3 reasons why your Marketing budget is under threat -

WHAT IS THREATENING MARKETING?

Proving the value of Marketing is becoming a daily uphill battle, not just for agencies but for the marketing teams within businesses. Think about how often marketing budgets are reduced because businesses are struggling with rising costs of manufacturing, economic challenges facing consumers, and/or unpredictable consumer behavior.

This doesn’t happen because it is ineffective, but because its impact is misunderstood, or worse, invisible to decision-makers. There’s an educational job to be done here, but all that requires time. Which, ironically, is also the reason why this problem exists in the first place.

WHAT IS THE CAUSE?

Different stakeholders measure Marketing success in different ways, at different times, and over different reporting cycles.

Every stakeholder walks into the room with a different view of what marketing should deliver and by when. Everyone’s chasing results, but the clocks they’re watching aren’t ticking in sync. This misalignment creates confusion, leaving marketing efforts undervalued and misunderstood. The different stakeholders measure success in different ways, at different times, and over different reporting cycles. This fragmented view distorts the true picture, and the consequences for the marketing teams are dire – lost credibility, lost budgets, lost opportunities.

WHAT MARKETING TEAMS NEED TO CONSIDER

To explore this further, let’s start here: Good marketing doesn’t just convert, it grows a pool of potential buyers, it inspires greater loyalty from existing customers, and enables well-marketed brands to command a price premium. Beyond this, with ever growing new brands entering different categories, good marketing is needed now more than ever, to protect against the frickle consumers that exist today due to choice & access.

Brand-building budgets specifically, are usually the first to be reduced. The reasoning seems logical: unlike performance campaigns (volume drivers), it can be difficult to attribute immediate sales growth to brand activity (always on). However, reduced brand investment weakens consumer preference over time, requiring ever-greater promotional spending to maintain sales volumes. The long-term sustainability of the brand becomes compromised.

VOLUME DRIVERS VS ALWAYS ON

To stay relevant, brands need to apply the “rule of three”, a theory by Herbert Krugman. The theory that three exposures are optimal for advertising effectiveness, with each serving a distinct purpose: first to create awareness, second to demonstrate relevance, and third to reinforce the message.

In most cases, the rule of three isn’t possible over a period of 3 months, which is the typical period for performance campaigns (volume drivers). This is a continuous exercise which when one part of it isn’t done correctly, the rest suffer. This is why brand activity is critical.

BUT, finance teams report in quarterly cycles and volume drivers are campaigns where it is easier to attribute growth in sales to, and as a result, these campaigns remain preferred.

However, research shows that the long-term sales impact of media investment during months 5-24 typically equals that of the first four months.

In essence, while short volume drivers do drive higher impact on sales, brand activity not only drives sales but also contributes to how well those volume drivers perform when they do happen. A volume driver on the back of a quiet period is a lot less impactful vs one that has always-on brand activity.

What drives even further disconnect, is the fact that long term brand measurements are costly, and time consuming, while for volume drivers impact is visible in a short space of time. That doesn’t mean brand activity isn’t effective, but rather it gets lost in the panic and excitement of it all.

SO WHAT NOW?

It’s time to lean on measurements. Yes, they may be costly and sometimes very time consuming, but you will thank yourself in the long run. Consider doing some measurements, even if to align the thinking and expectation of all stakeholders. Once everyone is aligned and understands the impact of all the different types of marketing, you can go back to the usual measurements as required.

Beyond that, there needs to be better alignment between key stakeholders. The callouts below illustrate what both teams think about the level of alignment when doing marketing plans. There clearly is a need to improve.

61% of finance teams agree that finance and marketing have a shared understanding of the company’s marketing strategy. Only 43% of marketing teams agree with this.

71% of finance teams say budgets approvals are collaborative. 67% of marketers agree.
61% of finance teams say they collaborate with marketers when decision about marketing investments are made. Only 43% of marketing teams agree with this.
68% of finance teams say they share insights with marketers regularly. Only 48% of marketing teams say this happens.

While it’s not a size fits all type of situation, one thing is clear … finance and marketing need to bridge the gap. Agencies are critical in ensuring the brand teams are bringing the right data to these conversations, and we should start looking at how we can better empower our clients.

That’s it, I’m done. You can go on about your day.