Marketing is a hungry beast. Seemingly, there's never enough budget to do everything that's needed. Even in more settled times, marketing leaders are used to thinking creatively when it comes to making the most of their money and dealing with budgetary challenges. Marketing budgets are the first to be raided when the enterprise faces difficulties, generally speaking, and the last to be reinstated.

But in a year when the words "unprecedented" and "challenging" are starting to sound like gross understatements, the usual marketing budgetary challenges seem like a walk in the park. According to Gartner's 2020 CMO Spend Survey, 44% of CMOs expected an in-year budget cut of more than 5% as a result of COVID-19. Another Gartner poll taken less than two months later reported those expecting a cut of more than 5% had jumped to almost two thirds (59%) of respondents, with the remaining third expecting a cut of at least 15%.

By any measure, 2020 budgets are challenged. Even those who experienced near-term budget increases in the early stages of the crisis will likely see budgets normalize or fall as CFOs look to shore up the enterprise as the long-term implications of COVID start to bite.

All this means that budget and cost management are the most strategically important capabilities for CMOs and marketing leaders in 2020. Central to this is knowing what not to do as much as it's about what to do. Below are three of the most common mistakes for CMOs to avoid this year.

Mistake No. 1: Blanket cuts to in-year budgets with unrealistic targets

You've been told you must cut marketing spending — what do you do? You may assume that the fairest thing to do is to apply a 20% cut across all of marketing’s costs, that way everyone feels the pain. But in this quest for fairness, there is a fundamental mistake. It is not realistic to apply this level of cuts across the breadth of marketing's commitments. Marketing’s cost base is varied, with a mix of near-term, variable costs (e.g. media spend), and longer-term commitments (e.g. marketing technology costs). From a practical point of view, it's easier to cut some costs than others. Gartner data reveals that less than half (43%) of business leaders actually achieve the level of savings they set out to in the first year of cost reduction.

Applying blanket cuts also assumes that all the value dynamics of marketing investments are the same. Rather than thinking about marketing budget as individual line items, consider investments as bundles of resources that deliver value. And their value should be considered as expressed by the level of return that they deliver, both as return on investment and return on objectives. Rather than applying blanket cuts, spend time prioritizing marketing's investment, with the objective of retaining the bundles of resources that yield the greatest ROI, and cutting the costs with the weakest return. This is the basic essence of zero-basing: ranking investments based on their return, and considering if better returns could be achieved through alternative investments.

Mistake No. 2: Choking-off investments in marketing innovation

Marketing invested significantly into innovation until very recently. Data from 2019's CMO Spend Survey reported that almost a fifth of the total budget was set aside for marketing innovation programs of one sort or another. But Gartner's Innovation Survey 2019 reported that CMOs struggle to measure the value of their innovation efforts. This places innovation investments in a precarious position when it comes to budget planning. Based on mistake No. 1 above, if you can't measure it, it's difficult to defend it.

But the answer isn't to cut innovation budgets. The answer is to find a better way of measuring the value of innovation, considering the long-term return of realized innovation programs, but also measuring the impact on innovation processes and culture that can be linked to investment.

Why? Enterprises that continue to innovate throughout economic turns gain advantage. Gartner analysis from the Great Recession found those companies that focused on costs, talent and innovation achieved efficient growth, outperforming their peers in the immediate aftermath of the crisis, but also sustained (and grew) this advantage in the following years. Efficient innovation investment makes good economic sense.

Mistake No. 3: Mistake cost for value when building multichannel budgets

Throughout 2020, Gartner survey data has reported shifts in channel spend. Brands that traditionally spent heavily on offline channels have moved to digital. Meanwhile, some brands that previously heavily invested in digital have shifted some budgets to traditional channels like TV, taking advantage of media cost fluctuations. And as face-to-face events continue to be significantly curtailed, CMOs have had to rethink their multichannel strategies.

But have all these shifts been to the right channel? Data from this year's CMO Spend Survey has shown a massive commitment to paid, owned and earned digital channels. Are these channel investments being made in the most efficient ways? Evidence from Gartner's Digital IQ analysis, "B2B: How to Maximize the Efficiency of Digital Marketing Assets Amid Budget Scarcity," indicates there are still issues faced by brands. Digital ad spend may have increased, but there's evidence that this spend is not deployed efficiently or with appropriate calls to action.

The challenge is that the fundamentals of media planning are being ignored in the rush towards digital channels. As a result, channel value has been mistaken for channel cost. For example, shifting budget to digital advertising may seem like a logical step when you think about it only in terms of cost per touch. But focusing only on cost per touch masks the subtlety of channel dynamics. Even in budget constrained times, channel investments must be driven primarily by their ability to reach the target audience and to move them to the next stage of their journey as cost efficiently as possible.

Avoiding unintended consequences

The above examples represent just a handful of the mistakes that marketing leaders can make when tackling budget challenges. The truth is, this stuff is tough. But getting good at strategic cost optimization isn't just about making hard decisions and cutting costs. It ensures that marketing is sustainable in the face of upheaval. Furthermore, it prioritizes the stuff that marketing really needs to do to drive growth.

These may be skills that you sharpen in times of austerity, but effective cost optimization should be a constant part of your strategic marketing tool kit whether budgets are climbing or falling. That way, you not only avoid the common pitfalls, you start to become a master of value-based marketing.