Customer-based budgeting
Learn how to create a customer-centric budget in four steps.
Your CFO will love this budgeting process!
Building a marketing budget aligned with both customer acquisition and retention is daunting. CMOs frequently face the never-ending challenge with budget constraints to accomplish their strategic goals and objectives. Traditional budgeting methods often overlook the full view of customer interactions, leading to sub-optimal allocation of marketing resources. By implementing a customer journey-based approach into budget planning, businesses can ensure that every dollar spent is an investment in sustainable growth. This blog outlines the process to develop and secure the marketing budget you need. Your CFO will play a key role in supporting and also championing the transformative budgeting process.
Analyze Historical Sales and Marketing Expenses
Start this new, transformative budgeting process by reviewing historical sales and marketing expenses. Classify each line item as customer acquisition and/or retention in four categories – awareness, interest, customer satisfaction and repeat sales. Next, allocate percentages for each expense. Some expenses may serve dual purposes in both acquisition and retention. For now, just focus on providing an approximate estimate rather than worrying about exact precision. This initial step lays the groundwork by providing a clear picture of how your marketing dollars have been spent, allowing for a more informed decision-making process moving forward.
Allocate Team Time Spent on Customers
Budgeting isn’t solely about the actual dollars spent; it’s about where your organization is investing time with prospects and clients. This crucial analysis spans multiple departments, including marketing, sales, customer service, executive leadership, and even the technical teams. Mirroring the same process as in Step 1, assign time percentages to the different customer journey categories. Collaborate with your CFO to determine these time allocations and payroll dollars, distinguishing between teams that are 100% client-facing and those with partial client engagement. By meticulously tracking the time devoted to the different customer journey stages, you gain a complete view of resource distributions for both manpower and money.
Budgeting Tip: Implement a time-tracking tool for a month to accurately capture where marketing, sales, and customer services efforts are concentrated for another layer of data-driven insights.
Determine Revenue Goals for Each Business Unit
The next step is to establish specific revenue objectives for each business or product segment. Consider whether the sales target is to maintain current levels, reach break-even, or pursue aggressive growth. Based on these objectives, propose a marketing budget as a percentage of anticipated revenue. This figure could range from 1% to 25%, depending on the strategic direction of each segment.
Pro Tip: When setting these marketing budget percentages, strike a balance between a realistic number and ambitious targets. Tailor the percentages to align with your growth objectives and to stay competitive within industry standards.
Consolidate and Present Your Budgeting Insights
This crucial final step synthesizes all previously gathered data—historical expenditures allocated by sales funnel stages, staff time distribution, revenue objectives, and target marketing budgeting percentages by business units. It pinpoints the areas where resources may be falling short. Often, this analysis uncovers significant under-investment in critical areas, particularly in customer retention. A common challenge is the siloed operations of sales, customer service, and marketing departments, which can hinder cohesive team efforts.
Pro Tip: Develop a persuasive presentation that not only underscores these gaps in investment but also outlines the benefits and ROI of strategically reallocating resources. This approach facilitates informed discussions with stakeholders, showcasing how targeted adjustments can drive greater efficiency and impactful results.
Facilitating Productive Discussions with Your CFO
Equipped with your customer-centric budget proposal, you’re prepared to have meaningful conversations with your CFO about prioritization and resource allocation. Instead of a desperate statement of “I need more marketing money,” you can now demonstrate a detailed analysis showing how specific, targeted investments across the customer journey can yield quantifiable results.
Shifting the Dynamics in Budget Meetings: This new approach reframes the budgeting conversation from a tug-of-war over resources to a strategic discussion on optimizing marketing investments for maximum impact. Now you can say, “If marketing is responsible for generating 240 leads, it will cost this much. Our current budget will only allow for 120 leads, leading to a 50% budget gap.” By championing a comprehensive view of the customer journey, you prove the critical need of a balanced investment in both acquisition and retention grounded in data and strategic insights. Additionally, this new budgeting process earns the sales team’s trust, which directly contributes to increased leads and resources dedicated to improving customer satisfaction.
Conclusion: Transform Your Marketing Spend. How Customer Journey-Based Budgeting Fuels Business Growth
Customer journey-based budgeting is much more effective than traditional budgeting approaches; it’s a strategic shift in how resources are allocated, ensuring that every marketing dollar spent contributes to long-term business growth. By adopting this methodology, you not only prioritize meaningful engagement with clients, but also ensure efficient and effective use of precious marketing funds.
The objective is to demonstrate the tangible benefits of strategically allocated marketing resources with the sole focus of acquiring and retaining more clients. Not only do you gain your CFO’s support, but you also secure a budget to achieve business growth and a loyal customer base.
Additional Resources: For further insights to enhance your marketing efforts and strategies, explore our comprehensive A to Z marketing checklist which is designed to cover every facet of your marketing needs from digital marketing to lead generation to SEO.
Jessica Kelley
Founder and CEO
Jessica Kelley has more than two decades of experience in marketing and finance, with a focus on B2B and B2C channels. She has worked extensively within the healthcare, consumer, commercial, and software industries in diverse environments ranging in size from a $200 billion corporation to a startup firm.
Jessica is the founder of HPZ Marketing, an interim CMO and fractional CMO company and is certified by the Women’s Business Enterprise National Council (WBENC) as a Women’s Business Enterprise and Women Owned Small Business (WOSB). They provide interim and fractional executive marketing services to help businesses achieve marketing ROI with executable strategy and a relentless focus on customer acquisition and retention. Learn more about hiring a fractional CMO for your business.