(Note: This is Part 1 of a 4-part series on marketing planning. Check back here every Wednesday in August for a new installment!)

Don’t know if it’s time to spend more on marketing?  Unsure how to convince the CFO?  Pat LaPointe – managing partner at NPV Marketing, a leading marketing measurement firm – recently spoke to our members about how to justify spend increases. Read on for a summary of his top tips.

NPV’s research shows that ‘historical spend’ is still the number one means of allocating marketing budget, but lacks both rigor and credibility with the CFO.  What CFOs want isn’t certainty about the ROI of marketing spend (no business investment has a certain ROI, e.g., building a new plant in a developing country), but rather clearly stated assumptions and a sound understanding of risk factors. You can make a solid business case that will pass the CFO ‘sniff test’ by taking the 5 steps below.

1. Squeeze every drop from the current spend mix.

CFOs’ top piece of advice?  “Don’t ask for more money until you’re sure you’re making the most of your current money.”  You can find extra money in your budget by identifying and reallocating spend with low returns.  One way to do this is to eliminate spend at the point of diminishing returns and below the point of critical mass (see curve below). To determine where you are on the marginal returns curve, bring together experts and key stakeholders to reach an informed judgment of what you expect to happen with the next incremental dollar of spend.

2. Prioritize opportunities for investment

Get a clear sense of where the next incremental dollar is likely to get the greatest payback across products/regions/channels. This can be done without a lot of data by ranking opportunities attractive, neutral or unattractive (relative to each other) across 3 dimensions: 1) current performance, 2) future opportunity, 3) impact of marketing/sales spend. Boost investment in opportunities that are attractive on most dimensions, maintain neutral opportunities, and fix or exit opportunities that are mostly unattractive. You may find that some of the opportunities in the fix/exit zone currently have a high level of spend, while some of those in the expand zone have low level spend.

3. Check that prioritized opportunities have “points of leverage”: Make sure additional spend in prioritized areas is likely to produce returns by ensuring the presence of at least 3 of the following:

a)     A strong value proposition,

b)    Customers that are able to switch (and be kept),

c)     Customers that are likely to be responsive to marketing,

d)    A clear, resonant, distinctive message.

4. Assess the environment: Having assessed internal issues, look at the environmental context (e.g., economic, sociopolitical, technological trends).  If you think your internal assessment of trends may be too subjective, consider hiring an economics professor from your local university.  S/he can run your sales data from the last 5-10 years against a battery of macroeconomic factors to find correlations and assess upcoming conditions.

5. Manage risk factors: Estimate the likelihood and potential impact of competitor actions as well as a host of other events (e.g., delayed advertising, strikes, bad weather etc.)  If a risk factor has a high likelihood and high impact, avoid investment or carefully manage against it.

MLC members, access the full webinar replay here or join our upcoming webinar on Avoiding the Pitfalls in Marketing Planning (Aug 18) for more tips.

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3. If We Ignore Planning, Will It Just Go Away?
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5. Nothing to Lose But Your Chains: Touchpoint Planning in the Social (Media) Revolution