Communicating martech’s value in a slowing economy

The marketing industry is facing major challenges in 2023. Budgets are down, teams are facing layoffs and martech consultancies are struggling due to client budget cuts. Martech vendors trying to sell into marketing departments with smaller budgets have been even more miserable.

While some see this as the beginning of a lasting downturn, there are strategies marketers can use to optimize performance and demonstrate value today.

Marketing is always the first to go

For as long as I’ve been in marketing, the first organization impacted by any financial crisis has been marketing. Marketing was viewed as the “fluffy stuff,” particularly in engineering-driven corporations, mostly because it was difficult to quantify the impact marketing had on the business. (Remember the old “build it and they will come — we don’t need marketing” mantra?)

Historically, marketing value was hard to quantify. KPIs were simple measurements of leads generated and were not particularly meaningful. Even though marketing activities have become progressively measurable, the “fluffy” label persists.

To many non-marketing executives, marketing is perceived as more of a “nice to have” than a “must have” function. This is particularly true in B2B companies. As a result, when it comes time to reduce expenses, marketing becomes the obvious place to start.

Dig deeper: How brands should react to market slowdowns

Self-correction?

You could argue that what we’re experiencing is cyclical and, at some point, will self-correct. To a large extent, that’s true. Companies will eventually wake up and realize that cutting marketing has harmed sales and will reinstate budgets and give the go-ahead for hiring again. We’re already seeing some evidence of this as we get closer to the end of the year, and the pressure to meet revenue numbers intensifies. I call this the “uh-oh” effect.

That said, the best course of action would be to try and get off this roller coaster once and for all. Being subject to cyclical budget cuts stalls innovation and impacts overall marketing performance. It’s not as simple as turning everything back on. Time and expertise have been lost. Markets, technology and competitors have moved forward. Momentum is gone, and it takes time to ramp back up. 

While it may not be possible to stop marketing from being impacted in a downturn, there is an opportunity to try and mitigate how much marketing is impacted by drawing a straight line from marketing performance to business performance. 

Changing the conversation

Marketing impact has become increasingly measurable, so much so that marketers now have hundreds of data points at their fingertips. The challenge is distilling those data points into a few key metrics meaningful to the rest of the executive team and the board. 

In October 2015, Avinash Kaushik, then senior director of global analytics and digital marketing evangelist for Google, spoke at the MarketingProfs Conference about leveraging analytics effectively.

During his presentation, he showed a slide that made the point that as you communicate up the food chain — the higher you go, the less data you should present. It was a big aha moment for me, so I took a photo of the slide.

When it comes to communicating marketing performance outside of marketing, less is more. Using only the data points and KPIs that draw a line between marketing activities and overall business impact will clarify the value of marketing. Simplify what is communicated and focus on:

• The relationship between marketing, revenue growth and CLTV. How marketing’s activities contribute to topline and bottom-line growth. Summarize conversion and cost of acquisition numbers and leverage any other key metrics that allow you to connect marketing to top and bottom-line growth.
  • Overall impact of marketing dollars spent. Is there a way to show the impact of increasing or decreasing the marketing budget on top and bottom-line growth?
• Marketing’s contribution to customer engagement, retention and satisfaction. Ongoing engagement is critical to optimizing the customer lifetime value. NPS scores and key cohort analyses can be key indicators of engagement, retention and satisfaction.

Marketing excels at storytelling. In the same way that we craft stories to compel prospects to engage with us and purchase our products, we need to leverage storytelling skills and the data we have to create a compelling narrative about the impact that marketing has on business performance and the risks of reducing spend.

Optimize your martech to strengthen your marketing performance

A critical component of the marketing story is how we leverage marketing technology. For many executives outside of marketing, this appears as a black hole consuming a significant percentage of the marketing budget. As marketers, we have two challenges:

• To ensure that our martech stack is optimized from both a functionality and expense perspective and meets our business objectives.
• To communicate in an understandable way how we are leveraging technology to support the programs that ultimately drive business growth.

Some of the characteristics of a successful marketing tech stack are:

• An architecture that ensures that the right data is collected, cleansed, appended, distributed and acted upon.
• The stack is right-sized for the organization. The tech stack contributes to the cost of customer acquisition. A bloated stack with redundant products and functionality will negatively impact customer acquisition costs and, ultimately, customer lifetime value. 
• Each product is being utilized to the full extent possible. You may not need to use 100% of a product’s feature set, but you should use all the features that support your use cases and requirements.

It amazes me that so few companies have a big-picture view of their martech stack. The lack of centralized oversight can be attributed to:

• Distributed purchasing and technology responsibilities.
• Mergers and acquisitions.
• Limited internal resources, resulting in documentation falling off the to-do list. 

When working with a new customer, we first audit their martech stack and its component products. Without a comprehensive view, it is impossible to: 

• Ensure that data is complete, getting to where it needs to be and is being acted upon.
• Measure and optimize the performance of the stack and its component pieces.
• Control customer acquisition costs.
• Calculate any ROI metrics.
• Communicate the value of the technology in place both quantitatively and qualitatively.

This puts marketing teams in a vulnerable spot when it comes to budget reductions and opens the door for “helpful” statements, questions, and directives from finance and other non-marketing personnel. You may have heard one or more of these statements/questions:

“I think you have too many products, you need to consolidate”

“Do you really need XYZ product?”

“You need to take 25% out of your technology expenses”

“If you are buying this new product, which other products are you taking out of the stack?”

“Can you standardize on one technology vendor?”

The right question would be: “What would the business impact be if you increased/reduced your marketing tech spend by x%?” If that question were asked, could you answer it? 

If the answer is no, now’s the time to determine how to get an answer. Get your team engaged in defining the key metrics you need to answer this question and then devise a plan to acquire, review and present those metrics. You won’t be able to do this without understanding your technology environment. 

If that’s an issue for you, consider calling on one of your key vendors, an agency or a marketing consulting firm to assist you in this effort. If you can’t bring in extra resources, the best way to approach this is to: 

• Work with your team to define all the categories of technology tools you are using. Below are examples to get started (although you can bundle some of them into a single category if needed):
  • Creative tech.
  • Productivity tech.
  • Customer relationship management (CRM).
  • Customer success and engagement.
  • Customer experience and journey management.
  • Marketing automation.
  • Email.
  • Social.
  • Advertising.
  • Analytics.
  • Lead generation.
  • Data management.
  • Events.
• Give each team member a category or two to research and send them off to talk to the greater marketing and sales team. The goal should be to identify the following:
  • Tool name
  • Tool owner
  • Tool function (internal use case)
  • Tool cost
  • Tool integrations
  • Tool satisfaction (subjective)

With this information, you should be able to create a basic overview of your stack and draw conclusions about the value of the various component pieces. Over time, you can dig deeper (and you should). But for now, at least get this in place. 

Optimizing your martech stack and telling marketing’s story effectively can help you mitigate arbitrary budget reductions. While the environment is challenging, you have an opportunity to implement strategies to steer your department and company toward future stability and success.