Why CMOs should cut their own budgets

October 27, 2022
should CMOs cut their own budgets?

There’s a growing sentiment that marketing leadership doesn’t belong at the executive level of an organization. You’ll find articles like the above from respected institutions that speak to this growing phenomenon. The reasoning behind it is fairly straightforward: CMOs are struggling to prove ROI in a digital world that is passing them up. Of particular interest is the growing dynamic of authenticity, as younger generations are shunning advertising and marketing in its purest form, and are influenced by more authentic levers. This in and of itself would mean the curated voice of a brand, which marketing and advertising traditionally delivers, is losing its stamina.


“In a new McKinsey study, 83 percent of global CEOs say that marketing can be a major driver of growth…Some 23 percent of CEOs do not feel that marketing is delivering on that agenda, and the view elsewhere in the C-suite is even more mixed.” *

While marketing is a critical component of growth, and the data they capture and channel is critical to success, the value often gets lost in a foggy world of brand, culture and messaging.

Another indicator is the fragmentation of the CMO role into other titles like CSO, CGO, CBO, CDO and CXO. The lack of cohesive clarity in purpose, combined with the absolute need and desire to crack this elusive nut, can create a sense of chaos on the leadership front.

This is the main reason you’re seeing so much growth for marketing technology platforms like Salesforce. The idea that a system can help automate and move marketing data effectively through an organization is certainly tempting. It hinges of course on widespread adoption, which in many cases tapers off quickly. As a result, marketers are often relegated to serve as the Salesforce Keepers – the arms and legs of inputting and maintaining relevant data. This goes even further to limiting the growth potential for a CMO.

CMOs have an opportunity to operate more like a business executive.
That means instead of begging for more budget, you’re optimizing investment. This actually isn’t a major shift considering your budgets are cut anyway. The difference is that you’re anticipating and projecting what’s coming and responding proactively.

Here’s some ways to help change this dynamic quickly:

1 Insource strategically

Be more surgical and selective with future hires. While on paper it’s more cost-effective to insource, the commitment is high – and often leads to inefficiencies. As technology moves forward, your insourced team is going to have a harder time staying ahead of the curve. When the sales team has new demands that hinge on this repertoire – you’ll need to outsource anyway.Roles of management, coordination and pure production (like writing) are most effectively insourced.

2 Under-commit when outsourcing

Most if not all agencies are looking for retained YoY contracts with their accounts. It’s profitable, it’s easy to manage, and most of all it establishes reliable revenue streams to build upon. One big downside though is that agencies/outsourced vendors can get fat and happy, often swapping resources in and out to ‘value bill’ on the account. Your ROI can diminish rapidly here if you’re not careful. Try more projects, maybe require quarterly time-boxing. If they don’t like it, you’ll know why.

Note: Mavenray mostly does projects. Our approach is that we’re here to make your team smarter and lift performance. When we’re done, you’re positioned to keep growing. However, many clients want us to stay on board. When Mavenray stays on for a full year, we treat an annual contract like four three-month projects. It just keeps everyone on their toes.

3 Pursue broad P&L responsibility

Around 1 in 3 CMOs have P&L ownership and accountability in the Fortune 500. As you go down-market though, that ratio begins to thin out dramatically. This is where having a seat at the table and being plugged into the overall health of the organization can most effectively influence how you operate. Building trust with the exec team will get you here, but it takes time. Treating your own marketing function as if it operates with its own P&L, no matter how small it may be, is one way you can move closer to your goal.

  • When you manage with an eye for profits and losses vs. clicks and conversions – you’ll also begin to see marketing through an entirely different lens.
  • Attribution will become more important. You’ll want to know more precisely where and when people are getting to know your brand, and ultimately how to isolate and amplify those moments.
  • Supporting sales will become less critical. A flashy pitch deck or trade show booth may not provide your highest return. They might be your comfort zone, but the balance sheet will say otherwise. Support as needed, but set your sets on empowering sales to pick their own lures for fishing. Instead, you’ll be focusing on areas that have a much higher return rate on your time and budget, like digital.
  • Automation will be a priority. AAt every corner you’ll be looking for creative ways to let technology do as much of the heavy lifting as possible. The really strong CMO’s are putting a significant chunk of their budgets here, and with good reason.
  • Outsourcing should result in a ‘leveling up’ of your team’s capabilities and results. But outsourcing more routine work like maintenance may prove to have a lower return. This might be an opportunity to insource. The most waste (from the client side) and most value billing (the agency side) comes on long-term maintenance or retained contracts. By far. Here’s how a typical agency might to the math on a small maintenance contract:
    • Assign one junior person 4 hours a week. Bill 6. Cost: $35 ph. Bill $150 ph x 310h = $42k. If this staffer is 85% billable (baseline goal for production) then they are generating $230k annually for a $65k investment. Approaching a 4x return.
    • Assign two senior people to appear in quarterly meetings. Cost: $75 ph Bill $200 x 16h = $3200. If they are 70% billable (baseline for senior consultants) then they are generating $255k annually for a $135k investment. Close to a 2x return.
    • That’s a $45k contract for 12 months, or $3750 per mo. The account person says as long as it’s under $5k we can close this. So it instantly becomes $4750 pm. When that happens, and it almost always does, then value-billing follows (people bill 2 hours to a :30 meeting)
    • One thing you’ll notice is clear: Agencies are incentivized to leverage more junior staff. The people you see in the meetings are typically not doing the work. Everyone including you is fully aware of this, however – when you start breaking down the math and analyzing return on investment – you may begin to get clarity on where insourcing will optimize how you outsource.
    • As more junior staffers execute and the senior team fronts for them – as is the case with maintenance, or frankly many retained engagements – the opportunity to ‘level up’ your own resources will diminish substantially. In other words, your team isn’t really getting better at what they do, they just have a little more time to do it.

CMOs and other variants of marketing leadership – there’s a window of opportunity to distinguish yourself with leadership. While creativity and innovation are fantastic tools for disruption, it comes down to profit and loss in the end. While we marketers talk too much about Apple and Steve Jobs, I’ll say this: He was a marketer who had a full grasp of his fiscal responsibility. That right/left brain balance is rare, but certainly achievable. By honing these skills, your marketing results will no doubt be lifted to a higher level, you, your executive team and sales will be speaking the same language, and budget stress will soon be a thing of the past.


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