It wasn't so long ago when crafting a marketing budget was a simpler endeavor -- you contended with a range of print publications, radio/TV spots, and tradeshows. Those were the good old times, when it was easy to look your boss in the eye and guarantee your marketing spend would come in at budget because you bought as much media as you could with the money they gave you.
Nowadays, we are lucky to have performance-marketing channels like online advertising and affiliate marketing to lean on. As business shifts to the web, marketers have been given a wonderful gift: the ability to monitor the success of their programs down to each individual sale.
However, it still seems like performance marketing is creating a bigger set of headaches for CMOs and marketing managers, rather than making their lives easier.
For instance, performance marketing is harder to budget because it comes from a different cost center due to its cost-per-acquisition nature. So, payment comes after successful sales.
In addition, when things are trackable, it means that you can optimize and improve performance. Tracking and optimization take energy and dedication, and setting aside time to learn new programs like Google AdWords, Skimlinks, etc. It also means that you might find data suggesting things aren't going well.
Moreover, marketing managers are often told to "use their budget or lose it," and it's significantly more time consuming to manage performance-marketing budgets given the above, so some opt for the easy way out, which is avoidance.
While these are legitimate points, they can all be addressed with a proactive plan and clear discussions with your team on what you are looking to achieve. Don't be pulled off task by other daily demands of your attention. A marketing model that guarantees you only spend money if you are getting more money back should definitely be getting more of your attention.
Determine your goals and strategy for achieving them before breaking down your budget
Across industries, it's common to see an 80/20 split when it comes to budget allocation, with 80 percent reserved for brand marketing and the other 20 percent for performance-based activities like online advertising and affiliate marketing.
Following a set template might be a comfortable way to ease into the world of performance marketing, but is it the most effective?
Rather than follow arbitrary guidelines, step back and consider the marketing budget within the overall context of your company's goals and growth stage.
What are your company's primary objectives? Gaining market share? Demonstrating profitability pre-IPO? Acquiring new customers or retaining old ones? Building a strong brand? Most likely, it's some combination of the above that will vary based on the stage of growth your company is in, but determining your priorities is the first step.
After determining your company's top goals, it's time to assess if and how performance marketing can help you achieve your strategy for getting there. This will help determine if the 20/80 allocation is right for your business (it's probably not). There are a few common scenarios in which increasing the focus on performance marketing makes sense.