Budgeting For Better Outcomes
OMD UAE
23 September 2019

Originally published by Campaign Middle East.

By Saleh Ghazal, Managing Director at OMD UAE.

“What’s the budget?” is quite possibly the most common question agencies ask brand marketers. Whether the figure is set by the client or recommended by the agency, this question, followed by the budget allocation process, is the start of an inevitable debate with no definitive end.

Innovative technology-based tools now complement the arsenal of techniques and approaches marketers can access to arrive at the optimal budget level and allocation. Despite bringing science to an imperfect process, less than 10 per cent of marketing budgets are earmarked for these solutions. Despite their benefits, few marketers rely on technology and data to predict, analyse or recommend smart and agile budget allocations in this rapidly changing landscape.

Yet, the need is real. The CMO Spend Survey, launched this year, found that CMOs struggle to align marketing metrics with business priorities. The majority still regard awareness as their number one metric, rather than customer lifetime value and return on investment.

Difficult market conditions certainly call for even more budget optimisation and cost control. Most brands usually react by focusing less on the top of the funnel and awareness and more on the lower funnel and purchase intent. Instead of redistributing budgets to better performing channels, be they technology, data, analytics or media services, optimisation increasingly means cutting budgets.

The question is whether this is the best course of action. Are we yielding the highest return on investment or is there room for more growth? Can a dip in the market be managed differently to avoid declining results?
There are three pivotal measures that directly and indirectly help marketers to truly optimise both in the short and long-term.

ENDORSING MARKETING TECHNOLOGY
Martech is a group of systems and technologies that brand marketers leverage to conduct and improve their marketing activities. Let’s illustrate its benefits with the example of a brand that usually invests $100 to reach 100 people. By deploying the right martech solutions, such as MOAT, OpenSlate, IAS and others, the same $100 could reach 130 people. A 30 per cent increase in reach not only neutralises the impact of slowdown on a brand but also maximises its performance.

Globally, martech receives about one third of total budgets and growing, but in the region, this share remains obstinately low. Review your marketing technology investments rigorously and pragmatically, keeping what is working and seeking better solutions to improve your performance.

EMBRACING MARKETING SCIENCE
Marketing science helps marketers to better understand their customers and their needs. Instead of systems and technology, this approach is based on scientific methods that leverage data. What if the same $100 could increase the return on investment by 15 per cent? This can be achieved by allocating budgets to marketing science and deploying techniques such as multi-touch point attribution, brand portfolio optimisation, market prioritisation or customer lifetime value-based segmentation.

According to this year’s State of Marketing Measurement report, 82 per cent of marketers aim to have every campaign measured, but less than a third of those effectively evaluate the ROI of each channel.
In this context, measurement doesn’t refer to the traditional evaluation of a campaign performance but rather measuring what is more important: business results.

Marketers should know what to measure, how and when, activating analytics and marketing science to maximise business results. Involve your agencies in your business performance by sharing your data with them, compliantly of course, so that they can have a real impact on growth.

CHALLENGING REMUNERATION MODELS

Traditionally, most advertisers remunerate agencies for their services using a commission based model, irrespective of the outcome, the time spent or the value that the agency delivers. Instead of a flat commission, our brand would get better results from its $100 budget if it incentivised its agencies with a performance-based remuneration.

The World Federation of Advertisers says that 81 per cent of marketers believe that  performance based remuneration models that focus on outcomes will improve the agency-client relationship and enhance business performance. This is a ‘nobrainer’, as this remuneration approach pushes
agencies to challenge themselves to get paid fairly. It is a win-win situation for both brands and agencies.

Yet, performance-based remuneration models represent less than 5 per cent of total agency remuneration. If marketers truly believe what they claim about performance-based remuneration, then now is the perfect time to break with convention on compensation. Remunerate agencies with an outcome-based remuneration model.

Budgeting in tough times ought to be about facing adversity with the most effective weapons, not empty handed. Investments in technology and marketing science will eventually claim the lion’s share of marketing budgets, with good reasons.

Empowering agencies with the systems, technology, data and remuneration models to get the best from them and make better decisions faster is the way to secure the future. Traditional methods are no longer the solution to today’s problems, which need to be addressed holistically.

More than an agency, what marketers need today is a business performance company.

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