Nielsen recently surveyed nearly 200 marketing budget decision-makers at large B2C companies in the U.S. The intention was to get a sense of how big B2C brands measure their marketing success, and how that translates into the line-item spending in the annual budget. The results showed that marketers who use marketing mix modeling or other advanced analytic solutions to evaluate, simulate, and optimize decisions about spending have far greater confidence that they are allocating their budgets the right way.
But the results also shed some light on why the marketing budget — in all its nuance and complexity — remains one of the trickiest processes for marketers. Demonstrating the value of your strategy means proving the worthiness of marketing spend, and there remains a lot of variation in how businesses opt to approach the annual budget.
Lilly Wieber, director of product marketing, Nielsen, said she was surprised to find such a high percentage of companies that did not know what marketing mix modeling is.
“We assumed the majority of B2C companies with large marketing budgets were using data-driven methods to measure the impact of their advertising efforts and using those insights to inform how to best spend their dollars, as our clients are,” Wieber said. “But the findings reinforced that there is still a lot of opportunity to educate marketers at these large companies of the options and capabilities that are available to them, so they can more confidently assess the performance of their spend and determine how to set their budget.”
With access to data transforming the marketing process over the last 10 years, it’s no wonder that there are some businesses still trying to catch up. Not because performance-based solutions are cumbersome, but because there is a lot to consider in drafting both B2C and B2B budgets. The biggest difference between B2C and B2B budgets, Wieber explained, is that B2C typically has more data to sort through when making financial decisions, as well as shorter sales cycles depending on the product.
“These two aspects can be both a blessing and a curse,” she said. “More data and shorter sales cycles means it’s easier to tie marketing activities to customer actions — but only if you know how to use the data in the right way.”
Acknowledging the rapidly-changing media landscape, Wieber touted the importance of re-evaluating marketing performance on a regular basis. How often is regular? Well, that depends. Wieber said:
“Some types of measurement, like multi-touch attribution, use person or household level data that’s collected on an ongoing basis, which enables near-real time measurement of activities. And if it’s a tactic like email or online advertising that can be adjusted on a relatively quick basis, those continuous insights can be extremely valuable to enable you to tweak strategies on the fly, while campaigns are still in-flight. Budgeting relies on looking at how things performed in the past as an indicator of how they will perform in the future, but you need to be basing it on a more recent past than 3+ years ago.”
But it’s hard to get into the weeds about the marketing budget without first acknowledging the survey’s most alarming finding: 68 percent of marketers use the previous year’s budget and either increase, decrease or level-fund it — some do so just by using a simple Excel spreadsheet. As the media landscape continues to change, it appears, budget development has been slow to catch up.
Wieber said that Excel is a great starting point — with its low cost and nearly-universal familiarity — but making evidence-based decisions requires more sophisticated analytics. She laid out some of the obvious pitfalls of Excel:
- It’s too simplistic: Excel analysis doesn’t enable you to look at the interplay across activities. It’s often analyzing one piece of the puzzle at a time. Marketers need a holistic view of the channels, campaigns and tactics that impact performance, but the volume of data and depth of analysis required to do so is often unmanageable in spreadsheets.
- Relying on Excel creates inconsistency: if you ask one person to analyze the impact, they might do it differently than the next person.
- It’s prone to error in ways that other solutions aren’t: Excel analysis often has copied-in numbers, pulling from different spreadsheets, and this can lead to manual errors.
Wieber said that both marketing mix modeling and multi-touch attribution are valuable tools for planning and optimization, deliver the highest returns when used in tandem.
“Marketing mix models uncover key revenue and performance drivers, so marketers can make smarter strategic investments across all channels,” she said. “Once allocated, multi-touch attribution delivers the daily insights needed to make sure you’re staying on plan. By combining the power of these modeling methodologies, marketers can make a broad array of strategic and tactical decisions to maximize efficiency and effectiveness across their entire marketing portfolio.”
As far as the way the overall marketing budget fits in with other departments? The answer remains fundamentally simple, she said. Every department should be planning activities based on overall business goals.
“Ultimately, accountability is critical for achieving positive business outcomes, and planning and budgeting across departments should be based on the overall business objectives established by senior management,” Wieber explained.