B2B CMOs are having to do more with less while doing it faster than ever. But how can they overcome the brand value gap to secure greater brand-building investment from the board?
It’s no secret that the world economy has seen better days. High rates of inflation, lower levels of investment, and a generally uncertain economic outlook have put a spotlight on how – and, more importantly, where – B2B organisations spend their marketing budgets.
Despite a growing body of evidence showing the need to balance long- and short-term marketing – including recommendations from the ‘godfathers of effectiveness’ Binet and Field to spend roughly 54% of your budget on demand generation and 46% on brand marketing – fears, doubts, and uncertainties about brand’s role in business appear to be holding B2B organisations back from building out high-performing brand marketing programmes.
So, with our 'Closing the CMO-CFO brand value gap in B2B' report revealing that businesses are investing an average of $1-2 million in brand marketing programmes, what does the future hold for CMOs looking to capitalise on the growing opportunity in B2B brand?
The state of B2B brand-building investment
Let’s start by setting the scene. Our research revealed that nearly 70% of CMOs and CFOs said current economic and inflationary pressures were impacting their brand marketing spend levels. No surprises there.
When businesses hit times of economic instability, the urge to prioritise what’s seen as short-term performance drivers like lead generation almost seems like common sense. But that isn’t necessarily the case. The Institute of Practitioners in Advertising (IPA) found that investing more in brand marketing in a downturn sets businesses up for better success in the future.
It seems like senior Marketers have taken note of the growing body of research highlighting the importance of brand building in an uncertain economy, with 64% of the CMOs we surveyed feeling that in times of fiscal uncertainty, brand marketing should be given a higher level of importance in their company. In contrast, only 26% of CFOs agree.
When paired with our finding that 50% of CFOs are only “fairly” confident in their CMO’s ability to make effective commercial decisions relating to how and where marketing budgets are spent, we start to get a clearer picture of why marketing budgets – and those for brand, in particular – are under so much scrutiny.
CFOs are understandably in their element when all eyes turn to the financial health of a business. Budgetary controls, detailed views into cash flows, and a more ‘business-oriented’ remit mean senior finance leaders play a larger role in budgetary decision making in a downturn.
However, with 60% of CMOs wanting to invest more in brand marketing over the next one to two years compared to just 31% of their Finance counterparts, CMOs risk getting stuck in a continuous cycle of brand underinvestment. Interestingly, the figures almost reverse when asked about lead generation, with 62% of CFOs looking to place their focus there versus 34% of CMOs. Again, no surprises there.
CMOs are using metre rulers and CFOs, yardsticks
One of the driving forces behind CFOs’ reluctance to increase brand-building budgets lies in the difficulties with measuring the effectiveness and commercial value of brand marketing activity.
An overwhelming 72% of CFOs said their CMO struggles to do so. And to make matters worse, it seems like this view of the CMO extends to the boardroom too – only 22% of CFOs of the opinion that the value their CMO demonstrates to their business’ bottom line is “excellent”, with the majority stating it’s only “good” or “average”.
Conversely, should it really come as any surprise that CFOs are unwilling to invest more in brand when CMOs struggle to demonstrate its value to the business? A strong majority (67%) of our CMO audience admit that proving the effectiveness and commercial value of brand is difficult for them. To echo Roger Martin in ‘The Throughline’, brand marketing isn’t something that can be measured within a fiscal year. Yet, CFOs and the board insist on demonstrating ROI on brand activity.
As senior Marketers are pushed to provide reports on the returns of their brand marketing activity, they turn to imperfect metrics that fit within a shorter timeframe. Unlike our B2C neighbours, measuring Share of Voice against Share of Market can be challenging. Carrying out annual brand tracking exercises is expensive, time-consuming, and beyond the reach of many B2B organisations.
This leads CMOs to fall back on what they can measure – often short-term activities rather than what they should. We find this reality reflected in our report, with 81% of CFOs stating that the optimum period to measure the effectiveness of brand programmes is under 12 months. And more alarmingly, 44% of CMOs agree.
We can bring this into context with where the two functions differ in the metrics that matter most when assessing the health of their brand. Financial and commercial metrics like customer acquisition rate, revenue growth, and profit dominate the top three for our CFO audience. While brand awareness levels, brand consideration, and customer acquisition take the podium spots for CMOs.
Is an account-based mindset holding us back?
An impatience for results isn’t the only thing that seems to have spread from the financial department to Marketing. We’ve all heard the adage, 'targeting the right person, with the right message, at the right time, on the right channel'. It’s the thinking at the heart of the account-based mindset shift we’ve seen throughout B2B, allowing for tailored and personalised customer journeys that directly address an account’s specific challenges.
However, this approach may not be helpful when relating it to the world of B2B brand marketing. When questioned on whether brands grow through relevancy or reach, we find some expected results – and some much less so. 68% of B2B CFOs believe that brands grow best through audience relevancy, not reach. Surprisingly and more importantly, quite worryingly, so do more than half (54%) of the CMOs we posed the question to.
The view that buyers need to be dealt the right content or message at the right time to come across as an organisation that can appropriately address prospect needs isn’t wrong in any way. It helps create and maintain Category Entry Points (CEPs) from which buyers interact with a brand. But to get to that point, buyers need to know your brand exists.
As marketing research and effectiveness company System1 put it: “It’s actually the perceived ‘wastage’ from broadly targeted ads that grows brands in the long term.”
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Despite the fact big changes are needed to remedy these issues, most CMOs have an oddly buoyant prediction of the board’s future support for brand. 88% of CMOs have some level of confidence that they can convince the board to invest a greater share of budget in brand marketing next year.