Why your 2024 marketing budget falls short—and how to do better in 2025

For too many chief marketing officers, January is the cruelest month. Having been handed their insufficient marketing budget, they look grimly ahead to a year already dampened by disheartening compromises. Maybe they resolve not to let it happen again, but let’s be honest: Like most resolutions, it’s a promise they’ve probably broken before. To finally make the resolution stick, CMOs need to engage more productively in the budget-setting process. In my experience, the best way to do that is by learning to talk CFO. Yes, that means couching arguments in terms that resonate with finance people. But it also means better understanding the options for setting your budget and which one makes the most sense for your company. That way, when you talk to your CFO about next year’s budget, you can feel less like you’re putting your hand out, and more like you’re offering to lend a hand. Check out the latest Ad Age events and award programs Here are three strategies to focus the budget growth or market share objectives: Lead the conversation CFOs and CMOs don’t natively speak the same language. It’s not up to the CFO to understand brand affinity, engagement, net promoter score or the customer journey. Marketers do not even widely agree upon these things, and their links to business outcomes are not strong. They’re also the wrong things to focus on. To motivate your CFO, your arguments need to live at the intersection of marketing and business outcomes. Provide evidence of the correlation. For example, brand penetration is strongly tied to brand awareness. Both can be easily measured. Penetration indicates a brand’s inroads into a marketplace, how far it has come, how much growth is still available and how it compares with rivals. Their budgets can be compared. From this, we can find out how responsive the marketplace is to spending. We can predict broadly how much investment is reasonably required to achieve a certain level of growth. This can all happen without uttering triggering words like “storytelling.” Making a solid case requires deftness and data and a willingness to consider different avenues to getting what you need. Look ahead There are at least a dozen methodologies for setting a marketing budget, with no single best option. But some are better than others. For example, setting your marketing budget as a fixed percentage of last year’s revenue is a popular approach—and a very bad idea. It prioritizes the source of funds rather than their purpose. It treats marketing as an expense. And it renders the marketer an optimizer, not a strategist. Worse, it can lead to a downward spiral, where last year’s disappointing performance becomes next year’s handicap. You can’t climb your way out of a deepening hole with a series of tinier ladders. Whether you choose zero-based budgeting, a percentage of sales method, a share of voice approach or any of the numerous other strategies, each comes with its own set of limitations and blind spots. Every individual approach involves a trade-off: simplicity versus sophistication, aligning with revenue versus pursuing strategic objectives, focusing on efficiency at the expense of growth orientation, or prioritizing internal considerations over external market dynamics. But they aren’t all equal. Budget levels derived from a clear objective, such as penetration growth or market share gains, have a competitive context to them. They have strategic intent. They are a point of leverage, not an expense. Setting your budget based on growth or market share objectives keeps everyone focused on the same goals, and ensures your marketing is aspirational rather than reactive. But articulating this to your CFO may be trickier than you think. See our Year in Review stories here Ditch the funnel This may be wildly unpopular, but the marketing funnel is not your friend, especially when it comes to talking to your CFO about budget. Besides being a misapplied framework (it’s a mental model for salespeople), it contains a very squishy middle—“consideration”—that can be a black hole for budgets, sucking money toward solving a tertiary problem. In old-school terms, we should focus most on publicity and selling. Attempts to address the middle of the funnel with “education” often lead to bloated and expensive communications tactics directed at too few people at the expense of more powerful drivers of business success at the top and bottom. Better to forget the funnel and think in terms more relevant to the marketplace. How many buyers buy the thing that month? And how many people who could buy know that you exist? While making these arguments is not difficult, it does require some planning time. This is why you need to start now—and by now I mean yesterday. Remember, the marketing budget is in competition with other resources in a business, and it’s a key role of the CMO to influence the organization about the need for strong marketing support. You can’t do this on the eve of budget approvals—you need to be doing it all year. Start talking about your 2025 budget today, in language, frameworks and methodologies that your CFO will understand and find persuasive. That’s how you go from working with what you’re given to giving the CFO something to work with. Subscribe to Ad Age Sign up now for the latest industry news and analysis Click here

Why your 2024 marketing budget falls short—and how to do better in 2025

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