One day you walk into the office and find out that your boss wants to talk. On the agenda is the CEO`s proposition to cut your marketing budget.
Why? How do you deal with this?
First, I would like to let you know that you are not alone.
According to a Gartner, 14% of marketers expect budget cuts, even though spending for digital commerce and advertising are on the rise.
However, that does not mean you are just a victim of circumstance without the ability to do anything about it.
As a marketer, you realize the significance of marketing for companies like no one else. Lack of marketing investments may lead to a high churn rate, customer dissatisfaction, and other business horrors.
“You have to spend money to make money,” goes the old dictum.
In this article, you will find out how to persuade your executives to give up the idea of cutting your marketing budget.
Before that, let’s figure out why CEOs may want to cut a marketing budget.
Why CEOs May Want to Cut a SaaS Marketing Budget
CEOs are skeptical about marketing.
A decision to cut a marketing budget can be based on their distrust in marketing. According to Fournaise Marketing Group, 73% of CEOs: “marketers lack business credibility and the ability to generate sufficient growth.” 80% of CEOs do not trust marketers at all.
CEOs invest money in marketing campaigns, but they cannot see measurable results
A decision to cut the budget may also be made when a CEO does not understand the language you speak.
CEOs are used to speaking the language of numbers. If you communicate with your executive using generic and empty words such as effectiveness, growth, etc. without providing them with specific data, facts, and statistics, they will likely consider your work less important.
75% of CEOs do not think marketing applies such definitions as “results” and “ROI”.
CEOs have no idea how much a SaaS company should spend on marketing
Hubspot survey showed that most marketers never realize that CEOs do not understand what they are talking about. It means that CEOs may have no idea what`s going on with the marketing trends and how much other companies spend on marketing in the SaaS industry.
As long as CEOs cannot visualize an average sum of marketing spendings in SaaS industry, they may set budgets that are not realistic.
Now that you learned possible reasons for a CEO`s decision, let’s go over some concrete tips.
How to Persuade CEO Not to Cut a Marketing Budget
It is important to specifically show how a marketing campaign affects your company and why it is the best investment (out of many others) to solve the most pressing company concerns.
In the picture below you can see several marketing challenges that businesses face.
When researching, try to find answers to the following questions:
- What challenges are your company facing right now?
- How do your marketing initiatives solve the company’s problems?
Your clear answers to these questions will show your boss that your marketing campaign is worthy enough to be invested in.
Perform competition research as well. Learn about their current marketing strategy and subscribe to their social media feeds.
You can also subscribe to competitor e-mail newsletters.
Set up Google Alerts for top competitors so that you get an email every time they get a mention online.
It may be worthwhile to purchase research reports on SaaS companies. These reports often publish industry overviews, some of which may contain beneficial information.
You can use an audit tool like SEMrush to find data on PPC ad spending and traffic volume.
Place the results of your research into a PowerPoint slideshow and include screenshots of impressive ad campaigns or downloads. This way you can illustrate the results of your work and, therefore, its marketing value to your CEO.
Know How Much You Should Spend
Before defining your SaaS marketing budget, look at what others in your industry are doing and how much they are spending on marketing while taking into consideration the size and specifics of each company.
You can google the spendings of top companies in your industry or you can find this information in research reports.
Most SaaS firms typically spend between 15% to 25% of their revenues on sales and marketing, with 20% to 40% of that amount on “pure” marketing and demand generation.
On average, enterprise corporations spend about 11% of their budget on marketing while smaller companies spend about 9% of their budget. Companies who plan on outperforming their competitors invest 13.6% of overall revenue in order to do so.
Learning and following SaaS trends is also essential when planning a budget. Knowledge of these trends will help you figure out what activities to invest in.
Consider KPIs and Metrics
Every marketing activity should be linked to an outcome that will make money for the business—this is what KPIs are for.
Most CEOs want to see KPIs as a measure of success. Words like “growth,” “effectiveness,” and “good/bad results” mean nothing to a CEO if they are not followed by concrete numbers.
Here are some pointers on how to develop KPIs:
- Ask yourself, “What results do I want to achieve?” before “How am I going to achieve these results?”.
- Describe the intended results. Once you understand them, it will be easier to explicitly define what is being measured.
- Set targets and thresholds.
- Define and document selected performance measures.
I will not go into detail about KPIs in this article as we have already covered this topic in this post quite broadly.
I hope you will do this homework on your own and define the KPIs that suit your SaaS company, considering its size and product specifics—there’s no universal formula for every company in the SaaS industry.
If you correctly define your KPIs, they will help you illustrate quantifiable evidence that marketing investments significantly contribute to a general business outcome.
So, before you spend a dollar of your marketing budget, define the KPIs so that you can refer back to them when demonstrating your point to the CEO.
Prove Your Point to the CEO
When the day X comes, and you are standing in front of your CEO persuading them not to cut your marketing budget, show up with your guns blazing.
The first thing you should do is to make your boss think about marketing as an investment that affects the whole business.
As long as the CEO regards marketing as an expenditure instead of an investment, they are more likely to cut your marketing budget.
To avoid this, provide the CEO with a prepared marketing plan, calculated ROMI (return on marketing investment), and any other necessary documents that reflect the effectiveness of marketing campaigns.
A marketing plan will help your CEO see concrete marketing channels, objects of expenditure, and overarching strategy.
By calculating ROMI, you will be able to explain how well your marketing is doing and which aspects need improvements to achieve your business goals.
Marketing organizations that can show ROI are 1.6 times more likely to acquire higher budgets, according to a HubSpot report.
Use the experience of authoritative marketers, their quotes, and relevant statistics. Choose the brightest examples to illustrate to your executive what the company may lose if the budget is cut.
For example, here is a quote of Anne Moss Rogers, Co-owner/Creative Director at Impression Marketing, a digitally focused marketing firm. She says that cutting a budget is like
“cutting off the hand that holds your wallet. If marketing brings in customers and you cut that out, how are you going to get new customers and generate revenue?”
If your marketing budget is cut, your company may lose customers and opportunities to grow.
So, when the CEOs tell you about their decision to cut your marketing budget, you will need to persuade them to rethink their decision. Here’s what you can do about it.
- Conduct research to learn about the challenges your company is facing right now.
- Research the competition. Some executives are often intrinsically motivated by the possibility of outperforming their competitors.
- Pull the results of your research together and present a PowerPoint slideshow. Include screenshots of impressive ad campaigns or downloads in your presentation to illustrate marketing value to your CEO.
- Define KPIs while considering the size of your company and product specifics. This way you can refer back to defined KPIs when demonstrating your point to the CEO.
- Perform deep and qualitative research to identify buyer persona, then show the CEO how your marketing activities affect buyer persona`s decisions.
All these steps can help you persuade your boss to rethink their decision about cutting your marketing budget.
Have you stumbled upon similar situations? How have you persuaded your CEO not to cut your marketing budget? Share your experience with us and other visitors in the comment section.