Spend management is hardly the most glamorous component of marketing, but its impact can be game changing. That fact is particularly important as businesses react to the downturn ushered in by the Covid-19 pandemic.
Done well, spend management can free up marketing budget and serve both as a foundation to weather a storm and a catalyst for future growth. Effective spend management enables agile decision making within days (or even hours), allowing marketers to rapidly re-deploy funds where they matter most.
Based on work with more than one hundred companies across different industries, we’ve found that marketing organisations that get the most value from spend management do four things well.
Think through which services you really need
- Double down on what works – To figure out where spend is having the greatest impact, marketers have to commit to a granular understanding of where their target consumers are and whether the money they’re spending is really reaching them
- Create a flexible and iterative statement of work (SOW) – The usual variances that would occur throughout the course of a year in a SOW are likely to be even more pronounced during the current crisis. To address this issue, develop SOW blueprints on a rolling basis instead of annually, crafting the next-quarter SOW with a high degree of clarity and the SOW for the quarter after that with semi-clarity
- Tailor your agency’s account team – Marketing organisations should adjust their staffing to match the right people with the right work, flexing senior staff up or down as needed. This should be evaluated regularly as part of the quarterly SOW process
Change the way work is done
- Embrace faster decision making – Move from a linear hierarchy to a decentralised, agile model in which cross-functional teams are given highly focused tasks and clear key performance indicators (KPIs). Instead of waiting for approvals and input, these agile squads have the ability to make their own decisions
- Create an anti-redundancy culture – Marketing organisations need to have a robust asset-management platform for managing and reusing photos, videos, and other content, rewarding people, both internally and externally, who do so
- Work with finance to reform the annual budget process – Given the uncertainty surrounding the foreseeable future, CMOs need to effectively articulate their strategy and objectives for the coming year and let that guide the budgeting process. Resetting the way money is allocated and moving toward a fit-to-purpose budget prevents wasteful spending and empowers CMOs to set their own agenda
- Continuously demonstrate the value of marketing – CMOs should forge collaborative bonds across the C-suite, focus heavily on “impact”—tracking and communicating the value of every marketing investment—and make sure everyone has a crystal-clear view of the value that marketing spend generates
Optimise where work is done
- Bring business-critical activities in house – “In-housing” usually makes the most sense for activities that require a deep knowledge of the business, greatly accelerate the speed to market, or allow the business to leverage a specific capability for a competitive advantage
- Create the right ecosystem of agencies – Create a detailed view of the overall agency ecosystem and establish clarity on how each agency fits together in a cohesive model. Detailing this overall vision allows marketers to select the right agency to fill a specific role and integrate it seamlessly into the broader agency ecosystem. Filling these roles in a fit-to-purpose manner allows marketers to manage their spending without sacrificing the quality of their marketing
Pay the right price
- Know exactly what you’re spending – Making smart decisions about spending requires transparency. To get better visibility, companies need both a robust spend taxonomy, a tech stack capable of tracking it, and disciplined operating models that ensure the accuracy and completeness of the data
- Arm yourself with comparable price data – Due diligence can yield millions of pounds for reinvestment in high-priority initiatives. For agency fees, understanding market rates for similar services and gaining insights on cost drivers via “should cost” analyses can provide transparency about fees and leverage for obtaining better rates
- Give agencies a reason to go the extra mile – Create a link between performance and compensation through a re-evaluation of agency compensation models. For example, basing as much as 20 to 50 percent of total fees on performance and offering an extra payment of 10 to 25 percent above the base rate for exceptional work provides incentives for the agency to listen to the client’s needs and perform above expectations.
We believe that CMOs and other marketing leaders who can implement these lean marketing actions can play a leading role in ensuring their businesses successfully navigate the downturn and position themselves to succeed when customer demand returns.
The author would like to thank Hussein Hakim, Jeff Jacobs and Rachael Schaffner for their contribution to this article.
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