily driven by our ability to clearly define the revenue impact of a budget cut. We eliminated the “murkiness” and lack of understanding of marketing’s revenue contributions by shifting our process to meet the needs of leadership and influencers.
Marketers you’re empowered to change the “status quo” by quantifiably proving in the value of your work. No doubt there are other high impact steps, share your “proofs of concepts” so we can all learn together.