Why Analytics should help your CMO achieve zero-based budgeting
One of the key responsiblities in many Analytics or Data Science teams is analysing Marketing Spend.
Ideally this is not just retrospective, but includes forecasting (or prescriptive analytics to use the buzzword). Providing such an independent assessment & guidance to a CMO can be one of the key ways an Analytics team proves its value add.
So, I am delighted to welcome Peter Abraham as a guest blogger to talk us through the best practice that he recommends. Peter comes from the same We Are Crank agency as our existing guest blogger, Ben Salmon. In this post he shares the results of their latest research report on this key marketing need.
Over to Peter to spill the Marketing dirt, with research that uses wonderful names for segments of marketers (from Legends to Loafers) responsibilities
Zero-based budgeting for Marketers
Forecasting, or better still zero-based budgeting, is a method of planning your marketing spend with a clean slate at the beginning of the year and then monitoring performance regularly, rather than basing it on what has gone before.
It is emerging as the model of choice for many firms, including Unilever and Diageo, as it allows marketing teams to think deeply about what will drive value in the year to come, instead of relying on assumptions – a risky approach in a rapidly changing market.
Despite the efficiency and flexibility offered by forecasting and zero-based budgeting, the research shows that there is still a large gap between those that do forecasting and those that are just being handed a budget to spend.
For this research, we designate marketing teams that are adopting best practices in the area of budgeting and associated activities as ‘Legends’ (i.e. Leaders) and their less sophisticated counterparts as ‘Loafers’ (i.e. Laggards).
Do you enable your CMO to control their budget?
Half (50%) of respondents labelled as ‘Legends’ have total control over forecasting, compared with 18% of Loafers, who are more likely to have their budget set by someone else and handed to them.
Why are some marketers not taking control of their own budgets? It may be due to current internal work processes, or because some marketing teams do not want the responsibility of owning a target. It may also be that marketing departments that are very brand awareness-focused have become responsible for the
Key findings from the report include:
- 27% of Loafers never revisit their marketing forecast, while more than 90% of Legends revisit theirs more than twice during the financial year.
- 72% of Legends allocate more than 20% of their marketing budget to digital, compared with only 27% of Loafers.
- Loafers use benchmarking a lot less than Legends, who collaborate more, use published data and subscribe to a benchmarking platform.
- 55% of Loafers tend to use Google Analytics for basic metrics such as traffic volume, which is a rudimentary measurement, while Legends prefer to measure performance by using multi-channel funnels (in Google Analytics).
Do you influence your CMO to use the metrics they need?
Legends are better at identifying the best KPIs and metrics. They have a better understanding of measuring ROI, they use benchmarking, and they build forecasts which they revisit on a regular basis, not just once a year, continually adjusting, improving and investing or re-allocating.
In the last financial year, revenue from digital channels increased by more than 10% for more than 57% of Legends, while for 46% of Loafers it remained more or less the same.
Addressing the concerns of your CFO with zero-based budgeting
Financial officers are frustrated at the lack of commercial competence in marketing. This was evidenced in a 2014 report by Marketing Week which reported 83% of marketers were unable to quantify ROI, not only that but 49% of marketers insisted on being handed more control of the financials.
Financial officers expect marketers to:
- Understand commercial objectives
- Create realistic forecasts and predictions
- Have more accurate reporting, KPIs and metrics
The role of the CMO, and in some cases Heads of Digital, has expanded to include
More senior marketers are accountable for supporting sales channels and driving more measurable sales outcomes deeper into the sales funnel.
Our report looks at some of the behaviours that characterise Legends, how forecasting can deliver greater efficiencies, and suggest how you can adopt a better approach within your organisation.
What will you do about zero-based budgeting for Marketing?
Thanks to Peter for that blog post. You can download the full version of their research report here: “DOWNLOAD free guide”.
What about you? Are you aiding your CMO in proving the financial accountability of Marketing, through your Analytics work? If not, could such a partnership help you both prove a clearer ROI.
If you have already achieved a more financially accountable Marketing team, through your use of Analytics, I’d love to hear from you. Please contact me & we can discuss a future blog post or audio interview.