Marketing Budgets Increase! Are You Allocating Wisely?

The economy is getting better, right? The answer is still not crystal clear. Yes, the DJIA topped 11,200 last week, but unemployment is still hovering near 10% in the US. The economy has reset expectations for all of us in our personal and professional lives. The idea of doing more with less is now a long-term business strategy versus a short-term mandate. Or is it?

Our data shows that marketing budgets are growing for many marketing leaders, but budgets may take years to return to “normal” (e.g. pre-Great Recession). We read every day in business journals about “the increased need for accountability in marketing.” CMOs have more measurable data and analytic tools today, but are we really making better strategic marketing investments?

In our February 2010 marketing leadership panel survey, we asked: Which of the following best describes your 2010 marketing budget compared to your 2009 marketing budget?

Most marketing leaders see steady or increasing marketing budgets. Thirty-seven percent state their budgets will increase in 2010 versus 2009. Another 35% of marketing leaders see budgets remaining the same as last year. The smallest percent -- 27% -- are working with reduced budgets.

Regardless of your budget situation, marketing leaders must continue the shift towards managing marketing as an investment versus an expense. CMOs will likely influence or own more technology budget as marketing shifts to digital and emerging media. Marketers are working more every day with IT and corporate finance on capital budgeting processes for new technology investments like listening platforms.

Two keys to success in this era of increased accountability are for CMOs to:

  1. Manage customers and brands for profit. Forrester has written about Customer Lifetime Value (CLV) in the past as a key metric for marketing leaders. The typical CLV equation calculates total value to date but does not include brand metrics. New services and software are now allowing CMOs to measure the value of customers based on their individual CLV and Customer Brand Value. Sometimes brand value is not measurable at the customer value, so marketing leaders rely on segment or cohort value instead. But this is a milestone as marketers can now measure the impact of brand efforts on total customer value.
  2. Invest in a new generation of Media Mix Optimization (MMO) tools. Marketing leaders today, more than ever, must determine how best to spend $1 in marketing/advertising budget. Many marketers and vendors believe MMO is the key platform to help marketers pull and push the right levers for profitable growth. Forrester has also written extensively about media mix optimization and modeling. MMO grew up in CPG as brand marketers like P&G and General Mills tried to measure the impact of media mix on sales. Over the past ten years, MMO has spread and delivered ROI to nearly every major sector including financial services, insurance, retail and hospitality. The emergence of social and mobile marketing customer data provides another input.

Please help me answer the two key questions raised here:

  • Are you managing customers and brands for profit?
    • If so, how are you using total customer value, customer engagement value and customer brand value in your marketing investment decisions? What measures are you using to benchmark success?
  • Are you leveraging MMO to help you make strategic marketing decisions?
    • If so, what type of results have you had? Are they informing further investment in MMO? Are you adopting new algorithms with the changes in how consumers spend their media consumption time?

I am working on two documents in May on these subjects. Please comment below or email me at cmitchell@forrester.com if you are willing to share your thoughts and opinions. Please answer the polling question too.

Thanks,

Chad