We recently explored the challenge of defending marketing budgets at the Demandbase Smarter CMO Forum. Why is it such a hurdle, and what are these Smarter CMOs doing to shift the narrative?

Part I: The Budget Defense Dilemma

The hurdles surrounding marketing budgets stem from the inherent challenge of measuring marketing’s impact, coupled with an incomplete understanding across the executive suite regarding the nuances of how marketing works in the modern buyer’s journey.

Attribution is Difficult: Marketing measurement is hard — and it’s becoming even tougher. In my time at Marketo, tying marketing to revenue was relatively straightforward: we would generate marketing qualified leads (MQLs) and a predictable number of them would flip to opportunities. This made it relatively easy to demonstrate how more marketing investment would yield more MQLs and ultimately more pipeline and revenue. However, today’s complex buying environment — characterized by larger buying committees and longer sales cycles plus more complex dynamics between marketing, sales, and SDRs — complicates attribution since you can’t tie any single marketing interaction to a buying decision. This causes disputes over who sourced opportunities and makes it much harder to draw a direct line between the marketing budget and revenue.

Brand is Especially Difficult: That same buying environment makes investing in branding essential. Only 5% of B2B buyers are in-market to buy at any given time — leaving a massive 95% out-of-market. Unfortunately, many CEOs and CFOs tend to think of marketing a simple transaction akin to a gumball machine — insert money and get immediate pipeline out. However, this is a far cry from how marketing actually operates. The reality is that the impact of brand investments on the business can take 1 to 3 years to materialize and usually in ways that are difficult to measure. This disconnect leads to an underinvestment in branding that leaves you and your competitors fighting over the same 5% of in-market buyers. 

Asymmetry of Activity vs. Results: It’s no secret that marketing and sales are two sides of the same coin. But sometimes, one side gets more attention than the other. Marketing spend is easy to see and measure, since it typically involves specific programs and invoices, but the results of marketing activities are tough to quantify. Sales activities, on the other hand, can be tough to measure, but the results are easy to see: closed deals. This asymmetry leads to a perception that sales investment is revenue-driving and marketing is a cost center.

Limited Stakeholder Understanding: Non-marketing executives, notably CFOs, may not have the patience to understand marketing intricacies, straining relationships and making budget defense a challenge.

PART II: 7 Strategies for Fortifying Marketing Investment 

The discussion at the Smarter CMO Forum uncovered various tactics for defending marketing investments. This section delves into these strategies, ranging from employing benchmarks and showcasing marketing’s influence to aligning budgets to business aims and fostering sales collaboration.

1. Use Benchmarks: Benchmarks are crucial for setting and defending the marketing budget. They show how your investment compares to other companies, and if you are significantly below, that can help make the case for incremental investment. (Just be aware, benchmarks represent averages, so if your business needs to perform above average, you need to make a case for being above the benchmark.) Insight Partners publishes some great benchmark data for SaaS companies, including total marketing spend vs. new logo bookings and marketing as a % of sales & marketing investment, as well as insights on how marketing investment is allocated across programs, people, and other.
2. Measure Marketing-Sourced Pipeline: Many Smarter CMOs, despite the known inaccuracies, continue to use marketing-sourced pipeline to show marketing’s impact. Although flawed, it’s viewed as better than no metric. One CMO uses a first-touch attribution model but resets the first-touch source after 90 days. Other CMOs mentioned that claiming influence is generally smoother than claiming to be the source, and that if marketing plays a role at any stage, whether it be sourcing the deal or accelerating pipeline, then marketing can get influence credit.
3. Avoid Metrics that Reduce Power: I suggest marketers avoid ‘cost per’ metrics (such as “cost per lead”) since that makes it too easy to think of marketing as a cost center. Instead, use metrics such as investment per opportunity or pipeline dollar; it’s a subtle but powerful shift in framing. Other CMOs suggested refraining from discussing “boiler room” metrics that matter to marketing but not to other executives (such as click-thru rates), and instead to focus on core marketing impact metrics such as pipeline generated and revenue influenced.
4. Set Budgets Based on Goals and Segments: Another Smarter CMO approach is to tailor budgets around target market segments and specific business goals, rather than by channel and tactic. This facilitates stakeholder engagement and centers discussions around the business’s goals. One CMO mentioned that it’s particularly powerful to engage fellow executives in a discussion about which segments, products, and regions should get proportionally more or less investment.
5. Partner with Sales: Some Smarter CMOs mentioned that it’s especially helpful when sales leaders advocate for marketing investment since they know that more reps not making quota is a bad recipe. Another suggested that a unified budget for sales and marketing enables flexible investment allocation in tune with market demands and buyer behaviors, especially if you can move investment between marketing programs and SDRs based on what’s actually working.
6. Use Common Metrics: The unique challenge of marketing defending its value to finance could be eased by establishing “generally accepted marketing principles (GAMP),” mirroring the generally accepted accounting principles (GAAP) in finance. This common metrics system could facilitate better communication with finance and enhance marketing’s credibility.

Market Your Marketing: Perhaps the most powerful tactic the Smarter CMOs shared is the need to market your marketing internally. Effective internal communication on achievements and strategies cultivates understanding and demonstrates how marketing strategies align with business objectives. The Smarter CMOs talked about presenting this information at board meetings as well as quarterly QBRs and 1:1s with fellow executives. While it sounds like a lot of work, they all agreed it’s an essential part of the modern CMO’s job.

Conclusion 

CMOs have a tough job. They need to set marketing budgets, but it’s hard to do that when other executives don’t fully understand the complex ways marketing affects revenue. Yet there are ways to make it easier. CMOs can demonstrate marketing influence, align budgets with business objectives, partner with sales, use benchmarks, stay strategic in discussions, and maintain constant dialogue with their peers. If they can do all that, they’ll be in the best position possible to defend their marketing investments and help their organizations succeed.

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So what is a “double funnel”? It’s a funnel that tracks both lead-based metrics from traditional demand gen (such as MQLs) as well as account-based metrics (such as MQAs). Funnel metrics help organizations connect specific investments/actions to impacts on revenues to maximize the effectiveness of every single dollar in the budget. The double funnel is a “both/and” approach – asking, why must we choose either the MQL or the MQA when they can be stronger together, working side-by-side?

After all, an account is typically made up of a buying committee and that committee is made up of individuals. We need to see the account as a whole, with an account-based context to engage with individuals within each account. Accounts and leads, MQAs and MQLs, aren’t archenemies but can actually sing in harmony. 

Setting Up the Double Funnel: People, Processes, and Technology

“We look at operationalizing our double funnel in terms of people, process, and technology,” says Coupa CMO Pattabhiram. “So first on people, we’ve segregated our marketing teams using a clear alignment based on [B2B customer] segments.” Coupa (a SaaS/software provider) has a dedicated account-based marketing team for enterprise companies/accounts and another one dedicated to small and midsize businesses/SMBs. Coupa deploys a digital center of excellence that serves each team in targeting their enterprise and SMB accounts, respectively. 

In terms of processes around engaging accounts, Coupa uses three tiers of ABM: one-to-one, one-to-few, and one-to-many.  Each “are driven by an entitlement model [note: account entitlements are a framework created to make clear what the level of investment should be for each tier of accounts], which is based on discussions we’ve had [internally],” says Pattabhiram. “ So maybe the North American enterprise sales organization gets 5 one-to-one accounts, 15 one-to-few accounts, and a single one-to-many for a more scalable approach.”

On the technology side of the double funnel, says Pattabhiram, “the most important tool we use is the single, Demandbase platform.” Coupa deploys Demandbase as “the orchestrator of our entire approach, from gaining intent and insight into different accounts and then going into different account journeys,” depending on the account’s level of engagement and funnel stage. With an account context and account-based insights from Demandbase, “you can move the deal forward, even if an account is not initially engaged” and provide tailored messaging to advance the account journey from awareness to closed revenue and increased lifetime value.

How MQAs and MQLs Live in Harmony

How does Coupa keep one funnel from cannibalizing the other? “What we do differently at Coupa is we look at MQLs and MQAs together as a sourcing model,” says Pattabhiram. So instead of Coupa asking “what’s your inbound, your outbound, and what is sales driving?,” the software company has created “an allbound model, which means that about 30-35% of our business needs to come from inbound and then 65% is allbound, which is the cost of MQAs – sales, marketing, and account development reps going after target accounts.”

Since teams are aligned to the same target accounts with allbound, Pattabhiram says, “sourcing doesn’t really matter in that context and the way to operationalize allbound is to create the incentive system so that account development reps are comped regardless of what the sourcing is.”

The allbound model has reduced conflict in the enterprise business, notes Pattabhiram, who offered a hypothetical.“If we’re going after Procter and Gamble, for instance, the partner at Accenture might have introduced us to the CIO, then the CIO might have come to our website or maybe attended an event we hosted, and then maybe someone from our sales team had dinner with someone at P&G, but who really cares about who’s sourcing it, whether it’s sales or marketing, right?” 

Pattabhiram explains that “the allbound model has really paid off for us in terms of driving harmony, not harm within our operation, because conflicts over sourcing have been eliminated by treating MQLs and MQAs the same.”

To learn more about how Demandbase can help drive efficiency with your organization’s inbound and allbound motion, see a demo here.

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