A CFO asks, “What are we actually getting for our marketing spend? What’s the ROI”? The CMO fumbles.
Most marketing leaders can defend a campaign, but few can defend a portfolio. This is not a reflection of competence. This is a matter of speaking different languages as the CFO, and the gaps between the two are costly. The CFO asks for single, mathematical answers when the territory of marketing is not that straightforward.
TL;DR:
- Most CMOs can defend a campaign. Few can defend a full portfolio to a CFO.
- Spend splits into three buckets: performance, transformation, and R&D, each with its own payback, risk, and time frame.
- Before an audit, know your real % split, which bucket is starved, and your rebalancing trigger.
- Baseline: 70-20-10 (performance/transformation/R&D) for a mature business; more R&D if you’re early-stage or scaling fast.
The core problem is a matter of being on the same page in terms of the different types of marketing investments and how each has its own matching (payback period), risk and expected returns; how each is different for near-term (performance), brand/CRM (transformation), and future-facing (R&D).
In this case, the CMO needs to not only speak the CFO’s language (risk, return & time frames) but also express how each of the investments is different across these three axes.
Here are 3 questions every CMO should know the answer to in advance of a CFO budget audit meeting.
Question 1: What percentage is actually in each bucket- performance, transformation and R&D?
Often leaders think they know their split and are wrong when they actually tally it up. Actuals v. new year budget estimates often come out of alignment (remember this is a budget audit meeting). The gap is between stated strategy and actual spend (e.g., “we say we invest in brand” vs. the invoice reality).
As a guide, the 70-20-10 split is for a mature, going concern. Even then, ensure a minimum allocation of 10% on R&D to decrease the likelihood of falling behind in the future. However, that number in particular should be higher if you’re a new venture or growing at a high clip.
Question 2: Which bucket is underfunded?
In this case, we mean “starved,” not zero investment, in the context of the objectives it’s meant to achieve. Performance usually wins here by default as it’s measurable in the near term, and defensible quarter to quarter, while Transformation and R&D quietly are easy to take from. Put another way, what’s working today is an easy “yes” for CFOs to up the budget.
Unfortunately, that’s a very short-sighted approach given the compounding cost of a starved bucket of transformation, or R&D is lost visibility, category drift, reduced future pipeline & not keeping pace with changes in buyer behaviors. Again, this is a matter of mismatched time horizons and metrics if the CMO allows it.
Question 3: What is your rebalancing trigger?
Most companies rebalance reactively (a bad quarter, a CFO mandate) instead of proactively. Please read again. Ideally you’ll rebalance at the mid-year point or no more than quarterly to ensure strategic plan alignment. However, sometimes financial gravity wins out; that’s reality, and you need to change allocation accordingly.
A CMO needs to know what the current reality is, how and when to argue for definitions (such as % of pipeline change, CAC creep, brand awareness dips, competitive share shifts, etc.) to rebalancing triggers in advance of audits.
In an over-performance case, it sets CMOs up to pivot proactively and defend the reasons for shifting spend v. simply defending in the moment. Even if these aren’t strictly adhered to, they are important concepts to be on the same page about, as budgeting is an ongoing process and alignment will pay off in the future.
Why this matters now
Doing more with less has been the mantra for several years now. In addition, CMOs face challenges of shifting buyer behavior, rising acquisition costs, and AI reshaping how buyers evaluate solutions. The risk isn’t simply a headline number being over or understated; it’s misallocating and mistaking that error for “marketing doesn’t work”. Once that sets in, good luck getting budget for anything other than performance marketing in the future.
Your homework
You should have January-June budget numbers updated and finalized, if not yet July. This gives you ½ year of data. Run your numbers across the 70-20-10 allocation and see where you land. If you’re “starved somewhere”, is it strategic or reactive? How can you course correct?
Bonus Points: “What bucket is starved in your org right now?” Initiate proactive conversations on the need to re-balance in the second half of the year to your C-Suite.
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