7 Ways Smarter CMOs Are Defending Their Marketing Budgets

Repeated cuts over the last few years have hit marketing departments hard. Marketing programs are often the first thing to get cut, leaving many teams with shrunken program budgets. This hampers company growth, and if not managed well, can trigger a cycle of cuts and stagnant growth. In fact, Gartner’s 2023 CMO Spend and Strategy Survey revealed that 71% of CMOs feel their 2023 budgets fall short of what’s needed to meet their goals, 75% are struggling to achieve more with less, and 86% are seeing a need to restructure their marketing operations for sustainable results.

We recently explored the challenge of defending marketing budgets at the Demandbase Smarter CMO Forum. Why is it such a hurdle, and what are these Smarter CMOs doing to shift the narrative?

Part I: The Budget Defense Dilemma

The hurdles surrounding marketing budgets stem from the inherent challenge of measuring marketing’s impact, coupled with an incomplete understanding across the executive suite regarding the nuances of how marketing works in the modern buyer’s journey.

Attribution is Difficult: Marketing measurement is hard — and it’s becoming even tougher. In my time at Marketo, tying marketing to revenue was relatively straightforward: we would generate marketing qualified leads (MQLs) and a predictable number of them would flip to opportunities. This made it relatively easy to demonstrate how more marketing investment would yield more MQLs and ultimately more pipeline and revenue. However, today’s complex buying environment — characterized by larger buying committees and longer sales cycles plus more complex dynamics between marketing, sales, and SDRs — complicates attribution since you can’t tie any single marketing interaction to a buying decision. This causes disputes over who sourced opportunities and makes it much harder to draw a direct line between the marketing budget and revenue.

Brand is Especially Difficult: That same buying environment makes investing in branding essential. Only 5% of B2B buyers are in-market to buy at any given time — leaving a massive 95% out-of-market. Unfortunately, many CEOs and CFOs tend to think of marketing a simple transaction akin to a gumball machine — insert money and get immediate pipeline out. However, this is a far cry from how marketing actually operates. The reality is that the impact of brand investments on the business can take 1 to 3 years to materialize and usually in ways that are difficult to measure. This disconnect leads to an underinvestment in branding that leaves you and your competitors fighting over the same 5% of in-market buyers. 

Asymmetry of Activity vs. Results: It’s no secret that marketing and sales are two sides of the same coin. But sometimes, one side gets more attention than the other. Marketing spend is easy to see and measure, since it typically involves specific programs and invoices, but the results of marketing activities are tough to quantify. Sales activities, on the other hand, can be tough to measure, but the results are easy to see: closed deals. This asymmetry leads to a perception that sales investment is revenue-driving and marketing is a cost center.

Limited Stakeholder Understanding: Non-marketing executives, notably CFOs, may not have the patience to understand marketing intricacies, straining relationships and making budget defense a challenge.

PART II: 7 Strategies for Fortifying Marketing Investment 

The discussion at the Smarter CMO Forum uncovered various tactics for defending marketing investments. This section delves into these strategies, ranging from employing benchmarks and showcasing marketing’s influence to aligning budgets to business aims and fostering sales collaboration.

1. Use Benchmarks: Benchmarks are crucial for setting and defending the marketing budget. They show how your investment compares to other companies, and if you are significantly below, that can help make the case for incremental investment. (Just be aware, benchmarks represent averages, so if your business needs to perform above average, you need to make a case for being above the benchmark.) Insight Partners publishes some great benchmark data for SaaS companies, including total marketing spend vs. new logo bookings and marketing as a % of sales & marketing investment, as well as insights on how marketing investment is allocated across programs, people, and other.
2. Measure Marketing-Sourced Pipeline: Many Smarter CMOs, despite the known inaccuracies, continue to use marketing-sourced pipeline to show marketing’s impact. Although flawed, it’s viewed as better than no metric. One CMO uses a first-touch attribution model but resets the first-touch source after 90 days. Other CMOs mentioned that claiming influence is generally smoother than claiming to be the source, and that if marketing plays a role at any stage, whether it be sourcing the deal or accelerating pipeline, then marketing can get influence credit.
3. Avoid Metrics that Reduce Power: I suggest marketers avoid ‘cost per’ metrics (such as “cost per lead”) since that makes it too easy to think of marketing as a cost center. Instead, use metrics such as investment per opportunity or pipeline dollar; it’s a subtle but powerful shift in framing. Other CMOs suggested refraining from discussing “boiler room” metrics that matter to marketing but not to other executives (such as click-thru rates), and instead to focus on core marketing impact metrics such as pipeline generated and revenue influenced.
4. Set Budgets Based on Goals and Segments: Another Smarter CMO approach is to tailor budgets around target market segments and specific business goals, rather than by channel and tactic. This facilitates stakeholder engagement and centers discussions around the business’s goals. One CMO mentioned that it’s particularly powerful to engage fellow executives in a discussion about which segments, products, and regions should get proportionally more or less investment.
5. Partner with Sales: Some Smarter CMOs mentioned that it’s especially helpful when sales leaders advocate for marketing investment since they know that more reps not making quota is a bad recipe. Another suggested that a unified budget for sales and marketing enables flexible investment allocation in tune with market demands and buyer behaviors, especially if you can move investment between marketing programs and SDRs based on what’s actually working.
6. Use Common Metrics: The unique challenge of marketing defending its value to finance could be eased by establishing “generally accepted marketing principles (GAMP),” mirroring the generally accepted accounting principles (GAAP) in finance. This common metrics system could facilitate better communication with finance and enhance marketing’s credibility.

Market Your Marketing: Perhaps the most powerful tactic the Smarter CMOs shared is the need to market your marketing internally. Effective internal communication on achievements and strategies cultivates understanding and demonstrates how marketing strategies align with business objectives. The Smarter CMOs talked about presenting this information at board meetings as well as quarterly QBRs and 1:1s with fellow executives. While it sounds like a lot of work, they all agreed it’s an essential part of the modern CMO’s job.

Conclusion 

CMOs have a tough job. They need to set marketing budgets, but it’s hard to do that when other executives don’t fully understand the complex ways marketing affects revenue. Yet there are ways to make it easier. CMOs can demonstrate marketing influence, align budgets with business objectives, partner with sales, use benchmarks, stay strategic in discussions, and maintain constant dialogue with their peers. If they can do all that, they’ll be in the best position possible to defend their marketing investments and help their organizations succeed.