Match Your Budget to Your Market Position

Build a flexible budget by aligning to business goals and justifying ROI.

Analyst Perspective

To be a successful CMO, speak the language of metrics, collaborate with colleagues, and lead with data.

Shashi Bellamkonda

Principal Research Director
SoftwareReviews Advisory

Marketing leaders of technology companies, regardless of whether the company is a startup, venture capital–funded, or a large multi-billion-dollar company, are successful if they can demonstrate the value of marketing to the company's goals through proper budgeting, data, and analytics.

If a marketing leader cannot demonstrate the ability of marketing to drive revenue and marketing-influenced pipeline, their budget will be challenged and others will lack confidence in them, which could lead to the marketing leader being excluded from board meetings or product and strategy discussions.

To become better C-suite and leadership team members and be recognized as forward-thinking leaders, chief marketing officers (CMOs) who have earned the respect of the CEO, the board, and their peers set their strategy by:

• Speaking the same language about metrics and agreeing on revenue influenced by marketing.
• Setting up a metric-driven marketing organization and determining the contribution of marketing activities to revenue dollars or retention.
• Collaborating well with colleagues, especially the chief finance officer (CFO), and taking the time to do internal marketing so the company knows the real contribution of marketing based on data for credibility.
• Becoming seen as a marketing leader who can lead both short-term revenue-generating campaigns and long-term investments in brand-building and scale-building activities.

This blueprint aims to guide CMOs at every stage in their mission to become full participants in their company's growth. It also provides them with the tools they need to defend their budgets in the face of adverse economic headwinds.

Match Your Budget to Your Market Position

Build a flexible budget by aligning to business goals and justifying ROI.

EXECUTIVE BRIEF

Executive Summary

SoftwareReviews Insight

In the past, marketers might have argued that some marketing activities were too difficult to measure. But today's successful marketers know that there are ways to measure the impact of all their marketing activities, and they use this data to improve their results and justify their spend.

SaaS companies allocate marketing budget in many ways

CMOs: Be data-driven, proactive, and growth focused to secure funding.

Organizations typically follow one of these paths. Large organizations may have all these scenarios.

Not getting measurable ROI?

Tightening budgets can result in competition for funding

Marketing executives must manage their budgets with the same level of scrutiny and efficiency as a startup CFO, or they may face challenges:

1. No metric collection processes or dashboards are in place. Getting metrics is a long process that is not timely.
2. You are not able to connect the marketing programs and spend to the company’s goals.
3. Everything is on autopilot. The budget is completely allocated and there is no flexibility to change strategy and modify spend based on data.

“CMOs, while known for nurturing the craft of marketing, must also be champions of disciplined use of data and technology to connect the end-to-end customer journey across business functions.”

– Janet Balis, Harvard Business Review

Follow these guidelines to create a budget that gets results

1. Transparent

   Metrics are tracked and easily visible to enable decision making. They are shared extensively as a dashboard, and all systems are connected.

2. Aligned

   Budget allocation is aligned with the company's goals, with a clear distinction between revenue-generating efforts and experiments.

3. Collaborative

   The budget is discussed with other leaders, and they support it. Trust and cooperation are fostered.

4. Cohesive

   The marketing team is fully engaged, informed, and aware of the budget and objectives.

5. Agile

   Circumstances are constantly changing, so the marketing budget should be adaptable to be reallocated as needed.

Align every marketing dollar spent to revenue

Prove to stakeholders that marketing is an investment that makes money and contributes to business growth.

CMOs who align with the CEO, make data-driven decisions, and measure key metrics demonstrate management prowess and achieve better results.

• The leadership team is aligned and supportive.
• The pace of getting to scale increases.
• Key metrics can be reliably measured.
• Management prowess is seen by the board.

“Good marketing is not about winning creative awards or telling interesting stories. [It’s about] delivering customers and sales.”

– Jill Avery, Harvard Business Review (2017)

Marketing budgets should not be opaque or unclear

Ensuring budget transparency and demonstrating the revenue returns generated are crucial for maintaining and growing your investment.

Marketing leaders need to improve budget visibility and accountability and avoid these pitfalls:

• Marketing leaders may not prioritize monitoring the budget and may not have a clear view of the marketing expenses and results, preventing them from being able to quickly make changes.
• Other members of the leadership team may not be able to articulate a clear understanding of the marketing budget and the results.
• In business reviews, marketing leaders hear the words, “I am not sure how Marketing is contributing to revenue.”
• Marketing and Finance code items very differently, and a lot of time is spent reconciling the line items

Seek input from other leaders on planning.

1. Talk to Finance about what you want to achieve in the next year and how you plan to do it before you start developing your budget and plans.
2. Get the Sales leader's input on marketing-influenced revenue and sales enablement needs.
3. Learn more about the specific communication needs of Customer Success for onboarding, expansion revenue, and churn prevention.
4. Partner with the Product leader to ensure that the product roadmap and marketing needs are aligned for next year.
5. Have a brainstorming session with the Technology team to generate new ideas for marketing stack technologies that can improve marketing efforts.
6. Have a strategic conversation with HR about employer branding and training needs.

SoftwareReviews Insight

The first job of the CMO is to understand the corporate goals and make sure the marketing projects address the CEO’s vision before proposing anything else. The marketing leader must align with the CEO, considering the CEO’s background – sales, finance, or product focused.

Budget depends on multiple factors

Budgeting is not a one-size-fits-all exercise

Spend in Marketing has the potential to attract customers with a higher lifetime value.

Choose the right set of key metrics

The journey begins by assessing performance against key front-office metrics as a function of startup phase.

See Optimize the Right Metrics to Scale Your Business

A solid foundation helps you grow to a strong superstructure

Track sales and marketing spend ratios and compare to the pipeline created

SoftwareReviews Insight

Early-Stage: Brand strategy and value proposition are expressed in customer-centric terms. A lead generation engine is in place.
Mid-Stage: Focus is on customer marketing, retention, and continuing to drive ARR.
At-Scale: More growth is driven from existing customers.

Annual contract value (ACV) determines sales and marketing budget mix

How marketing dollars are spent depends on the size of the contract. Here we analyze three models by their ACV.

Marketing Spend Distribution to ACV

Distribution of Spend for Marketing Program

Marketing Resource Allocation

SoftwareReviews Insight

The ratio of payroll to program spend and where in program your marketing dollars go can determine the success or failure of the business. If the marketing team is top heavy and there are less marketing dollars for program spend, that means you will not be getting marketing-influenced contracts, which leads to higher customer acquisition cost.

Planning a Budget: Evaluating Current Needs and Future Goals

Six Steps to Build an Economy-Proof Budget