If you think it’s hard to develop a marketing budget, you’re in good company. Most marketers today must do more with less. Faced with steep competition, B2C marketers need to spend every penny wisely.
As the CMO of Visual IQ, a Nielsen Company, I see first hand how challenging budget planning can be—both for my company and for our customers.
As the number of ways to reach and engage consumers via platforms, channels and devices has skyrocketed, marketing and advertising budgets have not grown in parallel. Setting the right budget is critical as marketing executives are asked to grow results and contribute directly to the bottom line.
The pressure to perform is heating up an already stressful task. In my experience, the budget process is fraught for several reasons:
- Marketers must evaluate performance from the previous cycle and make predictions about what impact future activities will have on the bottom line.
- Gathering accurate data about spend and marketing performance is challenging. Marketers often have to estimate costs and can be penalized if they wish to grow budgets for untested initiatives—or if campaigns from the previous year didn’t perform as expected.
- In addition, the process is time-consuming, with some estimates at up to 20% to 30% of senior executives’ and financial managers’ time.
The bottom line is that the budget process can be a barrier to innovation and improvement, with many marketing executives settling for incremental changes from the previous period.
In this environment, the findings of our Data-Driven Decision Making report come as no surprise. We surveyed over 200 B2C marketers with significant marketing budgets. We found that more than half of them (60%) don’t feel very confident in their teams’ ability to allocate their marketing budgets effectively.
We also found that marketers today cobble together spreadsheets, in-house analysis and agency recommendations. Many simply don’t know the best way to build their budgets; 68% simply use the previous year’s budget and either increase, decrease or level-fund it.
And many of us don’t rely on tools that could help us. Less than half of marketers use key information from marketing mix models (that show the relationship between marketing spend and business performance) and about one-fifth aren’t familiar with these models.
These findings validate what I’ve long suspected, particularly regarding the challenges our customers face: Budget planning is a high-stakes arena where there is little consensus regarding the best way to allocate budget for optimal return.
Three Ways We Can Do Better
Deciding how to spend millions of dollars across different brands and marketing options is challenging. But there are ways to make it easier and more accurate. We found several practices that more confident marketers have in common. Here are three recommendations for how to improve the budget planning process.
Recommendation No. 1: Apply Data To Decision-Making
Using data-driven decision-making helps you understand past performance and get information that improves your confidence in budget allocations. Rather than relying on time-consuming, internal spreadsheet-based analysis, consider implementing marketing mix modeling, multi-touch attribution or another analytic solution to evaluate and optimize spend decisions.
Recommendation No. 2: Use A Scenario Planning Tool
Marketers who have access to software that enables them to run their own simulations of various budget scenarios have the most confidence in their allocations. These marketers are more likely to feel that they are spending their company’s dollars wisely than those who rely on spreadsheets or agency partners to estimate the impact of potential marketing budget allocations for them.
Use a scenario planning tool to forecast the impact of different spend levels in a virtual environment prior to making real-life budgeting decisions.
Recommendation No. 3: Get Support From External Experts
Marketers today realize that to engage consumers successfully they must have an in-depth analysis of the entire journey—both online and offline as well as across devices. As the report details, using marketing mix modeling, multi-touch attribution or another advanced analytic solution to evaluate and optimize budget decisions can give you confidence that you are spending your company’s dollars wisely.
When the expertise, data, analytics, and tools aren’t available within your organization, consider seeking support from external analytic service providers. Selecting the right solution for your organization comes down to your goals and objectives. Consulting with an experienced vendor will help you achieve the insight you need to drive meaningful results for your business.
Turning Insights Into Action
Marketing is getting more complex. As marketers in all industries race to keep up with the demands of the digital era, they look for advice that will help them measure the efficiency and return on investment for every type of investment across channels, business units, products and markets. Using the right tools, technologies and expertise to get a handle on how spend impacts performance may be the wisest decision a budget-planning marketer can make.
For additional insight, download our How Data-Driven Decision Making Improves Budget Confidence and Results ebook.