Making the Business Case for Your Marketing Budget

The best marketing leaders have a logic based on experience and data, regarding how marketing spending will impact various business activities and outcomes.

This logic should be clearly articulated and justified to other decision-makers, particularly the CFO, so it ultimately becomes a shared logic — one that all members of the senior management team buy into. The idea is to make finance an advisor and stakeholder in the effort, so its buy-in is baked in from the beginning.

Marketing leaders must show their impact on KPIs associated with the brand and customer relationships — and they must regularly track these measures.

Unfortunately, this is not the case in many companies. Most companies need a more regular collection of these metrics.

CMOs often face headwinds when making the case for investments in brand building, which many marketers acknowledge as being especially difficult to measure as compared to lower-funnel activities that are closer to sales and revenue.

CMOs can start by understanding the CFOs’ preference for financial data to assess the success of marketing investments, creating a funnel-wide view of how marketing is delivering value in each part of the funnel and, importantly, demonstrating how it will be measured with clear ties back to business strategy.

Monthly meetings of the senior management team are unlikely to be the best place for making the case for marketing spending, as marketing leaders are not setting the agenda and are unlikely to have the airtime to offer a nuanced and comprehensive view of marketing’s impact.

But it is recommended for this to happen in a setting where the CMO offers evidence and logic for spending while addressing important questions. A side benefit of this approach is that non-marketing leaders will appreciate that marketing is an investment, not just a cost.

The gold standard for building a business case for marketing spending is to run an experiment using a control group that does not get marketing spending.

The goal is to build a strong understanding of the counterfactual — what if marketing spending had not occurred? This might be done in small-scale experiments in the field or in the lab.

Recent research published in the Journal of Marketing finds that satisfied customers are more responsive to brand marketing and sales efforts, more open to future company offers, and more likely to share positive word of mouth — netting, on average, a 3% savings in future expenditures.

This is something a CFO can take to the bank.

According to surveys, 41% of marketing budgets are based on the previous year’s expenses and adjusted during the year if needed, while only 10% of marketing budgets are revisited every month or quarter to meet company objectives.

One reason budgets are not scrutinized more regularly is that metrics are not collected very regularly. Given this metrics gap, how can marketers ask for changes to budgets? Marketing leaders need up-to-date knowledge to drive conversations about budgets.