How Do You Set and Justify Your Marketing Spend?

October 4, 2021

CMOSurvey Making Case for Marketing Spending Oct2021While about 7 in 10 CMOs believe that the role of marketing has increased in importance over the past year, many also feel increased pressure to prove the value of marketing to others in the C-suite. The latest report from The CMO Survey reveals that 59% of CMOs are feeling more pressure to prove marketing’s value to the CEO, while 45% feel they need to prove as much to the CFO.

CMOs in the B2B Services sector look to be under the most pressure to prove the value of marketing to their CEO, with 68% saying as such. Likewise, an above-average share (52%) of CMOs in the B2C product sector feel increased pressure to prove marketing’s value to their CFO.

Setting Marketing Budgets

Amid this increased pressure to prove marketing’s value, it’s instructive to see how marketers go about setting their budgets. The most popular approach is that budgets are set on a yearly basis based on the previous year’s expenses and adjusted during the year if needed (41%). In fact, a plurality of companies across most sectors follow this approach. The only exception is the B2C Services sector, where the largest share (44%) build their marketing budgets from scratch every year, based on new needs and objectives. This is otherwise the second-most common method for setting budgets (from the list of 4 provided) for CMOs overall.

The survey shows that, as of August, marketing expenses account for a rather steady 12.1% of companies’ overall budgets. However, echoing findings from research from Gartner that shows that marketing budget’s share of company revenue experienced a steep decline, The CMO Survey reports that marketing expenses currently account for 8.6% of companies’ revenue, down from 13.2% in February 2021.

Making a Case for Spending

CMOs expect marketing spending to increase by a hefty 13.4% in the next 12 months. At 16.9%, B2B Services companies are expecting to see an even larger increase in the coming 12 months.

If the pandemic has highlighted anything in the world of marketing, it’s the impact that digital marketing can have. In the last 12 months, the CMOs surveyed say digital marketing spending has increased by 15.8%. The double-digit increases are expected to continue, with respondents estimating that digital marketing spending will grow by 14.7% in the next 12 months.

When trying to make a case for their marketing spending, the most common behavior senior marketers say they exhibit is building a business case based on how marketing spending is aligned with business priorities and strategies (1.9; based on a scale of 1 to 5 with 1 being “all the time”). This is followed by setting reasonable expectations about how marketing spending will influence returns (2.1) and explaining marketing’s hypothesis about the impact of spending (2.2).

On the other end of the spectrum, senior marketers are less likely to build a business case for marketing spending based on financial returns (2.4) or by showing the impact of marketing spending on intermediate KPIs such as customer or brand outcomes on the way to financial returns (2.5). The least common justification is to run experiments to make the case for the impact of marketing spending (2.8).

The full report can be found here.

About the Data: Findings are based on an August survey of 282 top marketers at for-profit US companies, 94% of whom are VP-level or above.

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