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Factors Influencing Digital Marketing Budgets

By May 27, 2014

For the first part of this series on allocating and managing digital marketing budgets, click here.

At the core of any CMO’s role is resource administration; it’s a critical aspect of generating the best results from people, time, expertise, technology and money. The most successful CMOs determine how best to allocate their resources, a task that can seem overwhelming when examining complex marketing budgets. How CMOs go about planning their digital marketing budget goes a long way toward determining their success. Last time we discussed how CMOs can use the 70/20/10 rule to ensure a balanced mix of channels in the budget; now let’s take a look at the variety of internal and external factors which could influence where to allocate budget dollars.

Digital marketing budget allocation: fixed vs. fluid

Internal and external forces affect the marketing mix and should be considered when finalizing budgets in a top-level annual plan or in reallocation efforts throughout the year to ensure an optimal chance of success.

Some organizations still set budgets annually; usually these organizations have many stakeholders which will be affected by any change. For the CMOs of these organizations, once the plan is set, it’s set. The marketing budget acts as the blueprint for the foundation and won’t be tweaked unless something drastic happens. The CMOs of these organizations tend to be held accountable to their forecasted results and falling short of these goals will be seen as a failure.

For other organizations, the marketing plan provides a starting point and will pivot within a changing environment. Teams constantly assess new opportunities for merit and ability to help meet goals; if one channel, publisher or campaign fails, it gets scrapped and budget diverts to better options. Organizations which recognize that the market, consumer trends and competitors change constantly tend to rely on this digital model, and CMOs should ensure the budget adjusts accordingly to respond to the market.

Regardless of which type of organization a CMO belongs to it’s important to consider the following internal and external factors when budgeting.

Internal

  • New offerings and directions – every year brings new products, services, division launches and brand shifts, all of which need marketing support.
  • New assets and resources – developed a new mobile app or signed a new celebrity spokesperson? These assets should be leveraged in the marketing plan.
  • Promotions – does the organization utilize promotions to stimulate engagement or sales? It makes sense to increase spending to take advantage of promotion times.
  • Changes in the team – personnel changes can impact the available skills and resources for a channel; if a key content marketer leaves, it may be time to divert dollars to another channel until they’re replaced.
  • Dramatic changes in the business – mergers, acquisitions, bankruptcies and IPOs could all have a major impact on budgeting decisions and spending needs.

External

  • Seasonality – for many companies, business ebbs and flows throughout the year; marketers support high sales periods and drive value during the lows.
  • Consumer trends – as consumers flock to new technologies (smart phones, tablets) and new venues (Facebook, Pinterest, YouTube), marketers must keep up or get left behind.
  • Industry changes and competitors – competitors can pop up from the most unlikely places, and marketing is expected to help combat these threats.
  • The world around us – political strife, economic downturns and intense weather can provide major curveballs for any company. There should always be a crisis plan in place to adapt to dramatic changes.

Both an art and a science, budget planning should leverage precise calculations for goal setting and forecasting but still require the human element to provide expert context to manage these known and unknown variables. Predictive modeling technology has emerged to help marketers better forecast media performance and calculate future results, but regardless of whether CMOs choose to rely on this technology, when budget planning, they should plan for the best and prepare for the worst.

For more information, download The Kenshoo Guide to Budget Planning for Digital Marketers at: www.kenshoo.com/budget-guide

Stacie Levy is senior director, marketing at Kenshoo

 

  • http://www.ictoolkit.com David Jackson

    The thing is most companies don’t realize the CMO can change the entire course of the company, for better or worse…