Current marketing spending levels are unsustainable. Increasingly, CEOs are demanding that marketing executives do more for less with their marketing budgets.

Careful attention must be given, however, to how spending is restructured. Cuts in spending risk near-term brand performance and long-term brand equity. Doing more with less requires new approaches that manage marketing spending as both a cost and an investment.

More for Less
Implementing approaches drawn from purchasing supply management (PSM) can help identify such opportunities. PSM-inspired tactics include renegotiating with suppliers, redefining purchases to better match customer needs, and reengineering core marketing processes. Overall spending can be reduced by 15 to 25 percent through these efforts.

On the investment side, we help clients better align marketing spend with strategic growth drivers. Focusing on customers with the most economic potential, the most profitable opportunities, and the most effective messages ensures that spend is an investment in future growth. Our work shows that often up to half of a company’s marketing budget can be reallocated to more effective activities, typically driving 10 to 15 percent revenue performance improvement.

Programs for Clients
We work with companies across a range of industries to develop effective marketing spending programs for new and existing brands, geographies, and channels. McKinsey clients benefit from our in-depth understanding of the broader strategic issues faced in their business and sector, as well as from our experience in improving operations and organizational performance.

Our approach to improving the effectiveness of marketing spend usually entails efforts around five key levers:

• Apply PSM discipline. We recommend applying PSM approaches to commercial spending across the entire marketing spend chain. This involves consolidating suppliers, renegotiating contracts, reducing the total cost of ownership for key purchases, and streamlining purchasing processes to reduce shared costs.

• Eliminate wasteful marketing programs. We help clients conduct rigorous post mortem analyses of marketing spending programs, weighing results against objectives. Determining the real return on investment for each program and the root causes of inefficiency give a company the information it needs to improve or eliminate inefficient programs. One cellular provider we worked with determined that regional event sponsorships were not having the desired impact on customer behavior, freeing up 25 percent of the sponsorship budget for reallocation.

• Refocus spending on critical “bottlenecks.” Customers form relationships with products or services as they move from brand awareness to brand loyalty. Finding where in this process a brand is encountering difficulty – a bottleneck – allows a company to set specific spending objectives. For example, one brokerage firm discovered that it lagged competitive benchmarks for consideration-to-trial conversion by 35 percent; by focusing attention on potential problems with the value proposition and messaging, the client was able to close this gap.

• Improve the power of brand messages. Ensuring that brand building focuses on critical messages that strengthen brand equity increases the value of each media placement (allowing smaller media buys). Effective messaging assures consumers that a brand has the necessary requirements they are looking for, while also touching on the unique “drivers” that inspire the ultimate purchase.

• Truly optimize spend. We help clients re-evaluate and prioritize marketing spending both within and across programs. For example, a company can identify spending that is beyond diminishing returns or below critical mass in one activity area and then eliminate or reapply that spend to better advantage across the full range of activity.