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The CMO Digest: How to Steer the Marketing Team with a Tight and Shrinking Budget
Written by
Mariam Hazrat
mariam.hazrat
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The CMO Digest: How to Steer the Marketing Team with a Tight and Shrinking Budget

Talk about the world turning upside down. Before the virus outbreak, in the Gartner 2019-2020 CMO Spend Survey,, it was found that 86% of CMOs had reported that future economic and business climates would have positive effects on their organizations’ ability to meet performance goals, and 61% felt marketing budgets would increase in 2020. And now? Well, 65% of CMOs and marketing leaders report they are already bracing for moderate to significant budget cuts due to slowdown.

Cost-cutting and reviewing budgets in the event of global pandemic of this scale isn’t unreasonable especially when you have employees to care for and salaries to pay. As the first step to tighten spending dollars, marketing budget inevitably comes under scrutiny. With uncertainty increasing by the hour, its certain that the CMO’s are asked to cut down costs.

Now when it seems like that the corona crisis is here to stay for a while with more severe consequences, and there’s no time to wait for the dust to settle down before you start planning, here are a couple of steps that can help:

1. Build a Crisis-Management Team

As marketers, we need to now adjust to a very different short-term environment with long-term consequences. Dealing with this in the most efficient manner needs careful thought. Leaders should appoint a specialized crisis management team that would focus on revenue-related activities and implement a cost optimization strategy. The focus should be on the business’s short-term health while keeping in mind the long-term realities and opportunities. Given the degree of uncertainty, the team needs to be agile when it comes to reacting to shifting demands and impacts that corona crisis is causing on the business, customer behaviour, and the economy in general.

To facilitate all this the team of course needs necessary data to review the impact of the expenditure incurred through COVID-19 communications. And also study the potential impacts of reduced or changed marketing activities due to the cost cuts.

2. Make the best use of the available budget

While most of us are tempted to cut down costs we must not forget that ignoring the risks of aggressive cuts do more harm than good in the future. Your focus should be on doing more with the same budget. And it’s important to figure out effective ways to reach and engage with customers, to mitigate the impact on growth owing to the crisis and subsequent cost cuts.

As rightly said, marketing dollars saved today may cost significant business losses in the long and short term. Cutting down engagement efforts now will lead to higher customer churn and poor retention.

The responsibility lies on the shoulders of the CMOs to find a thought-through balance between budget reductions and strategic reinvestment. So instead of cutting costs across the board, CMOs must look for ways to drive efficiency. They need to formulate a new approach that maximizes the effectiveness of current investments and processes and free up resources to reinvest in activities that propel growth in the current scenario. Knowing where to focus is the key to managing the crisis and here’s what you need to do:

  • Optimize expenditures – Know your priority customers. Who they are. Where they are. When they want to be served. And how they want to be served. Look for overlap in agency or martech platform contracts, reduce or postpone business obligations that won’t bring value in the current environment. Also, evaluate low-cost marketing channels (emails over SMS/push notifications) with better-optimized marketing messages.
  • Don’t stop investing in innovation – Focus on investing in next-gen marketing capabilities and innovations. Establish a dedicated budget to fund an always-on testing discipline so you can continue to innovate in challenging times. Also, make the most of customers’ strong shift to digital by building a best-in-class customer data infrastructure to better understand your customers’ needs, behaviours and preferences. These investments help in faster recovery from the current slump, and boost the organization’s immunity to crisis situations.
  • Keep a close tab on performance and effectiveness – At times, while focusing too much on improving spending efficiency we end up jeopardizing the spending effectiveness. Look beyond baseline effectiveness metrics. Get rid of the low-ROI activities. Re-invest in the high-ROI activities to minimize your opportunity cost of reduced spending as measured in lost or delayed revenue.

3. Respond to scenarios swiftly

No one had a playbook with a winning formula to deal with a crisis like this. Given the high degree of uncertainty in the foreseeable future, long-term planning is not on your to-do list. But CMO’s need to make near-term cost corrections and respond to the impact of COVID-19 on marketing budgets through swift and decisive action. Create flexible and adaptable budget scenarios and conduct reviews of how the pandemic may impact marketing functions in the near term. But don’t lose sight of the long-term marketing and enterprise goals.

How to Negotiate The Budget With Your CFO

While all the above do’s and don’ts and tactics come in handy, another challenge that stands before the CMO is getting the budget sanctioned from the CFO in the next few quarters (or more). While the health risks associated with the pandemic could be contained in the next couple of months, its impact will be looming over the business world through this year and into 2021. Budgets will continue to be tight and you will be expected to deliver higher results with these low budgets.

As CMO’s very well know it, the impulse at such times is to make broad cuts in the marketing budget. But the question is, why does marketing budget come under the scanner during tough times?

The ROI on marketing spends is not directly visible and immediate, it is hard to establish a direct and linear relationship between the marketing spend and performance. And underlining the bottom-line impact of marketing is complex because of a number of factors, including shifts in consumer behaviours, thinly distributed customer attention across channels, rising media and advertising costs, etc. But this is no way implies that there is no impact.

The moment you put a plug on your marketing efforts you’re putting a halt on the communication that happens between the business and the customer. This is definitely not good for your overall business in the long-run. While marketers will agree to this, the real challenge is in finding a common language between marketing and finance to make a strong case for marketing effectiveness and to reboot the CMO-CFO relationship.

Not everyone understands the nature of marketing, the costs associated with it and the risk involved if you compromise on your marketing efforts. There’s plenty of data out there to prove the worth of marketing at the time of crisis. Here are a few pointers that would be in your favour when you vouch for marketing budgets.

  1. Explain the areas you need to prioritize in the current economic situation – Point out the key customers and segments, stages of the funnel, channels and moments that need attention. Stress on the potential threats that require immediate action. Chalk out your plans to take immediate actions to support short and long term growth.
  1. Lay out the roadmap not only for survival strategies but also the future goals – Convince the CFO that companies that win in downturns don’t just play defence, they play offense as well. Identify the avenues where doubling down now can boost growth during and after whatever lies ahead.
  1. Compare and analyse ROI of different investments – Your CFO wants to talk numbers and you give him that. Analyze investment categories to compare the relative ROI of different investments, and prioritize both opportunities to drive efficiency in nonworking and working money categories. Use data based results to back up your analysis.
  1. In the present situation, do not miss out on making your case for redirecting funds from commitment to events, sponsorships, and meetings that have been cancelled and aren’t going to happen anytime soon. Explain the importance of an increased focus on digital channels to pick up the slack.

And while CMOs are often not as adept at assessing risk, CFOs are often not as comfortable at assessing the risk of not acting. By collaborating on both sides of risk, it is more likely that the firm can land on a more effective decision.

Final Thoughts

The current budget challenge that has terrified marketing leaders around the world and across companies, is definitely not the last one. But by taking these immediate actions, CMOs can better ensure that their organizations remain nimble and adaptable in the face of uncertainties that are yet to come our way.

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