You need to plan your marketing budget differently for 2023. Here’s why

It’s that time again—time to start thinking about your company’s marketing budget for 2023! 🥳🥳🥳

Because we love you, we would wish you a new year with an unlimited budget. But of course, that isn’t likely to be the case. So the next best thing we can do for you is offer some guidance on how to make the most of your marketing budget.

Changing times have brought on new obstacles

Now let’s make one thing clear: your marketing budget will need to increase from whatever it was in 2022, and definitely be far more than what it was in 2021. Why? Because from 2020 onwards, marketing and growth teams have been expected to do more with less, and they are being spread thin in their quest for scalability and profitable growth. Even Gartner research reports that marketing budgets have risen to 9.5% of revenue, up from a 2021 low, as indicated in the graph below:

Market changes have also led to growth-at-all-costs losing the power it used to hold. I know that’s hard to believe, but the truth is that this approach is only good for growth projections, not for long-term profitability. And it goes without saying that there are so many variables that can affect profitability. Luckily, there is a formula for teams to measure their marketing profitability potential:

Marketing Expansion Multiple (Current Marketing Spend) = Available Marketing Capital / budget till recycling (Current Marketing Spend)

There are a lot of technicalities associated with the formula I shared above—so I highly recommend you check out this post, which elaborates more on that. But finish reading this one first please. 😇

To get back to my main point here—user acquisition is becoming increasingly difficult with rising customer acquisition costs that quickly make deep dents into the marketing budget. This becomes amplified as less-qualified customers quickly churn. For teams that don’t overcome these challenges with futurespected insights based on LTV data 😉, it collectively gets chaotic as budgets rapidly lessen earlier on in the year.

Is that all that you would need to factor? Oh if only! 

Additional factors you need to bear in mind

While planning your marketing budget, you need to factor things that could trickle down to affect your business, such as growing economic and geopolitical uncertainties; inflation-related concerns; changing customer journeys, and innovations that would play a role in helping your growth team achieve optimal success. Now to expand on that final point—between market changes, privacy limitations, and rising customer acquisition costs, growth teams behind data-driven subscription companies are finding themselves in the position of having to shift gears, and focus on profitability above growth. However, that is easier said than done for companies in-house.

Due to inconsistencies in user acquisition, in addition to general volatility in unit economics, it has become difficult to utilize internal data to find the right signals to send to ad networks, and make informed decisions. This setback stems from the lack of both predictive capabilities, and LTV indicators to determine effectiveness in early stages of campaigns. This is where you’re gonna need a little extra boost.

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Predictive AI: The extra boost that will help you achieve scalable profitability

Let me start off with some interesting numbers. According to a recent study by Razorfish, three-quarters of marketers fail to use behavioral data for online ad targeting. Additionally, 58% of CMOs report their in-house teams lack the capabilities needed to execute their strategy, and many will need to look to outsourced marketing partners, particularly in marketing data, analytics, and AI-powered technologies.

We’ve talked about these points at length on our blog. For instance, here’s a post on why growth marketers really need a boost to amplify UA campaigns, and here’s another that features tips and tricks to build the best data team.

There are many benefits that come from using marketing AI technologies, such as predictive AI, would also prevent the unnecessary denting of your marketing budget. I mean, imagine the things you would be able to do differently (and with full confidence) if you knew your campaign's future revenue and ROAS—as soon as just a few hours after acquisition! As a result, you might find yourself spending a little more on some channels over others. And within each channel, you would keep a closer eye on which campaigns are faring well, and which ones are doing not-as-well— doubling down on the campaigns that are more profitable.

Notion serves as a great case-in-point here. Before they started using predictive AI, they were facing several challenges due to the fact that they were optimizing their campaigns for upper-funnel events, by applying rules of thumb and proxy-metrics. They realized that they would be able to get the most out of their marketing budget if they had the ability to predict which users would eventually convert to paying customers and yield high LTV. After becoming acclimated with a predictive AI solution, the team saw that the insights could be used to optimize their campaigns towards the predicted value of their customers, resulting in the reduction in CAC, and the substantial uplift in ad spend ROAS. 

On that note, there’s a secret weapon you would definitely want to factor into your arsenal…

Secret weapon: Joining forces with a strong marketing partner

Don’t let the title of this section throw you off. 

I know, times are crazy, money is tight, and setting aside some budget towards external marketing partners might sound counterintuitive in times like these. However, at the end of the day, it is up to companies to find the missing link that will differentiate them from their competitors, and provide a lasting advantage.

From PLG SaaS companies, to DTC subscription brands, and everything in between—leading data-driven teams are responding to current market conditions by increasing their investment in marketing to build their 2023 pipeline by factoring strong marketing partners to assist with improving efficiencies across the board. 

For example, our codeless predictive growth platform harnesses the power and potential of AI technology, to overcome growth challenges with futurespected insights based on extracted LTV data. We analyze thousands of data points to predict each user’s future propensity and lifetime value shortly after acquisition, enabling growth and marketing teams to acquire and retain high-value users for greater long-term profitability. Also (if we may say so ourselves!) it’s a heck of a way to combat the market changes, privacy limitations, and rising customer acquisition costs—all while achieving exponentially greater ROAS in a matter of weeks.

Beyond automation and AI, marketing partners can assist with things such as changing your customer base due to high turnover, changes to product lines needed to improve profitability, and ways to shift customer expectations.

To be honest, we can go on for days talking about topics that relate to marketing budgets. But for the sake of brevity, I’ll just say that as you plan your marketing budget for 2023, you would definitely want to make sure you’re allocating the right amount to the right activities to support your growth. While at it, explore ways to capitalize on your marketing budget to increase profitability. Don’t copy+paste your strategy and budget from 2022, because now is the time to think bigger and better in terms of approaches to take on the ever-changing market, and become more profitable than ever before!