Whether it’s smoothing out your marketing budget approval process, building trust with your key budget-approving stakeholders, or pushing back on budget cuts, here are four approaches that will help you justify an increased marketing budget - and likewise meet or exceed your performance goals. Depending on your unique needs and situation, choose just one or layer on all four.
1. Get involved in the marketing budget process early.
We only have so much time. Working against the clock is no way to make good decisions. Collaborate with others or pave the way to leverage your data. Here are a few tips to help prepare busy marketers for budget season (early):
Track as you go - all year long.
Don’t wait until it’s time to ask for money to start collecting data on your marketing budget. Set yourself up for an easy win and collect data as you go.
Create a simple spreadsheet that includes the following on a monthly basis:
- Actual budget invested
- Organizational Assets (or Profit)
- Percentage of Assets (or Profit) to Marketing Budget to Profit
- KPI Goal(s)
- KPI Actual(s)
- Percentage of KPI Target Hit
This tool will help you use data to tell the story of your year as you plan for what comes next. Likewise, it will also be helpful when it comes to setting realistic goals and accountability with your staff and key stakeholders.
Know your data.
There are three key data points that you should have a handle on. Knowing these will help you make smart decisions and evaluate your current spending, while also planning for your future marketing budget.
The key data points you should know are:
- Cost Per Acquisition (CPA) - how much does it cost you to meet your goal? For example, does it cost you $200 in advertising to get a new customer?
- Lifetime Value of Acquisition (for example, if you are selling loans, the value of a new car loan might be $500 over the life of the loan)
- Return on Ad Spend (ROAS) - how much money did you make from the money that you spent?
If you don’t know these key data points, get with your digital team or agency to help you figure them out. Make sure you’ve got Google Tag Manager and Google Analytics set up correctly to help you track values.
At Edge, we compile a Data Warehouse each month for our digital marketing clients. This hugely valuable information helps us see trends and costs, and to look back as we look forward.
Review changes in costs.
Are you focusing on a few keywords in digital search advertising? How has the cost for those keywords changed since the beginning of the year? Keeping tabs on costs like these will help you know where to look to get data quickly when you need it.
If it’s costing you more to retain your marketing team, facilitate events and promotions, pay for advertising hard costs and consulting, etc., those costs should be factored into your request to increase your budget.
Spend the money.
Lastly, spend the budget you’ve been given! If you don’t, it will be assumed that you don’t need it to accomplish your goals. Going backwards to justify lost budget is much more work than actually spending what you’ve been allocated. So spend it!
2. Leverage the knowledge of your marketing partners.
If your marketing partners are worth their salt, they will have a wealth of useful information at the ready for you to dig into and build your case for an increased marketing budget. Don’t be shy about tapping into their knowledge, data, and insights to support your ask.
These partners can be your traditional or digital media outlets, your digital or ad agency, a consultant, or any combination of the above.
Questions to ask your marketing partners
If you have an agency, they can compile this information and save you the legwork:
- Historical spending - how much have your competitors spent historically?
- Spending trends - are clients spending more on average, less or about the same as previous?
- Creative examples (ideas for your organization as well as historical creative that competitors have run)
- Blind data - how do you stack up next to competitors in your field? Your partners may not be able to share names, but they could provide a total spend number and what your percentage of that number is. For example, if you are selling new cars, how much money is being spent by car dealerships? How do you stack up?
- Competitor activity - how many of your competitors are active with your advertising partners? If you’re the only one, then you have 100% share of voice, but why aren’t your competitors competing in that medium? Might be time to look at strategy.
Things you can ask your digital marketing agency for:
- What is my cost per acquisition? How is that CPA trending?
- How does that compare to the previous year?
- What keywords or keyword phrases are we targeting?
- What keywords or phrases are trending up or down?
- What target demographics are performing well for me?
- What target demographics are increasing versus decreasing? (Example: You might want to grow your impact with a younger demographic, but seeing that your marketing really resonates with adults 50+ will tell you that your strategy needs to be adjusted.)
- Are there any lifestyle factors that stand out? (Example: The agency has noticed an audience affinity for boat owners, which could lead you to include boats in your creative, or create a product that appeals to people who own boats.)
- What is my return-on-ad-spend (ROAS)?
- What’s new? It’s important to remember that everything was new once. Digital ads were new, video ads were new, connected TV was new. So ask, “What’s new?” “What tactic should we be positioning ourselves to try in the future?”
Compiling the data from these sources will paint a telling picture of where you’ve been - and where you’re at - and then help you forecast where you want to go.
3. Retrofit your marketing budget KPIs with the cost to reach them.
Being asked to grow a specific metric by a specific amount is a great approach to prove your marketing budget request is not only valid but absolutely necessary.
Let’s use the example of growing membership at a credit union. If the goal is to add 450 net members in the course of a year, what will it take to acquire that number? (The net membership number allows for attrition.)
If the example credit union has been doing digital marketing for at least a year and has Google Analytics and Google Tag Manager set up to help track results, they can use this data to determine how much it will typically cost to acquire a new member.
Comparing digital metrics and marketing budget
If you know what it costs to acquire a new member/customer, and your net membership goal for the year is 450 members, what will you need to spend to get there, accounting for attrition?
Here is a simple formula you can follow:
Target net new members + Typical annual attrition = Total actual members needed
Total actual members needed x Cost per acquisition (CPA) = Total budget needed
Let’s put some real numbers in here to help demonstrate this formula.
450 (Target goal) + 120 (Typical Annual Attrition) = 570 Total actual members needed
570 (Total actual members needed) x $150 CPA = $85,500 (Total digital budget needed)
In this scenario, to achieve the goal of adding 450 new members, it will likely cost $85,500 in digital advertising focused on acquiring members. Similarly, other goals in play (like adding loans or other products) would require an additional marketing budget, following a similar formula to the above.
What if I don't have digital metrics?
If you’ve never done digital advertising, you can still take these steps. What did it cost in advertising and promotions to grow the membership you did in the past membership cycle? If you don’t have digital data to lean on, it would make sense to average the past three years so that you can avoid any anomalies.
That formula would look like this:
Target net new members + Average annual attrition = Total actual members needed
Average annual cost over past 36 months ÷ Average number of new members acquired over same period = Average cost per acquisition (CPA)
Total actual members needed x Average cost per acquisition (CPA) = Total budget needed
With this data in hand, you can compare your budget expenditures against your KPIs and determine what it will take to meet your goals for the next cycle.
4. Keep your Key Stakeholders Updated, and Keep it Simple.
Marketing can be a mystery to many. To those who love data, marketing can seem fluffy and fun. That’s why it’s important to have your data organized and be able to speak to your boss and/or your board in a way that they will understand.
Those who are in the thick of marketing everyday know how complex it can be. So, keep it simple and provide analogies that resonate with your target audience: your boss and your board! For example, put your marketing skills to work to help communicate what you are doing, how you are doing it and what it will take to meet the goals that are put before you.
Simple things to share with key stakeholders
- Changing marketing costs
- Field of competition (What are your competitors spending? Where are they spending?)
- Changes in competition (new to market, exiting market)
- Market changes (population adjustments, shifts in demographics, psychographics, etc.)
Here's an example of how to present the data:
The cost to compete for the keyword phrase “mortgage loans” has increased by 50%. Additionally, three of our competitors are advertising aggressively with outdoor ads on billboards. On top of that, a new loan provider has moved into the market and built a fancy branch. And, we’re seeing a dramatic increase in the younger affluent side of our target audience. This may have something to do with the expansion of high-tech employers coming to the area.
With each of these market shifts, you can put a few bullet points together to help substantiate what you need to accomplish the goals set before.
Last, but certainly not least, leaning on other sources of authority always helps to solidify your point. Use market resources like industry publications, Google Trends, and general market data (like inflation numbers or cost of goods) to underpin your marketing budget story and ask.