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Many businesses spend their time each fall trying to predict the future. They’re diving deep into historical data and trying to overlay that onto their expectations for next year. How many customers will purchase from us again? Which channels require a larger presence? What larger economic factors must we account for? And so on. This process didn’t just exist for annual budgeting, however. The very nature of old media marketing dictated this exercise as much as internal budgeting needs. Old media depends on predicting the future — and largely explains the limited lifespan of the modern CMO. Does this need to be the case? I’d suggest not. And here’s why.

If you’ve never heard of “upfronts” before, you’re lucky. The major broadcast TV networks sell huge blocks of advertising time for the current TV season (usually around 75%-80%), well in advance of the actual start of the TV season. This is no trivial exercise. The networks pull down billions of dollars annually. Of course, if the shows those broadcast networks sell fail to hit, the advertiser is out a healthy chunk of change. And the CMO who authorized the buy is out on his ear. 

Fortunately, digital marketing allows for a more nimble model, one that depends less on predicting the future and much more on how quickly you react to a changing marketplace. Using this model, budgeting digital becomes less a question of how much you’ll spend in any given period and more a function of how effectively you manage your numbers.


Photo credit: Lulu Vision

Instead of planning your budget the traditional way, allocating x percent to tactic A and y percent to tactic B, look instead at allocating budget based on return. What percentage of your bottom line comes from paid search? Then allocate that amount back into the channel. Get 25% of your business from SEO? Then put 25% of your marketing budget back into it. Social not performing as well as you’d like? Reallocate its budget to the channels producing a positive return.

Your goal is to make your budgeting and spend more nimble, more easily allocated to the channels producing positive results. For instance, if you’re getting $5 in return for every dollar you spend in a given marketing channel, why would you stop spending there at all?

Of course, it’s not always easy to move to this model. Here are a couple of tips to keep in mind:

  1. Look for big movers (up or down) in your budgeting. If you’re like most businesses, mobile is probably growing significantly faster than other online marketing channels. It’s probably a good idea to provide a little extra in the budget for future growth. Likewise, if one of your activities continues to lag, maybe it’s time to pull the plug (or at least limit the resources you’re throwing at it).
  2. Know your numbers. Rob Petersen and Andrew Schulkind recently offered up some tips on Google Analytics metrics every marketer should know and how to count your content marketing success. Make sure you–and your corporate stakeholders–know the success metrics for each tactic. You don’t want to spend your time fighting a rear guard action, continually defending prior decisions from those looking to poach your purse. 
  3. Prioritize strategically. As big a fan as I am of knowing your numbers, sometimes it’s worthwhile to “overspend” in areas core to your businesses long-term success. Your website likely will remain a critical component of communicating with your customers for years to come. The same is true for your email list. Don’t pillage budgets of core areas to fund emerging platforms that might drive traffic and sales away from your core, strategic initiatives. 
  4. Adapt, adapt, adapt. As your numbers come in, be ready to adjust your spend accordingly. Part of talking your CEO’s language is knowing when it’s time to pull back from those tactics that aren’t working and refocus your energies on the areas with the greatest potential. And if you’re hitting a point of diminishing returns, don’t be afraid to use your remaining budget to test new ideas instead of throwing money down the drain.

Budgeting and planning is a complicated endeavor. And exploring this model will take both time and the buy-in of your organization. But you can make it work to your advantage by ignoring the temptation to trying to predict the future. Build your digital marketing plans around adapting quickly to what happens instead. Your focus becomes less about predicting the future and more about making history for your company.

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About Tim Peter

Tim Peter helps companies put the web to work to grow their business. Since 1995, he has developed innovative e-commerce and digital marketing programs that have delivered billions of dollars in revenues. An expert in e-commerce and digital marketing strategy, Tim focuses on the growth of the social, local, mobile web and its impact on both consumer behavior and business results.

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Are you confused and frustrated by the rapid pace of change in digital marketing? Do you find yourself struggling to get ahead...