The Positive Correlation Between Savings and Growth

Many of the steep and complex challenges facing today’s marketers are like the moving pieces of a financial puzzle, all begging the same fundamental question: how to do more with less? In searching for some answers, we partnered with one of our automotive clients on how to save money while making an impact.

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But first, some context. Increasingly, marketers are expected to deliver higher sales growth on tighter budgets and shorter timelines. A recent survey from the CMO Council and B2B market intelligence firm Televerde found that 63% of marketers are under “very high” to “extreme” pressure to deliver revenue growth, yet only 53% are, at best, moderately confident that they will meet their revenue targets. In 2020, the average CMO tenure fell to its lowest level in a decade—just 40 months—according to an annual survey by Spencer Stuart.

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All of this was happening as the pandemic threw the normal rules about budgets and planning out the window. Now, marketers are facing a new problem as the pendulum swings from cost savings over-investment. In fact, 2022 is forecasted to be the highest expenditure in the last decade according to Statista. It may seem like a good problem to have—except that it requires a high degree of commercial confidence with where to cut and where to reinvest.

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We don’t believe marketers have to choose between cost savings and growth. On the contrary, having analyzed the performance of thousands of businesses and consistently watched companies outperform competitors with larger budgets, we concluded that there may actually be a positive correlation between savings and growth. That was our hypothesis, and we set out to prove it late last year. We began by having a frank conversation with one of our biggest clients—a major automaker—about making some tough choices in deciding where and how to spend its marketing dollars.

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Case Study: An Automaker’s Path to Efficiency

Today’s marketers are pulled in many different directions. They tend to spread their budgets across every major channel and are understandably drawn to exciting new digital mediums and platforms like TikTok and Twitch, which have huge followings but are still relatively early in their ROI development. Rarely do marketers attempt to quantify how much value all of these investments, in combination, bring to their customers or their businesses.

We decided to collaborate with one of our automotive clients to statistically model where we could take money out of the system without it impacting growth and, rather, areas that were underfunded that could lead to more growth. The amount of savings we uncovered was rather shocking—all told, it was $12 million—but the areas we identified that were over- and under-invested were consistent with our knowledge of the category.

This one incredible case of savings and growth has enormous implications for other brands that are ready to take a more holistic data approach. Whereas companies usually look at the data vertically in isolation, we examined the entire scope of data horizontally in the context of the overall company’s performance. As Kate Ardini, CMO of John Hancock, states: “A marketer may well know how much a campaign’s clicks or impressions drove sales, but how often does it consider whether the $5 million it is spending on the lead agency and another $10 million on promotion are generating enough sales to warrant the investment?”

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Ways CMOs can find hidden performance levers:

1. Connect performance data and budget between silos. Look at the performance in a horizontal fashion to understand the inefficiencies that sit between the silos. It is fairly simple and commonplace to demonstrate siloed performance, but much more difficult and rare to plug the data into a horizontal ROI analysis correlated to sales. This does not mean an expansive data implementation, but an ongoing data scientist who can be your neutral, single source of truth.

2. Operate your budget like a P+L. At its core, the methodology used to arrive at these conclusions was fairly straightforward. We examined three distinct datasets side-by-side—financial (i.e., total marketing budget), sales and marketing performance—and searched for correlations between marketing investments/activities and revenue growth over monthly or weekly time periods stretching back three years.

3. Compare performance of programs cross channel. Too often the idea of integrated data boils down to dashboard—a great tool that, by itself, cannot explain the “why” or connect the dots on what’s driving growth and what’s not. Marketers need to understand not just the outcome but the cause.

4. Run teams that divest programs quarterly. Integration is still an opportunity to unlock value. Black Glass’s data and experience suggest that considerable resources and opportunities are still wasted in most organizations in failing to properly integrate different marketing units and partners.

The positive outcome of this scientific method is clarity on what’s working, what’s not working and why. Imagine the power of having the answers to those three questions—in one clear-cut analysis. As best said by Ed Brojerdi, CMO of Fair.com, “We could all benefit from measuring twice and cutting once. The power of commercial data will unlock a world of certainty for marketers.”

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