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Three Best Practices of Marketing Budget Allocation

How many times in the last year did your marketing budget either delay or completely halt your plans? Instead of bringing your strategy to life, it was an anchor weighing everyone down. 

Your marketing plans are only as agile as your budget. Realigning investments to meet evolving strategic goals is a critical competitive differentiator. But it’s a massive challenge for marketing teams to halt the momentum of previous budget decisions. 

Forrester recently introduced their Strategic Budget Allocation Process which breaks away from the traditional budgeting processes with fixed annual budgets by department or function. Instead, organizational objectives dictate marketing budgets allocation. Now marketers are empowered to make meaningful changes in their investment strategy in response to changing buyer needs or campaign strategy. 

Cutting down on unfocused spending and unnecessary budget planning delays sounds great, but before you dive in head-first we’ve got some best practices to make the jump easier. Here are three best practices to strategic marketing budget allocation, that will set your team up for success:

  1. Establish a marketing planning and measurement hierarchy
  2. Align marketing KPIs to the planning and measurement hierarchy
  3. Get marketing and finance in lockstep

Alright, now let’s dive in…

1. Establish a marketing planning and measurement hierarchy

If you want to align marketing budgets to business strategy, it’s not going to happen if your plans aren’t following that same strategy. And you won’t be able to report on results if you aren’t measuring success against targets for those plans. 

Aligning marketing plans and activities to business objectives from the start gives the marketing team confidence that every action they take is moving the needle forward. To make sure your marketing team is building (and budgeting) for a strategy that drive business impact, start your planning by answering these three questions:

  1. What are the company’s top priorities for the quarter? For the year?
  2. What pipeline and revenue numbers are we aiming for this quarter? For the fiscal year?
  3. What are the adoption rates or implementation goals for your product? 

This results in stronger decision-making by every marketer because they can gauge any adjustments against current goals, plans, and business objectives. The cherry on top, is finding a way to bring all your planning, budgeting, and measurements together in one view.

2. Align marketing KPIs to the planning and measurement hierarchy

You can’t measure the success of a marketing program, without knowing what success looks like. We recommend defining the KPIs, targets, and goals during the planning process to better measure the ultimate success of your marketing investment. 

Bonus points if you collaborate with other stakeholder departments on KPIs. This automatically elevates your metrics from a marketing-only investment to relevant for the whole company. Now everyone’s on the same page regarding marketing’s impact and how their investments support overall business growth.

Building KPIs and measurement goals into marketing plans, sets you up to measure against them as you execute. Now you’re eliminating big surprises at the end of a campaign or program, and have an optimizing metric to help you adjust plans over time. 

3. Get marketing and finance in lockstep

When you collaborate with other department stakeholders on metrics, the first place marketing should look to is finance. As one of the biggest discretionary budgets in the entire company, it’s no surprise finance wants to know what marketing’s dollars achieved. 

But how does this help marketers better allocate marketing budgets with strategic plans? Understanding how finance views and categorizes marketing spend as part of the company’s investment portfolio will help with setting SMART strategic targets and scenario planning.

We’re not expecting you to be experts in each other’s fields! Take turns teaching each other the fundamentals:

Finance – needs to know how marketing organizes spend, because it’s a lot more granular that general ledger codes. Finance has one general ledger code for advertising, but marketing allocates ad spend by campaigns, geography, teams… the list goes on!

Marketing – needs to know finance’s processes and rules around submitting invoices and POs. Following these rules as closely as possible leads to a better, more aligned relationship.

Then you can focus on tracking and aligning on key data points such as targeted segments, program family classifications, functional teams, tactic metadata, the position of each activity in the planning and measurement hierarchy, or common regional and business unit breakdowns.

Driving impact for the business is marketing’s top priority. And to get there, we need to cut out all the random acts of marketing. Nailing down budget alignment keeps everything organized so you can easily pivot to a different scenario and execute on it without causing massive budget headaches and delays.

Now you’re armed with some best practices, it’s time for Forrester’s Strategic Budget Allocation Process!

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