Making the Case for Your Marketing Budget in Turbulent Times

Veteran CMOs are familiar with the following scenario: The economy wobbles, companies consider cutting their marketing budget, marketers protest, industry groups produce reports showing why companies shouldn’t do that, then companies more or less do it anyway. Well, as 2023 begins, marketing budgets are under pressure once again. GroupM, WPP’s media buying business, and Magna, IPG’s intelligence unit, have each lowered their 2023 U.S. ad spend forecasts. According to a recent global survey from marketing intelligence firm WARC, 2 in 3 marketers expect a recession will have a significant impact on their strategy. "It's the topic among CMOs: How am I going to convince my CEO and CFO to invest in marketing and not cut my budget?" said Pamela Forbus, chief marketing officer of Pernod Ricard North America, the spirits maker behind Kahlúa, Absolut and Jameson. If the evidence indicates brands do more harm than good by shrinking marketing efforts during an economic downturn, why does it keep happening? Where is the disconnect? Interviews with analysts, consultants and marketers themselves suggest one possible answer: CMOs aren’t skilled at defending their budgets to their CEOs and CFOs during recessions. They aren’t persuasive in proving their work generates a return on investment. They don’t speak in terms that sway anyone—aside from other marketers. “The CFO has other metrics of business success they worry about beyond marketing,” said Tina Moffett, principal analyst at research firm Forrester. “A good marketing leader understands the dynamics of the business and can tell the story of how valuable marketing is within that context.” In other words, CMOs need to help their CEO, CFO and other members of the C-suite understand the value of their work beyond short-term revenue growth. They need to build a business case that is not only compelling and easy to understand, but also engenders trust and confidence in marketing for the long term. Four guiding principles can help marketing leaders achieve these goals. Build the business case based on data To prove the impact of marketing spend, CMOs must be expert storytellers. That work starts with a proper framing of past data, which suggests reducing advertising dollars during a downturn is a mistake. Sometimes maintaining ad spend is wise since a brand sticks out more amid a dearth of commercials from its competitors. Sometimes raising it is even better. Sometimes it costs less to keep customers during the bad times than trying to win them back as the economy recovers. “There were a lot of lessons from 2008 that said brands that continued to invest, whether it was advertising or other ways, outperformed those that didn’t,” said Mary Zalla, global president of consumer brands at brand consulting and design firm Landor & Fitch. According to recent research from WARC, it’s misguided for companies to scale back on advertising during a recession featuring high inflation—like the one that may occur this year—because advertising enhances brand equity, which impels shoppers to accept paying higher prices. Without a distinction in quality, consumers will be tempted to purchase the cheaper private-label version. “It’s almost more important to keep marketing during this particular recession than in a normal recession,” said David Tiltman, WARC’s svp of content. Learn to think—and speak—like a CFO But, again, none of this matters if CMOs can’t turn other C-suite members into converts. “While the advice is solid and well-founded, it is also often ignored,” noted Tiltman, who pointed out it’s less stressful for a company looking to reduce costs to run fewer TV commercials than close a factory. The problem might be in the language CMOs are using to defend their budgets. Forbus explained some CFOs view marketing data and attribution models as “black box” science. “They don’t believe it,” she said. One approach to overcoming this obstacle involves CMOs moving away from marketing jargon, which may have currency in some circles, in favor of vocabulary that appeals to those with the power to increase or decrease the marketing budget. That means explaining how ad campaigns and event sponsorships affect financial metrics, such as volume, price and mix. It’s about linking brand power to a company’s stock performance. It can also entail embracing the jargon of other executives. “If marketers can start talking the language of pricing, price elasticity and price premiums, they’re much more likely to cut through at a board level than talking about future brand sales because pricing and margins are currently some of the things keeping the CEO and CFO up at night,” Tiltman said. Jason Galloway, who leads KPMG’s U.S. marketing consulting business, said marketers often come to him frustrated about budget cuts. They’ll show him healthy numbers for popular marketing KPIs, such as brand awareness or social engagement, and express confusion over why the CFO doesn’t seem to care. To Galloway, there’s not much mystery there. “If you can’t connect your brand metrics to the bottom line, they don’t matter,” he said. The Marketing Accountability Standards Board (MASB), an organization designed to set and maintain guidelines for measuring how marketing drives growth, has been fighting this since its founding in 2007. Brand and consulting veteran Joanna Seddon, who serves as MASB’s CEO, described the group’s purpose as intended “to change perceptions of marketing by turning it into a language that CEOs and CFOs can speak and understand.” Its mission remains ongoing. A recent report from MASB implies CMOs, as opposed to chief financial officers, are the real asset managers at brand-centric companies. “Even if only partly true,” the authors wrote, “it calls into question the board compositions of many companies—which tend to have few, if any, marketing experts—and the pervasive lack of CMO participation in quarterly earnings calls.” Be aware of the CEO perception gap Some of this might stem from a larger issue, which is that CEOs don’t think too highly of CMOs. Why give a marketer more money and authority if you think they’re going to waste it? According to a survey of 150 CEOs at U.S. companies with at least $250 million in annual revenue commissioned by full-service independent ad agency Boathouse Group, the majority of chief executives give their top marketers a B on overall performance. More CEOs handed out Cs than As. Questions about a CMO’s ability to drive growth and translate company goals into marketing goals also received mixed grades. John Connors, CEO and founder of Boathouse, said some of these weak results are due to the incongruous agendas of marketers and other corporate leaders. While CMOs often state they’re all about the consumer, Connors explained, CEOs are focused on investors, employees, government regulators and consumers, among other stakeholders. “The CEO’s not looking for marketing’s definition of performance; the CEO is looking for the CEO’s definition of performance,” he said. Or consider the average time CMOs dedicate to one company before moving on to another is now 40 months, according to executive search and leadership consulting firm Spencer Stuart. That’s the shortest duration in more than a decade. CEOs, by comparison, stay in their roles for an average of 85 months, more than twice as long. Why is this the case? Some CMOs might be well liked, super successful and in high demand. Others probably aren't, and are asked to leave. "The CMO has the shortest tenure of any C-suite executive, and it's because they don't speak the same language as everybody else," Galloway said. It could also be that turnover rate stems from poor job descriptions and unclear expectations, meaning everyone’s at fault. Whatever the reasons, a short tenure can cultivate a short-term mindset, which leads to less credibility and more job hopping. “CMOs are too often in a resume-build mode when they arrive, which worsens their reputation,” Connors said. Establish collaborative relationships with the C-suite Because much of marketing deals with human emotion, psychology and behavior, it's harder to put on a balance sheet than, say, the number of forklifts in a warehouse. It can be difficult to always know what's working and what's not. Marketers can use this to their advantage since a good way to prevent budget cuts and convince others to accept your ideas—i.e., market yourself—comes down to being a decent human being who works hard, exhibits humility and treats colleagues with respect. Maybe it’s obvious, but KPMG research showed companies produce better results when the CMO has a good working relationship with the CFO. Galloway therefore advised marketers to “make the CFO your best friend.” Charisse Hughes, chief brand and advanced analytics officer at the Kellogg Company, said open and ongoing communication with her CEO and CFO is crucial to educating them on the value marketing brings to the company. And that doesn’t mean limiting conversations to just the victories. To do so would invite suspicion and doubt. “As much as it’s about celebrating the successes, it’s also about sharing the learnings when you fail,” said Hughes, who noted the maker of Pringles and Frosted Flakes is dedicated to strengthening its marketing muscle through a test-and-learn approach. “There’s going to be some things that won’t work.” At Pernod Ricard North America, Forbus is a living example of this guidance. As a first-time CMO coming from a background in data analytics, Forbus is close to her CEO, Ann Mukherjee, who joined the company in December 2019 and recruited Forbus about six months later. The two spent a decade working together at snack and beverage giant PepsiCo. Mukherjee also has experience working as a CMO at PepsiCo and consumer goods manufacturer S.C. Johnson, so she understands the role. “I am so blessed,” said Forbus, who is also an active MASB board member. “My CEO believes in marketing, and she’s fighting to keep the marketing dollars for me. I don’t have to do that.” To maintain transparency and accountability, Forbus has monthly meetings with members of the finance and analytics teams to review marketing data, make decisions and move money around. Beyond Free Wi-Fi, How Delta CMO Tim Mapes Is Marketing the Travel Experience Overall, the Paris-based Pernod Ricard sets aside around 16% of net sales for advertising and promotional purposes. For its fiscal year ending June 30, 2022, the company surpassed $10.7 billion in net sales for the first time, marking a 21% increase compared with the prior 12-month period. "We're not going to cut," Forbus added. "We know it works." For a profession that often talks about crafting brand narratives for different consumer groups, it appears marketers still have room to improve in presenting certain stories aimed at a very specific audience: their superiors. Developing a basic literacy of finance and data analytics, while deepening bonds with other decision makers, will help tell that tale.

Leadership & Talent

Making the Case for Your Marketing Budget in Turbulent Times

CMOs must become data-driven storytellers who speak the language of the CEO and CFO

Paul Hiebert

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Paul Hiebert