8 Ways that Real CMO's Cut Their Budget

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by: Alain Thys

I always say that if you gotta’ do something, you gotta’ do it right. And when it comes to cutting marketing budgets, that rule applies as well. Real CMO’s know the question is not to decide how much red ink should be used. They see their challenge in cutting wisely. Reducing marketing spend while keeping sales intact. Ensuring customer loyalty when there’s less funds to please the customer. Building the brand when there’s no cash to do it.

So when they go to work, they apply 8 principles, and I can only advise you to do the same …

#1  Do a thorough media-impact analysis
According to a recent McKinsey survey, only 7% of B2B brands and 17% of B2C brands regularly do a quantitative and qualitative analysis of the effectiveness of their marketing spend (i.e. did we actually make some money from all of this?). It takes a bit of analytical effort and budget, but real CMO’s use modeling techniques to identify those media and messages which don’t contribute to the bottom line. This way they shave 20-30% off their marketing budget without losing a penny in revenues. And as the tools for this have been around for years, they don’t pay much attention to the media and agencies which have forgotten to mention them before.

#2 Replace GRP & SOV thinking with Engagement
Traditional shout & sell marketing creates a lot of waste. First, you need to overshoot in GRP’s to actually reach anyone. Then you have to accept that the majority of those actually hear your message (from the bathroom?), don’t believe your claims. And those who do may not be part of those 8% of shoppers that make up 80% of your sales. Real CMO’s invert this logic. Through customer-centric communication planning (also in B2B!) they reach out with messages people want to hear. They engage in conversations. And in the process are prepared to challenge every traditional belief they or their business might have about marketing.

#3 Align Marketing & Sales.
According to a 2008 study by the CMO Council less than 20% of over 500 respondents have got their house in order when it comes to sales & marketing co-operation. The others have relationships which are best described as "intermittent". But when the blind lead the deaf, accidents are bound to happen. Campaigns get launched without sales support. Sales runs into areas which are not prioritised for marketing attention. And funds go out the window. Real CMO’s know the answer to this is simple. They put sales and marketing teams in a room and alllow no one leave until every marketing penny is connected to a sales initiative and vice versa. The pennies which don’t contribute, get axed. Simple.

#4 Review Your Funnel
And when they’re on the topic of sales, Real CMO’s also review their funnel. How many customers want to buy their product? How many are ready to become loyal? How many are about to leave? And what is the value of each of them? Most companies lack a real-time view of what is really going on in their business and spend money based on assumptions and competitive benchmarks. Understanding the real shape of your funnel allows real CMO’s to rapidly highlight those areas where marketing funds are being wasted, and where – perhaps – they should even spend more. 

#5 Analyse your customer journey
Customers can also help to cut budget. Looking at the customer journey, there are moments of truth and moments where your customer frankly couldn’t care less. But when it comes to cutting costs, most companies treat them all the same. As a result they generate bad savings in some areas, while continuing to waste money in others. Real CMO’s do a journey analysis which really dives into the insights that drive their customers. This allows them to identify those moments that truly matter. These are the areas they don’t cut. But all the others they challenge. Especially as they might find some where their customers are happy the brand stops "marketing to them".

#6 Do a marketing operations audit
While some are exceptionally lean, many marketing departments have eluded the smart purchasing methods and integration we have seen in other business areas. Budgets are fragmented, vendor (read: agency) criteria and briefings are vague, process mapping is limited, the use of technology is virtually non-existant. Real CMO’s know that a "hard" audit of their marketing processes, expenditures and vendor/agency relationships can easily generate 10% in savings, if not more. And as it typically simplifies the work they have on their hands, it even frees up their mind for more creative and strategic matters. 

#7 Challenge marketing funds that don’t delight your customers

Whether they are called promoters or advocates, or something else "very happy customers are more profitable". In fact, during these hard times, they are the ones that will carry your business through the recession. They buy more, are more loyal, negotiate less and – if you’re lucky – bring their friends. That is why real CMO’s focus on creating and activating these "very happy customers". And challenge initiatives that do not achieve this. They help sales teams focus on building commercial strategies on delight, and make sure every ounce of customer satisfaction translates into profit.

#8  Challenge marketing tradition
During times of crisis, people are more open to new ideas. Taboos are easier to challenge. That is why real CMO’s take a fresh look at the marketing trade and challenge the traditions that have stopped making sense. Use the internet to crowdsource their creative campaigns. Cut out media agencies or even media to set up their own communication channels. Reconsider their channel and retail initiatives (how about a flagship in stead of a pointless billboard campaign?). In short, they relook at what they’ve always thought made sense, and find better ways to achieve the same at a fraction of the cost.

#BONUS: A structural agency review
Marketing is in a fine mess and part of the problem is the degree to which the profession has industrialised itself. Many agencies are factories that are more geared to produce adverts than make money for their clients. Many media sell what ever they have in stock, rather than look at the audience a brand is trying to reach. Real CMO’s understand the difficult predicament their vendors face, when they need to reinvent themselves. That is why they ruthlessly review all aspects of agency and media co-operation. But when it comes to acting, are pragmatic in what they request and even supportive in delivering this. This allows them to slowly turn the marketing ship into the right direction.

And as always, if you have suggestions to make these 8 thoughts better, feel free to comment and amend…

Full disclosure:  In my role at Futurelab I or my colleagues act as advisor on all the topics above, so there is a slight bias in my opinions 🙂