Why Is Transparency in Marketing Spending Difficult? – Part 1
Marketing is certainly a need in every business. Marketing costs can account for a considerable part in the monthly spending. The marketing spending usually grows in line with the company size. The problem is that marketing budget is rarely published in a transparent way. As a result, it is difficult to measure how marketing budget is related to the sales and profits.
Problems with Transparency in the Marketing Spending
A common problem that leads to the problem is inability of the finance department and marketing department to work together. These two departments work separately. Therefore, tracking, classifying, and accounting for marketing spending become limited by lack of collaboration between both departments. The problem is even worse in the digital marketing. There are more types of digital marketing efforts, and the payment mechanisms vary widely.
Due to lack of understanding on how the marketing spending goes into sales and profits, it is difficult for the management to identify the following things:
- The total costs of sponsorship programs
- The actual investments in digital media
- How the digital media reaches the intended customer segment and audience;
- How to count and differentiate between earned and owned marketing investments.
- How to count marketing costs for contents, technology, digital marketing, analytics, SEO, and other digital tools that make up significant parts in the marketing spending.
Consequently, the CEOs often put a pressure on the Content Management Officers (CMOs) to prove the value contributed by the digital marketing efforts to the company. In response to the pressure, the CMOs are taking aggressive analytical efforts, which are actually very costly. For instance, they need additional investment in performance management software, marketing analytic software, modeling software, and many more.
Behind the Problems of Marketing Spending Transparency
Actually, there are some problems behind the difficulty in realizing transparency of marketing spending. They include the following:
Explosion of Marketing Mix
As described above, the types of digital marketing efforts become more complex. The companies need to adopt some of these marketing mixes to promote growth. Forbes research showed that 92% of CMOs invest in at least 20 marketing efforts to support and promote the business growth. These make measurement of marketing spending more complicated.
Why? Some of current marketing efforts are not paid media. The organizations tend to invest more in the infrastructures and contents to post in free social marketing channels. In other words, they actually do not pay the media.
Lack of Standards
As there are more types of marketing mix available now, defining the standards becomes more difficult. For instance, online procurement systems do not classify, code, and break out marketing costs and agency costs. In addition, media companies make the problems even worse. They focus on media-specific research, analytic systems, and measurement systems that support their own work.
Those problems in realizing transparency in the marketing spending are also related to the fragmentation of spending data. They are available in varied formats, systems, budgets, geographies, and organizations. Therefore, building a reliable database is another challenge. Get more discussions on the problem in the next post.