8 Essential Questions to Ask Before You Approve a Marketing Budget

This is the first question because everything else depends on the answer.

Whether your company is experiencing high growth or sales are stagnating, having clear insight into the reasons behind your particular situation is vital.

Often, leaders have an idea of what's working, but they aren't confident because they aren't tracking all of the data and can't attribute certain activities and channels to revenue.

Another common problem is siloed data, which prevents leaders from seeing how all the channels and tactics contribute to the end result.

While perfect attribution is not always possible, it's important to take the time to pull together the data you do have and get as clear as possible about what appears to be driving results. Where attribution falls short, incrementality testing and other methods can show what's truly adding revenue.

Otherwise, you may simply be putting more money behind assumptions.

Many companies track sales and marketing results but invest little in customer research.

Sometimes it's because leaders aren't fully aware of the research methodologies available or how powerful they can be. Other times, they know research would be valuable but don't think they have the budget for it.

If you find your company in either camp, consider implementing regular customer and prospect interviews, surveys, sales call analysis, win/loss analysis, and ongoing feedback loops to understand what really matters to your customers.

This information is foundational because it can impact the success of nearly every other marketing and sales program.

If you lack these disciplines, add a line item in the budget for them. Yes, it's an added expense. But the right insights can multiply the impact of everything else you're already spending money on.

Many business leaders only have general information about how they differ from competitors and what makes them unique.

And even if they have good information, there's a strong possibility that something has shifted over time.

This is where the research we just discussed becomes important.

Periodically conducting competitor, market, and customer research shows you what has shifted and how to adjust.

AI and automated monitoring tools can now track competitors and markets for you, but a person still needs to interpret what the changes mean to your customers.

This research can help you determine whether your value proposition is compelling and whether your positioning and messaging still resonate with customers today.

If your positioning is off, you may attract the wrong types of prospects. They look like good leads at first, then burn sales time and ad dollars and never convert.

With strong positioning, the right customer will quickly recognize that your solution is relevant to them, why it's different, and why they should act sooner rather than later.

There are many moving parts in a customer journey, from brand awareness and lead generation all the way through sales, onboarding, retention, and ultimately turning customers into advocates who refer you.

Before deciding where to spend more money, you need to understand where that process is breaking down or where it could be improved.

Whether your company is B2B or B2C, once you identify where the breakdown is occurring, you can determine what kind of further diagnostic work is needed to identify the true problem.

Make sure your budget includes the time, expertise, and technology needed for journey diagnostic work, then adjust your spending according to what you find.

Before you finalize the budget, look at each major line item and ask what organizational goal it is supposed to support.

If you've compiled the data from the research and measurement methods discussed above, those investment decisions become much easier.

Instead of simply increasing or decreasing the marketing budget across the board, you can prioritize the activities most likely to address the specific growth constraint or opportunity you've uncovered.

Your budget shouldn't just be a collection of marketing activities. It should reflect the growth problems you're trying to solve and the outcomes you're trying to achieve.

I've worked with many business leaders, and one thing we often have in common is impatience with results. Me included.

What we sometimes fail to recognize is that different strategies operate on very different timelines.

Some B2C advertising can generate an almost immediate response. In B2B, particularly when purchases are expensive or complicated, marketing can be much more of a slow simmer of building awareness, trust, and interest over time. Either way, define the leading indicators you'll check before final results arrive.

So before you cut a program because it "didn't work," take a closer look at what actually happened.

Short-term and long-term strategies run on different clocks.

Brand building, for example, often takes longer to show a direct revenue payoff than a demand-generation campaign, but its effects can compound over time.

If you don't know your CAC (customer acquisition cost) and LTV (lifetime value of a customer, based on gross margin rather than revenue alone), it becomes very difficult to determine how much you should spend to acquire a customer.

You need to understand both numbers and how they compare to each other. Agree on how each is defined with your finance lead before the budget meeting, so the numbers aren't debated in the room.

A 3:1 LTV-to-CAC ratio is commonly used as a benchmark in some business models, although the appropriate target will vary depending on your margins, growth strategy, sales model, and other factors.

You'll also want to understand how long it takes to recoup your customer acquisition investment, commonly called your CAC payback period.

These numbers aren't always easy to calculate, particularly in complex organizations with multiple products, services, customer segments, and marketing channels.

But even a reasonable estimate can give you much better information for making budgeting decisions than simply relying on what you've always spent.

And once you have good CRM and attribution systems in place, you can continue improving those estimates over time.

This is a question I don't think companies ask often enough.

Is there something on your list that you know you should probably be investing in but haven't pulled the trigger on for some reason?

If so, don't look only at the cost of doing it.

Look at the potential cost of not doing it.

If you are considering a vendor or service designed to support revenue generation, ask for case studies and examples of results from organizations similar to yours. Ask how long results typically take. Ask what assumptions those results depend on.

Armed with this information, you can start estimating the repercussions of delaying the investment. That could include lost revenue, slower growth, customer churn, inefficiency, or losing market share to competitors.

Not spending money doesn't necessarily mean the decision costs you nothing.

While it is important to choose proven methods most of the time, I also recommend setting aside a portion of the budget for experimentation. Not everything worth testing will already have a proven ROI. And the same method can sometimes perform differently for different businesses because no two businesses are exactly alike.

Sometimes new technologies, vendors, channels, and ideas require calculated bets that can pay off.

The important thing is knowing which investments are proven, which are experiments, and why you're making each one.