CMO versus CFO

Media investments 2023

These budget reviews are quite something. I never enjoyed them, especially not as CFO and part of an international organisation. You try and go to London to explain that your staff costs will be going up by 10% in 2023. “Forget it! Bring your costs in line with your turnover!” is just about the most civilised thing you’ll get hurled at you. And that this increase is required by law doesn’t factor in at all, on the other side of the Channel.

But fine, that’s something for the CFO and there is still some wiggle room at that level. But what about CMOs? Controlling and Finance always give you a pitying look, and it’s only when they’re looking for cuts to square their budgets that they’ll look upon you with some modicum of kindness. However, dear advertiser, there’s a lot of literature that can support you during budget negotiations. Try to take maximum advantage of this library of knowledge, because negotiating with substantiated data in hand is still the most sensible way to go. Data beats cockiness!

In this respect, a very thorough and interesting study by Nielsen was published this week. They examined 150,000 media campaigns (!) from all over the world and explored how budget allocation and media mix impacted ROI. Mention this to the CFO and they’ll sure be impressed!

Some outcomes from the study:

  1. Some 25% of brands spend too much on media, but cutting out the excesses hardly improves ROI. How is that possible? Well, the study shows that 25% of all companies overspend on a particular medium and when that excess is cut, ROI improves by a few percentage points but sales volume drops. In other words, reducing the budget is not a solution. However, improving the budget spread across the various channels, or in other words optimising the media mix, is.
  2. Not enough media is a bigger problem than spending too much. Nielsen found that more than half of brands spend too little on advertising to achieve maximum ROI. Increasing that spending improves ROI by just about 50% (!) on average.
  3. A healthy media investment, and especially to remain competitive, you need to spend between 1% and 9% of sales in media with a median of around 3.7% for Europe, whereas Asia and the US spend more (4.6% and 4.1%, respectively).
  4. TV is hot and the study indeed reveals that a lot of budget is spent on TV, yet in 30% of cases the spend is still too low! Optimisation can improve ROI by more than 50%.
    An analysis of display and video advertising shows an under-investment in 60% of all media plans. Increasing both touch points to optimum investment levels can achieve between 50% and 60% ROI growth.
    And as for TV, this was a global survey, not a Belgian one. So let’s not talk about the availability of TV ad space….
  5. And this is perhaps the most striking observation: the impact of media on sales and brand objectives. Even though there is no perfect media mix and this mix must be considered on a case-by-case basis, there are some general lessons to be drawn. Overall, display, social media and TV score above average in 60% of cases in achieving both sales and brand objectives.

Five conclusions, dear advertiser, which, regardless of your industry, budget and strategy do raise a few eyebrows. By the way, what Nielsen added and what they analysed is the impact of new media. The positive impact on aided brand recall of podcasts, influencers and branded content (if you could still consider these to be new) is around 70%. Not to be ignored therefore!

These analyses make some things clear for fma. There are long-term benefits in providing a sound and sensible approach to your media budget, looking not only at cost reduction and discount increases, but certainly also at tracking and post-campaign follow-up. Let’s face it, this analysis looked at 150,000 campaigns from all over the world. But when it comes to our own campaigns, do we know these results? If your answer is a resounding yes, then you have understood the message: analysing, monitoring and optimizing the past, helps tremendously for improving the future. More so in media than in any other industry!

You should also not be afraid to earmark budget to explore new areas! In our pitch work, we often see too much focus on negotiations alone. As important as negotiations are, at fma we push to put 20% of the budget into insights. That’s a lot, but it pays off we know by now! Out of the remaining 80%, earmark 10% for new media and see what the effect is on your brand. Trust us, it will pay off!

The key, then, is to convince your CFO with numbers instead of just trying to talk them into it. Already split up your media budget in this way, so that you can also present data, analysis, insights and reflections on your own campaigns during next year’s budget review. Increasingly, that’s where the strength of your media agency lies, that’s where they can make a difference, and that’s where they can really serve you on a strategic level. You only need to pluck up the courage to ask them for it.