Podcast Summary: How To Set and Sell A Marketing Budget

In this episode of the Cambridge Marketing Podcast, Kiran Kapur speaks with Chartered Marketer Thomas McAlinden about why marketers struggle with budgeting and how to approach it strategically. They explore common pitfalls, such as leaving budget decisions to finance teams or relying on arbitrary figures, and champion the "objective and task" method as a smarter alternative. Thomas stresses that marketers must shift from a “spend” to an “investment” mindset and be prepared to justify budgets with clear goals and tasks.

They also discuss the limits of measuring marketing return on investment and the importance of long-term brand building. The episode encourages marketers to take ownership of budgets and assert their strategic value within organisations.

 

Podcast Transcript

Transcripts are auto-generated.

Announcer (00:01):
The Cambridge Marketing Podcast with Kiran Kapur, brought to you by Cambridge Marketing College. See their range of courses and apprenticeships at marketingcollege.com.

Kiran Kapur (host) (00:13):
Hello and welcome. Today we're going to be talking about marketing budgets and the importance of setting a budget and how to sell it in the organisation. My guest is Thomas McAlinden Chartered Marketer. Thomas, welcome back. Why do marketers find it so difficult to set budgets?

Thomas McAlinden (00:32):
Well, when my experience when I've been dealing with marketers, I think, well, a large majority of them don't understand that they've got a role to play in it. Whether that is just from experience and what they have been used to with regards to the companies that they've worked for and just being given a budget. But actually, and I suppose quite shamefully, they don't really understand the financial implications of the work that they do. And with it, I suppose then putting forth the case to try and get the budget that is required to help them do their job basically.

Kiran Kapur (host) (01:11):
So why do you think that is? Is it because we think that we are creative and therefore don't want to get involved in budgets?

Thomas McAlinden (01:18):
Well, I think it's a number of things. First and foremost, I think for some marketers who've maybe moved into the role, which again, you'll probably know from your own experience and from the different companies that I've spoken to as well over the years, some people move into marketing that aren't actually trained within marketing and even some that have had training within marketing. One of the aspects that is missing is especially the kind of budget and getting to grips with numbers because as I say, some students I've spoken to about asking, well, even why did you choose marketing? A large proportion of them have said that they chose it because it involves no numbers. And when I've reminded them that if they go out and become a brand manager or even just a marketer and having to showcase the dreaded return on investment as it were, or marketing return on investment, they're going to have to be comfortable with numbers. And as I say, I think that's probably one of the kind of great weaknesses of many a marketer that, as I say, they aren't comfortable and ultimately don't understand that they've got a role to play in this. And they shouldn't just be always dictated to by the company to NS and say, there's your budget. Go in, do something over the next year and then come back and tell 'em it's been a success.

Kiran Kapur (host) (02:40):
Yes. We know a lot of companies will set a marketing budget by sticking their fingers in the air. So can we talk about some sort of practical methods of creating a budget?

Thomas McAlinden (02:52):
Yeah. Well, you and your listeners will probably be aware. There's numerous ways that companies assign budgets, as you've mentioned there about fingers in the air stuff could be. But with regards to it, it's a percentage of sales, whether it is about, well, we know what our biggest competi spent last year, so we're just going to spend the same. But what I particularly really like is with regards to the objective and task method, and ultimately it's about sitting down being that kind of strategic marketer and thinking, well, what is it I truly want to achieve next year? What is it that I can help my organisation achieve and with it any brand potentially that I might be managing? And then say, okay, well this is what I need in order to try and help me achieve these objectives. And again, I've lost count in the number of times that I've been in a different organisations where that sort of thinking hasn't actually occurred.

(03:56):
It's a question of the business has given me this money and I'm going to go away and I'm going try and also underspend. I'm going to try and not spend all of it. And that is ultimately one of, again, the greatest weaknesses rather than trying to redouble the efforts and amplify perhaps a message, et cetera, and make what's working for you work even better. I suppose this thinking that it's all about a spend rather than an investment. And when we speak about marketers perhaps having this focus, it's about them sitting down as well and thinking to themselves, what sort of marketer am I? Am I a really smart and strategic marketer, or am I a tactical marketer? Because it is then them just jumping on and doing things without fully understanding the bigger picture.

Kiran Kapur (host) (04:54):
When we were speaking earlier, you quoted a wonderful Mark Ritson comment. Mark Ritson being a journalist amongst many other things, writing a regular column in Marketing Week.

Thomas McAlinden (05:04):
Yeah. With regards to budgeting and budget setting, I suppose it was one thing that I read that I can't remember the year, so I'll probably be doing on a disservice, but it was I think 2013, 2014. It was several years ago, but it really hit home with me. And what he said within one of his articles was about whether you are a smart or a SOMA budget setter and SOMA in Mark Ritson's viewpoint stands for basically 'straight out of my ass'. I suppose that links back to the finger in the air stuff that you've said with regards to, well, how do we allocate budgets? Where does this figure come from, this arbitrary figure that perhaps is given to us? Whereas as written highlights as many others, both within industry and practise as well as within academia, you start talking about you as a marketer must recognise that you are to try and help your organisation.

(06:06):
And the reason that you're employed by an organisation is because of the skillset that you bring in with that. And what I mean by that is about developing that marketing strategy. And one thing that really, I suppose still hits home and something that I even asked when I go into organisations to today is about how has that budget been set? And marketers in a large portion of companies don't get that much involved, which is unfortunate because they let the organisation and particularly finance department dictate to them what they should be getting. And the kind of one quote in that article from that Ritson wrote several years ago is "Stupid marketers let the finance department set their budget". And it's about understanding what sort of marketer, in essence, are you a 'smart marketer' or a 'stupid marketer'. And you really need to then understand the value that you bring to an organisation because if you say quite simply, just let the organisation dictate to you with regards to the budget that you're getting, your role in essence really becomes pointless because you're going to be then constrained by a budget and not being able to achieve perhaps what you believe the company and indeed the respective brand that you might be working on as well can actually achieve.

(07:37):
So I think that's one of the key lessons that your listeners and marketers, I suppose can take away. Do you want to be a smart marketer or as Ritson calls it a SOMA budget setter?

Kiran Kapur (host) (07:50):
I have to say, as someone with a lot of SOMA characteristics, I completely get why people sort of just come up with something on the spur at the moment and it feels much more creative and much more sort of, "I'm a marketer, I am creative person, I just come up with things",. But actually I completely agree with you that the smart, the sitting down, the justifying, particularly at the moment, we are going into a very lean period for companies, cost of living rises and things. And so marketing budgets do get cut at this time, don't they?

Thomas McAlinden (08:22):
Yeah. It tends to be the case, and it is unfortunate that organisations do that. I know they've got different figures to hit with regards to quarterly figures and so on and so forth. And listen, the marketing budget is one of the quickest and ways to try and claw money back. But it's then understanding, or I suppose the marketer's job within those organisations to really push back and talk about, well, remember why this money has been, it's not a spend that basically I've been given to just go away and spend and do stuff over the next year. It is really to truly invest within our organisation and the marketing activities that we do now can and potentially will have immediate benefits with regards to short-term benefits and increasing sales, et cetera. But there's also that long-term benefits and with it the kind of brand building because what some organisations perhaps fail to understand is perhaps what a marketer might do today, might not see a benefit today or tomorrow or the day after, but it could be priming someone in the long term and the effects that someone or the marketing activities that a marketer does today could lead to a sale or further sales at some point in the future.

(09:47):
So it is really important that the marketer is able to push back on that and make sure that they're able to stress that the money that they are given by the organisation isn't something that they just go on to spend. They spend it in a strategic manner. And with it moving from this kind of spend mindset to really a marketing investment mindset,

Kiran Kapur (host) (10:13):
You've suggested 'objective and task' as a method of setting a budget. So can we just explore what that means in practise?

Thomas McAlinden (10:23):
Yeah. Ultimately, as we highlighted earlier on about you sitting down when you're going through your different planning cycles, sitting down and thinking about what's happening within the market, what your competitors are up to, what your consumers and or customers are up to and so on and so forth, and being able to identify what it is that you can potentially achieve in the next kind of year as it were, when you're going to be then creating your marketing plan and so on. So it's really important then to sit down and think about the clear and specific smart objectives that you believe that you can achieve. And ultimately then thinking in order to achieve this, what in essence tasks and do I need to do in order to try and achieve that objective? And only then by coming up with that and thinking about these clear objectives that you want to be achieving, can you then potentially send out to an agency if you're working with them to say, can you come back and give me costs, et cetera for these? And then going to the business and saying, listen, this is what we want. This is what I believe we can achieve. These are our specific objectives in order to achieve them. This is what we need to do to achieve each objective, and ultimately this is how much money we will need to invest in order to secure that.

Kiran Kapur (host) (11:56):
And then presumably that gives you a chance if the organisation says, well, we cannot physically fund that budget, you've then got an opportunity to talk about, well, which task do you want me to lose? Which objective do you want me to change? So it gives you a chance to have a much more considered conversation. Would that be right?

Thomas McAlinden (12:16):
Yeah, exactly. It allows you and the business to come to an agreement because remember, you as a marketer are going to be held to account with regards to the money that has been, and I say this term spent, I prefer the term invested, but from a business perspective, and they talk about the spend, you're going to be held to account to that. So it's important that as a marketer that you also understand that that's going to happen. And when it comes to the future point, when the question is asked, what have we achieved from the money that you were assigned for your marketing budget, you are able and quite confidently and capably able to say, well, we achieved this because we in essence had this, we were given this budget and it constrained perhaps what we could do. But you're exactly right to say with regards to getting that budget or having any discussions by the business to then say, actually, we can't give you what you're looking for. Then ultimately it's about to say, well, this is what we can then achieve. We might not achieve these lofty ambitions that we want because we need an extra 500 grand or whatever it might be. And it is just about making sure that the business realises that.

Kiran Kapur (host) (13:40):
Okay, so one of the other things that we often talk about in this area is return on investment or return on marketing investment. How do you measure that? Or is that actually not a sensible thing to try and do?

Thomas McAlinden (13:53):
Well, you can calculate it. It is not to say that you can't, with regards to calculating the MROI or 'marketing return on investment' is quite simply about the 'financial value that you're going to be gaining as a result of your marketing investment' minus 'the investment' divided by 'the investment'. Now, I know that might sound like a convoluted calculation, but the cost of the marketing investment is easy. That's just how much you've spent. The challenge then starts coming in with regards to, well, how are we always able to calculate the incremental financial gain as a result of the investment? Because some things we might not be able to categorically correlate with me spending some money and it always automatically leading on to a return on that. And as I say, that's when we start talking about the long-term brand building versus short term. Some of what you do will be long-term brand building and you might not see the immediate benefits now.

(14:58):
So the also challenge within that within MROI is that it is easy to recognise perhaps quick profits in short term, but not that long-term benefits that marketing then brings to brand value.

(15:13):
And I suppose one proponent of ROI being a silly metric, is Professor Byron Sharp. And I can't remember if I read that in his textbook marketing theory practise or evidence, but I remember he put a little Twitter post. Again, the timeframe escapes me, but it's just always about, or what he said or something about trying to quantify marketing returns has made really marketing consultants like myself and others, very rich, but done little for the status of marketing. And he says, it's not a sensible exercise. He says, nobody asks for the return on investment from people like the finance department, et cetera, or the HR department, or how much money will pay a CEO if we pay 'em more money, will that lead us to greater success? It just then leads down to that kind of, if you continue to try and chase ROI, as it were, you can end have an endless bottomless pit and if he argues can lead to potential problems in the future. And ultimately it says about ROI just quite simply being a stupid metric.

Kiran Kapur (host) (16:24):
You often hear about problems where accountants come up against marketers. The one that always sticks with me is Patisserie Valerie, which went into administration. They are a patisserie company, and the accountants have decided it was a great idea to remove butter from their butter croissants. But any marketer, you should have been able to see that in the long term. If you're a patisserie company, the one thing you don't muck about with is your patiseries - your product.

Thomas McAlinden (16:50):
Yeah. But it boggles the mind. And as I say, it's a debate that I normally have with either my friends that work in finance because again, they are sceptics of marketing. They truly do when they look at it black and white and view marketing as being ultimately a cost. And I have to have this constant debate with them to highlight actually, well, the marketers within your business, without them you understand the customer and so on. Which again, in consumer, which your audience will be well familiar with. But yeah, as I say, I'm a big believer in trying to chase that continual ROI or putting it down as one of these kind of holy grail metrics is a bit of a silly idea because we can still have accountability within marketing without, I suppose, using return on investment as the kind of stick to beat marketers with.

Kiran Kapur (host) (17:46):
So what other accountability would you put in instead of? Because I think a lot of marketers are going to go to the finance department who are then going to laugh and go, oh, you creatives, you are always trying to get out of doing return on investment. So it's much better if you can come back with a, "Well, why don't we measure it this way?" So what would you suggest?

Thomas McAlinden (18:03):
It's not a case of saying an alternative measurements and things like that. It is about making sure that the people within the business understand what you're actually trying to do as a marketer. And you've probably all read the work about long-term brand building versus short-term sales activation. And again, by lesbian, I'm probably pronouncing his surname wrong, and Peter Field, if memory serves me correct, and it's about making sure that the organisation understands that what we're trying to do is invest within the company because we're trying to make sure that we're growing the company brand or indeed the subsequent brands that we might be managing in the long term whilst at the same time try to generate revenue. And as I say, we do that because as marketers, we understand the consumer, our customer so well that we're creating what they're looking for. And as such are hopefully from a effective utilisation of the marketing mix, are able then to get consumers to buy us rather than a competitive set. And that then starts going down to other elements such as effective positioning and so on. But I truly believe it's this kind of mindset shift, but also awareness job internally with an organisation to make sure that people understand that it's not just going to be a very quick fix in what we do with regards to the investment within marketing. Because some of these realised gains, as it were, might not actually be for, and the immediate short term, as I keep saying it might be for the long term,

Kiran Kapur (host) (19:44):
Thomas, that was an really enlightening overview of setting marketing budgets, why it's important, why we should aim to be smart about it and not let the finance department take over. Thank you very much indeed.

Announcer (19:58):
Thank you. The Cambridge Marketing podcast from Cambridge Marketing College, training, marketing and PR professionals across the globe.