7 Tips So CMOs Spend Their Budgets Right
On average, CMOs spend 12% of their organizations’ money on marketing each year, with the education vertical peeling off the most, at 18.5% of total revenue; and mining and construction at 2%, says Steve Olenski in a Forbes article. Here’s how he says CMOs should manage their marketing budgets.
While July may seem early to be evaluating how CMOs spend their budgets, his contributed piece on Friday does roughly coincide with fiscal years and research prescient CMOs are doing for year-end talks.
Olenski, whose Forbes bio says he’s the “CMO Whisperer,” recommends CMOs spend their marketing dollars as so:
Treat the Organization’s Budget Like You Treat Your Personal Budget
Olenski says CMOs already know the basics about how to be fiscally responsible. He adds a quote from Ken Rees, CEO of Rise Credit:
"You should be painfully aware of how much each strategy costs you, both in the short-term and long-term, and have a plan for variances in each strategy," Rees says. "Every month, you should skirt close to your upper limit — but never quite touch it."
CMOs Who Do Not Learn From History …
Olenski suggests CMOs spend some time before they spend money analyzing their past efforts and results. Which efforts yielded the highest return? The least?
He says: “You can research your competitors and broad market statistics as much as you’d like — nothing will beat the relevance of your company’s own historical data.”
CMOs Citing the Underperforming Budget Items Can Eliminate Those Strategies
Olenski says many marketers are afraid to cut strategies that once worked, for instance. But they must. Olenski says:
“You can’t be afraid to cut the losers — the strategies that are underperforming — no matter how much potential you believe they have. This may be why we’ve been seeing steady declines in the amount of ad spend on TV, with 2018 spending expected to represent just 31.6% of all ad spend. If it isn’t working, it isn’t worth your continued investment.”
Don’t Be Afraid to Fail
After CMOs remove the previous year’s losing efforts, they should add back in “experimentation” as a strategy for 10% of the marketing budget, Olenski says. He says that number can change, depending on a CMO’s risk tolerance, how promising the prospects are, etc. He says, “how else could you discover a new strategy that has the power to improve your overall ROI?”
Don’t Put All of Your Budgetary Eggs in One (AdWords) Basket
CMOs spend 5% or less per security or asset in their investment portfolios; marketing budgets should be no different, Olenski says.
“You might consider a similar approach, though the 5% figure might be too restrictive (especially if you don’t have 20 different marketing strategies to spread your funds into). Diversification is, after all, just as important in marketing and advertising. Balance your long-term strategies with your short-term strategies, and avoid funneling everything into one channel — even if it comes with a high ROI.”
Penny-pinching should be a marketing team manifesto, Olenski says.
“Can you get a better price with a different agency? Can you get similar exposure using a cheaper channel? Do you really need that automation tool that costs hundreds of dollars a month? Spending less for the same results means a higher ROI — and freed up money to spend elsewhere.”
CMOs Spend Their Budgets and Need to Then Focus on ROI
ROI is more than money out, money in. Olenski says CMOs should first figure out what ROI means to their organizations. He asks:
“Should you consider immediate value, or lifetime customer value? Should you incorporate the costs of peripheral strategies that are supporting a niche-focused effort? Do your best here, and calculate ROI consistently for all your strategies, so you can compare apples to apples and identify the best tactics for your brand.”
What do you think, marketers?
Please respond in the comments section below.
Related story: 5 Tips CMOs Can Use to Improve the Customer Experience