The Marketing Architects – "The Science of Budget Setting"

Episode Date: August 26, 2025

Episode Overview

This episode of The Marketing Architects takes a research-based dive into the perennial question: How do you set a marketing budget that actually drives growth? Against the backdrop of budget planning season for 2026, hosts Alena Jasper, Angela Voss, and Rob DeMars examine evidence-backed frameworks for allocating budget, the challenges marketers face in securing investment, and the ongoing quest to balance long-term brand building with short-term performance. They draw heavily from Mark Ritson's "triple cooked chips" approach to budgeting and discuss practical strategies and mindset shifts needed for successful marketing investment.

Key Discussion Points & Insights

1. Mark Ritson's "Triple Cooked Chips" Budgeting Framework

• Step 1: Invest 5–10% of Revenue in Marketing

  • Based on econometric evidence, Ritson recommends 10% for those targeting true growth.
  • "His recommendation is to aim for 10% if you're serious about growth and gaining a competitive edge." [01:49 – Alena Jasper]
  • Hosts agree this is a sound benchmark, but actual company spend can vary widely by industry and growth goals.

• Step 2: Balance Long-Term Brand and Short-Term Performance

  • Established research (Binet & Field) suggests a 60/40 brand to performance split for B2C, 46/54 for B2B.
  • Many companies under-invest in brand, focusing too heavily on performance marketing.
  • "You can't succeed without both. But most companies are underinvesting in brand and caught in this cycle of chasing short term wins." [02:40 – Alena Jasper]

• Step 3: Measure Each Piece Properly

  • ROI metrics can misrepresent brand-building's long-term impact.
  • Use KPIs like awareness, consideration, and preference for brand; reserve direct ROI measures for performance spend.

[03:05] – Should Every Company Spend 5–10%?

• Angela Voss: "There's a lot of research behind it... budgeting is as much about internal dynamics and things like organizational psychology at times as it is about data." [03:07]
• Many high-growth companies (per Rob) spend far more: HubSpot 50%, TripAdvisor 53%, Snowflake 47%, L'Oreal 3–5%. [04:49–05:04]
• “Are we actually radically underspending? ... Are you radically underleveraged in terms of what you’re spending?” [05:04 – Rob DeMars]

2. Excess Share of Voice (ESOV)

• ESOV = advertising spend relative to category, compared with market share.
• Outspending your competition can drive disproportionate growth.
• “You mentioned one of them already. Just getting that viewpoint on what is your share of voice currently, what is your share of market?” [07:36 – Angela Voss]
• Tailoring the business story to CFO language is critical for buy-in.

3. Challenges in Budget Setting

• Internal Obstacles: Many organizations still see marketing as a “cost center,” not a growth engine.
• Attribution Bias: Over-reliance on digital tracking pushes spend towards easily measurable channels even if that limits long-term growth.
• Organizational Silos: Fragmented budget ownership creates internal competition and confusion.

4. Brand vs. Performance: The 60:40 Rule and Reality

• Many brands fall well short of the 60:40 (brand:performance) ideal, often emphasizing short-term wins.
• “Sometimes it feels like we’d rather have certainty than accuracy.” [13:02 – Alena Jasper]

5. Measurement Mindset

• Short-term Performance: CAC, ROAS, conversion rates, payback periods are useful for the finance team.
• Long-term Brand: Awareness, consideration, preference, share of search, and market share growth are needed to prove impact to boards and the CEO.
• “Meaningful brand metrics are those that connect brand investment to that future business performance.” [16:41 – Angela Voss]
• Geographical holdouts, synthetic control testing, and brand lift studies help bridge the “credibility gap.”

6. Creative Costs: Output vs. Outcome

• Spending more on production doesn’t equate to better results. The quality of the idea matters most.
• "I still don't know if it's a cost question. I think a badly produced commercial, whether you've spent a lot of money on it or a little amount of money on it, is still going to impact your brand equally." [20:55 – Rob DeMars]
• Pre-testing creative before full rollout is underutilized and can prevent costly missteps.

7. Overspending and “Sacred Cows”

• Budget allocations to pet projects (e.g., NASCAR sponsorships) or committee-driven spending can lead to ineffective spend.
• There’s value in questioning habitual allocations and being willing to “kill a sacred cow” to fund bold new approaches. [33:06 – Rob DeMars]

8. Openness & Flexibility in Budgeting

• Ideally leave 10–20% of budget unallocated for opportunistic investments or market shifts.
• "Get your leadership thinking around an open to buy amount and maybe that starts with 5% and then can it become 10%?" [29:45 – Angela Voss]

9. Advice for 2026 Budget Planners

• Start with the “why” behind budget requests—dig deeper than surface-level objectives.
• "Keep asking why till you get to the real answer." [30:13 – Rob DeMars]
• Understand in-market vs out-of-market audience splits to better balance between brand and activation.
• Share of voice analysis can help make the case for (or against) increased investment. [32:25 – Alena Jasper]
• Review how much budget is going to tools/tech versus media—especially for B2B brands. [33:38 – Alena Jasper]

10. Best (and Worst) Financial Advice

Notable Guidance:

• “Don’t throw good money after bad.” [34:04 – Angela Voss]
• “Compound interest is the eighth wonder of the world.” [35:39 – Rob DeMars]
• “If you want to see what someone values, look at their credit card statement.” [35:53 – Rob DeMars]
• Consider time-value tradeoffs—not just the lowest price, but what you gain or lose in experiences. [36:39 – Alena Jasper]

Notable Quotes & Memorable Moments

• [05:04] Rob DeMars: “Are we actually radically underspending? ... Are you radically underleveraged in terms of what you’re spending?”
• [09:51] Rob DeMars: “Are we starving the brand? Are we basically committing corporate malpractice by not applying enough?”
• [13:02] Alena Jasper: “Sometimes it feels like we’d rather have certainty than accuracy.”
• [16:41] Angela Voss: “Meaningful brand metrics are those that connect brand investment to that future business performance. These are the leading indicators of growth.”
• [20:55] Rob DeMars: “I still don’t know if it’s a cost question. I think a badly produced commercial, whether you’ve spent a lot of money on it or a little amount of money on it, is still going to impact your brand equally.”
• [29:45] Angela Voss: “Get your leadership thinking around an open to buy amount and maybe that starts with 5%...”
• [30:13] Rob DeMars: “The question for me is to focus on the why. So why are you wanting to do what you want to do? And keep asking why till you get the real answer.”
• [33:06] Rob DeMars: “Kill a cow. Kill a sacred cow... challenge yourself to look at what you just continuously default spend on and go. Maybe it’s time to kill that one and go for something big.”
• [34:04] Angela Voss: “Don’t throw good money at bad.”

Timestamps for Key Segments

| Timestamp | Segment/Insight | |-----------|--------------------------------------------------------------| | 00:38 | Introduction to budget setting theme and Ritson framework | | 01:38 | Breakdown of 5–10% revenue benchmark | | 04:43 | Real-world examples of companies' marketing spend | | 07:06 | ESOV explanation and application | | 11:29 | Realities of the 60:40 rule in B2B/B2C | | 13:06 | Attribution bias and measurement challenges | | 16:41 | Favorite brand measurement metrics; bridging short & long term| | 20:55 | Creative costs: why spend doesn’t always equal effectiveness | | 26:48 | Leaving part of the budget unallocated for new opportunities | | 30:13 | Advice for 2026 budgeting: "Start with why" | | 34:04 | Best/worst financial advice |

Takeaways for Marketers

• The 5–10% rule is a strong starting point, but competitive and category dynamics may demand more aggressive investment.
• Excess share of voice is a powerful concept for justifying increased budgets—frame marketing as growth fuel, not a discretionary expense.
• Avoid over-indexing on short-term metrics and beware of organizational inertia, attribution bias, and habitual “sacred cows.”
• Budget flexibility matters: plan for opportunistic (and inevitable) changes mid-year.
• Always know—and be able to defend—the “why” of your budget requests, tailoring the story to each stakeholder.
• Quantify brand impact with meaningful, leading metrics and leverage creative pre-testing.
• Review your budget allocation to minimize invisible costs and maximize efficient spend.
• Don't forget: Know when to quit on failing investments and recognize the value of your (and your team's) time.

In Summary

This episode offers a grounded, research-first approach to the perennial challenge of marketing budget setting. It blends industry best practices with candid agency insight and a practical, down-to-earth tone, ultimately encouraging marketers to plan boldly, measure wisely, and always remember the "why" behind every dollar spent. The advice and anecdotes shared provide both strategic direction and tactical inspiration for marketers heading into budget season and beyond.