Welcome! This post is part one of a three-part series on building and managing a marketing budget.
Nearly every marketer on the planet—no matter the role, industry, or seniority—has to make decisions about where to invest their marketing dollars. Those investment decisions will have a huge impact on every team’s success.
We’ll provide some recommendations for the very beginning of your marketing budget’s life: that crucial time when your team is making decisions about how to organize and structure its marketing budget.
In this post, we’ll cover:
If you’re on a marketing team with more than a few marketers, your organization almost certainly has multiple budgets according to type of spend. For enterprise organizations, the number of individual marketing budgets can easily number into the hundreds.
Chaos can result when there’s a lack of consistency among all these budgets. The best way to gain control is to bring them together into a hierarchy or structure. The structure you choose can have far-reaching implications. It’s not just day-to-day budget management, but also how your marketing team thinks about spending money and makes investment decisions.
When the budgeting cycle (typically, a fiscal year) resets, most marketing organizations won’t start with a blank slate—they’ll simply iterate on the previous year. Still, the beginning of a new budgeting period is a golden opportunity for marketing teams to consider how their existing budget structure is working for them, and to rejig things if necessary.
Midyear budget structure changes can be onerous, so it’s best to decide upon a structure that is likely to continue making sense for the organization throughout the year and commit to that.
When it comes to choosing a budget structure, have your budget hierarchy mirror the marketing organization itself. How are the teams of people organized, and how do they think about spending money?
Structure the budget as naturally as you can, based on how you’re already in the habit of allocating funds. With a structure that feels intuitive, it’ll be easier for each marketer to keep close tabs on how much they’re spending, and what results those investments are achieving.
For an in-depth guide, read our e-book Budgeting in a Crisis: How to Steer Your Ship Through the Storm.
Why not simply let your finance team make the decision about how to structure your marketing budget? The fact is the two departments have different ways of organizing the dollars leaving the company.
Marketers look at their spend according to what they’re trying to achieve with those dollars, whereas the finance department sees things in terms of general ledger (GL) accounts or cost centers. In addition, marketers are more focused on their future results and impact, whereas finance focuses on cash flow (a more immediate consideration).
To illustrate, we’ll call upon our recent conversation with someone who understands this issue better than most: Carey Rutigliano, Director of Financial Planning & Analysis for Cloudera. He’s a rare breed: a professional with a finance background who is a business partner to the company’s marketing team.
Here’s an excerpt from a webinar we did with Carey on the topic of breaking down walls between marketing and finance:
“Take the example of a $250k invoice from an advertising agency. Finance folks look at it and think, ‘Wow, that’s a lot to pay one agency.’ In contrast, marketers know that it’s a prepayment for an entire year’s worth of advertising spend, spread strategically across a variety of different campaigns and regions. Finance might have one GL account for advertising, but marketing will allocate the $250k across a number of line items in their budget—or even across multiple budgets.”
Unless your team is forced to, we don’t recommend adopting a finance-centric structure for your marketing budgets. Check out these additional resources on the relationship between marketing and finance.
Your first job is moving from chaos to order. It’s surprisingly common for marketers to operate in silos, with each group or team having separate processes (or lack thereof) for managing their marketing spend. If you’re a marketer looking to bring some structure and consistency to your organization’s marketing budget process, you’re already ahead of the curve.
Organizing your marketing budgets into a structure is the first step toward reducing budget chaos and getting clearer visibility into knowing where and how much you’ve invested, and what results you’ve achieved.
For more content on managing your marketing budget, check out Everything Marketers Need to Know About Their Budget.