SBI recently spoke with Chris Marjara, the chief marketing officer of McGraw-Hill Education. Newly hired at McGraw-Hill, Marjara is facing a unique challenge. He is leading the digital transformation of the company’s textbook business. Marjara is taking McGraw-Hill Education from a traditional textbook publisher to a digital-solutions company.
This is no easy task. But it is one faced by many marketing teams: reinvention to stay relevant in the digital age.
Marjara discussed in depth one of the biggest challenges — the budget. No marketing team can be successful in transforming their company without the proper budget. But how do you get the executive team on board? And once you do, how do you determine what your budget should be?
“Companies that are trying to reinvent themselves need a big marketing budget to do so, but long-tenured executives married to the old business model are reluctant to invest,” claims Greg Alexander, CEO of SBI. “How do you change that?”
Marjara says it’s simple. It’s about demonstrating real value. “You’ve got to prove your worth and keep proving your value every step of the way.” Only then will you gain the buy-in from your leadership team.
Once you have the support, the next step is determining your budget. There are four common budget-setting methodologies. How do you know which one is right for you?
The key to modernizing your Marketing Team is investing your budget wisely, for there is only so much money to go around.
Traditional Marketing Spend:
One method is simply a percentage of revenue. If your company does $100 million in revenue and 10 percent is spent on marketing, your budget is $10 million.
“This is the traditional method of calculating marketing spend, but it all depends on the context of the marketplace,” says Marjara. “For example, if you’re a brand-new technology looking to make an entrance into a new area, clearly you’re going to be spending a significant amount more to acquire new customers.”
Alexander agrees. Though useful, this budget-setting methodology must be placed in the proper context.
The second budget-setting approach commonly seen is competitive benchmarking. This requires establishing a peer group of companies and understanding how much they are spending on marketing. Then you must look at your spend. Is it greater than, less than, or equal to theirs?
Again, Marjara maintains it’s all about context. What type of industry are you in? Is it mature? Is it on the verge of new innovations and technologies? All of these issues must be taken into account. Alexander recommends you take it a step further and benchmark at the program level. “Somebody can always outspend you. It’s a question of do you have the budget allocated correctly across the programs and are you intelligently spending to give yourself a competitive advantage.”
The third method involves asking, “What can we afford?” In this case, it is a matter of making consumption choices. You are in survival mode and must make some tough decisions while looking at every dollar spent. Prioritization is key to increasing market share.
The fourth and final budget-setting methodology is a favorite of both Marjara and Alexander: objective-based budgeting. In this scenario, marketing teams gather a list of objectives that need to get done and list what it will cost to accomplish each.
Alexander recommends asking a series of questions. “How is the marketing strategy reflective of the corporate strategy? Are these mission-critical objectives?” If so, they must be properly funded.
At the end of the day, no matter what your budget-setting method is, marketing teams must get the budget, allocate it, and spend it correctly. The key to modernizing your marketing team is investing your budget wisely, for there is only so much money to go around.
How it Feels to Make Your Number
It has never been more important for the product team, marketing department, and the sales organization to work together, but it’s easier said than done. Turn to page 46 to learn the prescription for developing your 2016 sales strategy, with critical inputs from product management and marketing.