For many marketers, September signals the start of the most stressful time of the year: budget season. Since your budget is a guide for the coming year, having a budget that doesn’t truly reflect marketing’s needs is one way to ensure you have a rough go of it.
If you think it’s hard to develop a marketing budget, you’re in good company. As the number of ways to reach and engage consumers via platforms, channels and devices has skyrocketed, marketing and advertising budgets have not grown in parallel.
The pressure on marketers to set the right budget ramps up an already stressful task. Making predictions about what impact future activities will have on the bottom line is tough and gathering accurate data about spend and performance is challenging.
Marketers often have to estimate costs and can be penalized if they wish to grow budgets for untested initiatives, or if campaigns from the previous year didn’t perform as expected. CMOs and other marketing executives must grow results and contribute directly to the bottom line.
Over 60% of Marketers Lack Budget Confidence
It’s not surprising that a new report from Nielsen reveals that few marketers have confidence in their team’s ability to determine the most effective way to allocate their marketing budget.
Nielsen set out to uncover how those responsible for their company’s marketing budgets make decisions. It found a high-stakes arena where there is little consensus regarding the best way to allocate budget for optimal return.
In fact, over half of the marketers in the survey (63%) struggle to determine the right allocation, the potential impact of spend levels, and how to adjust budgets in response to changes within the company or in the market.
So Many Spreadsheets, So Little Time
Despite a wide array of forecasting models, methodologies and tools at their disposal, the research showed that a majority of B2C marketers cobble together spreadsheets, in-house analysis and agency recommendations, or simply adjust the previous year’s budget.
- Less than half of respondents (40%) feel very confident in their team’s ability to determine the most effective way to allocate their marketing budget.
- 63% agree it’s difficult to determine marketing spend allocation across tactics in a way that will drive maximum ROI.
- 68% of marketers simply use the previous year’s budget and either increase, decrease or level-fund it.
- Less than half of marketers use key information from marketing mix models (that show the relationship between marketing spend and business performance) and about one-fifth aren’t familiar with these models.
How to Improve Your Budget Decisions
Deciding how to spend millions of dollars across different brands and marketing options is challenging. But there are ways to make it easier and more accurate. Here are three recommendations for how to improve the budget planning process.
Recommendation #1: Apply Data To Decision-Making
Using data-driven decision-making helps marketers understand past performance and get information that improves their confidence in budget allocations.
Rather than relying on time-consuming, internal spreadsheet-based analysis—or risk that whatever was done in the prior year might not have returned the best results—consider implementing marketing mix modeling, multi-touch attribution or another analytic solution to evaluate and optimize spend decisions.
Recommendation #2: Use A Scenario Planning Tool
Marketers who have access to software that enables them to run their own simulations of various budget scenarios have the most confidence in their allocations. These marketers are more likely to feel that they are spending their company’s dollars wisely than those who rely on spreadsheets or agency partners to estimate the impact of potential marketing budget allocations for them.
The ability to be in the driver’s seat when making important budget decisions is beneficial. Use a scenario planning tool to forecast the impact of different spend levels in a virtual environment prior to making real-life budgeting decisions.
Recommendation #3: Get Support From External Experts
Selecting the right solution for your organization comes down to your goals and objectives. When expertise, data, analytics, and/or tools aren’t available within your organization, consider seeking support from external analytic service providers. Consulting with an experienced vendor will help you achieve the insight you need to drive meaningful results for your business.
Turning Insights Into Action
Marketing is getting more complex. Most marketers today must do more with less. Faced with steep competition and an increasing number of ways to reach consumers, you need to spend every penny wisely. Setting the right marketing budget is critical.
Using the right tools, technologies and expertise to get a handle on how spend impacts performance can help you get what you need to start the new year off right.
Get More Information
To learn more, download your copy of Solving the Marketer’s Dilemma: How Data-Driven Decision Making Improves Budget Confidence and Results
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