How successful CFOs make strategic marketing budget allocation decisions today

Marketing budgets puzzle finance teams and may even feel like a gamble with unclear ROI. Research shows that 64% of marketing leaders can’t track the financial impact of their activities, while nearly half of CFOs say marketing budgets lack ROI justification. This leads to friction, with marketing pushing for growth and finance focused on measurable returns.

This guide will help CFOs and FP&A teams tackle the challenges of marketing budget allocation. We will help you with actionable strategies for setting goals, creating flexible budget models, and measuring performance effectively to make the process more strategic and less uncertain.

The current state of marketing budget allocation: Challenges finance teams face

Allocating a marketing budget can be tricky since the results aren’t as directly connected to the spending as they are in sales or operations. It often depends on long-term goals and non-financial metrics.

Common challenges for finance teams include:

• Trouble proving the ROI of marketing spend: Unlike equipment purchases that reduce costs directly, marketing investments on brand awareness, content, paid media, SEO, and events create value indirectly and over time. Traditional ROI calculations fall short with unclear attribution, making it difficult to identify which marketing efforts drive sales.

• Communication gaps between CFOs and CMOs: CMOs prioritize metrics like brand awareness and engagement, while CFOs focus on financial measures like cash flow and capital efficiency. This disconnect in priorities and metrics may lead to missed opportunities.

• Tension between top-down targets and bottom-up proposals: Finance teams allocate budgets based on historical data, while marketing teams prefer budgets tailored to campaign needs. These approaches often clash due to shifting market conditions and new opportunities, causing tension without a clear way to align perspectives.

• Lack of standardized frameworks: Marketing does not have universal budgeting methods. Some teams use percentage-of-revenue models, others focus on channel-specific tactics, funnel-stage allocations, or econometric modeling, making benchmarking and budget justification challenging. For finance teams, this lack of structure complicates efforts to compare, optimize, or scale spending.
• Poor quality of performance tracking data: Customer data is scattered across CRMs, marketing tools, e-commerce systems, and financial software, making unified analysis tough. Integration issues worsen with inconsistent definitions, like systems tracking "leads" differently or varying attribution windows across marketing channels.

A framework that works: The 4-step strategic marketing budget allocation process

Setting up a marketing budget means balancing financial discipline with marketing expertise. Here’s how you can do it:

Step 1: Joint planning session structure 

Smart budgeting starts with teamwork between finance and marketing. Rather than each function working on budgets in silo, conduct joint planning sessions, and use a shared agenda to develop mutually agreeable goals and metrics to keep both functions aligned.

CFOs focus on financial constraints and growth targets, while CMOs highlight market opportunities and competition. It is important that they share an agenda that includes the financial context, performance of channels, and strategic priorities to better align on budget decisions.

Finance leaders should discuss:

• Revenue forecasts and growth targets
• Cash flow projections and seasonal considerations
• Historical marketing ROI and spend effectiveness
• Industry benchmarks and competitive spend analysis

Marketing leaders should present:

• Channel-specific performance data and attribution models
• Customer acquisition cost (CAC) and lifetime value (LTV) metrics
• Market opportunity assessments and expansion plans
• Pipeline impact, sales-qualified lead (SQL) conversion rates, and competitive intelligence

During the planning session, both teams should:

• Align on organizational goals, KPIs, and risk tolerance
• Assess past campaign performance by channel
• Explore new opportunities and agree on test budgets for experimental channels
• Define a timeline for budget approvals and follow-up checkpoints

As Christian Wattig put it, "Involving both teams is crucial. You know, you don't want this to be just a finance exercise because then the depth of the assumptions is too thin to be useful for variance analysis later." For more of his insights on collaborative budgeting, check out our webinar with Christian Wattig.

Business budgeting and planning software can simplify the planning process by consolidating all the data needed for planning from multiple sources into a single platform.  This allows CFOs and CMOs to collaborate in real time, build and visualize various budget scenarios, and model different allocation strategies. It also helps achieve alignment by eliminating any questions (or arguments) about whose data is “correct” or the most current, so everyone involved can focus on the real objective of building a realistic marketing budget that will drive growth. 

Step 2: Scenario analysis and modeling techniques 

Marketing should prepare budget requests at three levels, categorizing them as follows:

• Conservative: Slower acquisition, longer sales cycles, and lower LTV scenarios
• Realistic: Show expected performance based on current results and market trends
• Growth-focused: Assumes successful growth initiatives and favorable conditions

Support each budget option with data on the projected pipeline the marketing activities will create, the potential ROI, and profitability. Consider external factors like economic trends, competition, and regulations to make smarter and risk-aware allocation decisions. Challenge assumptions and create flexible budgets by using the following scenario planning methods:

• Growth scenarios: Create models to estimate best, worst, and base-case outcomes for spending and pipeline impact.
• Sensitivity analysis: Analyze how changes in key factors like CAC, conversion rate, and sales velocity impact performance.
• What-if modeling: Test changes like adjusting spending or responding to market shifts.

Scenario planning software can make developing any budget a whole lot easier because the right tool can integrate with all the systems marketing teams use to track the performance of campaigns and initiatives. This enables real-time modeling, faster assumption testing, and agile planning—transforming strategic planning from an annual, static exercise into a real-time, dynamic process.

Step 3: Decide on the best budgeting method(s) to apply 

Annual budgeting no longer fits modern marketing needs. For CFOs interested in building a more flexible and strategic approach to allocating marketing budgets, the following methods are worth exploring:

Zero-based budgeting for marketing

Zero-based budgeting (ZBB) requires justifying every expense from scratch to eliminate waste and prioritize high-impact initiatives.

The downside to zero-based budgeting is the same thing that makes it so effective—every expense requires a business case. When applied to marketing, with all its channels, campaigns, events, and other activities, this approach can be a pretty heavy lift.      

Nonetheless, it can be a good option for campaign-based marketing and can help reduce risk associated with new events, initiatives, or channels where the ROI is uncertain.

It’s also an approach you can use periodically alongside a different budgeting method, applying it to specific spending categories to identify expenses that may no longer be generating a return (that banner ad that no one clicks on? Gone.)

Driver-based budgeting for marketing

Driver-based budgeting ties marketing spend directly to business drivers like leads, conversion rates, and average order value, so the budget reacts to real operational levers instead of historical line items. 

This approach boosts agility and accountability by linking revenue sensitivity to marketing inputs, improving forecast accuracy and cross-functional ownership. 

Driver-based budgeting is well-suited to demand generation and growth marketing and channels with easily measured inputs and outputs, such as paid search, paid social, and events with clear lead gen goals. However, it can be difficult to apply to long-term marketing investments where the impacts are not as direct, such as PR and community building. 

Activity-based budgeting

Activity-based budgeting is a method that requires figuring out all your expenses up front by determining the cost for each activity planned. 

It’s a pretty straightforward method, but again, marketing involves a lot of different activities. Figuring out costs at such a granular level takes a lot of time, and maintaining an activity-based budget can be difficult for marketing teams engaged in high-volume marketing and/or running a lot of ad hoc campaigns. So, this kind of budgeting is best suited to marketing efforts that use a defined calendar of activities, such as content marketing, event marketing, and other activities that can be planned in advance.    

The upside to activity-based budgeting for marketing is that it’s transparent, which makes it highly adaptable. Everyone can see exactly what each activity costs and can add or remove activities to optimize spend and take advantage of emerging opportunities. And if the ROI for each activity is reasonably well-defined, the potential impact of those shifts is easier to evaluate.     

Step 4: Risk assessment and contingency planning 

Even with the best planning, marketing budgets face uncertainty. Build resilience by identifying risks like market shifts, operational disruptions, or financial constraints, and ranking them by likelihood and impact. 

Your scenario planning and what-if modeling will have taken these possibilities into account to provide a pretty good assessment of risk so you can develop clear response strategies:

• Downside protection: Identify quick cost-cutting levers that won’t compromise long-term growth.
• Flexible budgeting: Set predefined thresholds for reallocations or cuts and maintain reserves for unexpected needs.‍
• Quarterly reviews: Hold structured check-ins with marketing leaders to compare actuals against plan, reassess risks, and adjust allocations based on real-world results.

Building ROI models that actually work for marketing spend 

ROI models can be built in spreadsheets or planning tools to compare performance across campaigns. Here are some effective ROI models that can help marketers and finance teams alike forecast, track, and optimize marketing investments for better business outcomes:

Channel-specific ROI frameworks

Attributing marketing impact requires tailored models for each channel because they play different roles in customer journeys and have varying ROI timelines. 

Digital marketing

Using multi-touch attribution can help to better understand the ROI from different digital marketing activities:

• First-click attribution gives all the credit for a conversion to the first touchpoint that brought a customer in, making it most useful for understanding which channels are best at initiating customer journeys.
• Last-click attribution assigns all credit to the final interaction before conversion, ideal for identifying the channels that close sales or prompt final actions.
• Time-decay attribution weighs touchpoints more heavily the closer they occur to the conversion, making it useful when recent interactions are believed to be most influential in driving decisions.
• Position-based (aka U-shaped) attribution typically gives 40% credit each to the first and last interactions, with the remaining 20% distributed among the middle touchpoints, offering a balanced view that values both lead generation and conversion activities.

Note that it’s important to consider the timeframe when calculating the ROI of digital marketing activities. If you use too short a period (e.g., monthly), you might miss lagging revenue impacts. Generally, longer periods (e.g., quarterly or annual) are better for more fully capturing longer business cycles and long-term campaign effects. Choose a timeframe that aligns with your marketing strategy, typical sales cycle, and reporting needs to ensure ROI calculations reflect true incremental value. 

Another way to measure ROI in your digital marketing is to calculate your return on ad spend (ROAS). It measures revenue earned per dollar spent on ads, specifically, which makes it a good KPI for paid channels.

Event marketing

Event marketing is challenging due to its focus on relationship-building and long sales cycles. To measure success, track direct revenue from event leads, pipeline acceleration, impact on retention and expansion, and brand awareness through surveys. Use single-touch or weighted attribution to capture registered leads, attributed pipeline, and deals linked to event participation.

Content marketing

Content marketing drives value through lead generation, SEO, sales enablement, and customer education. Measure ROI by factoring in organic traffic, leads, improved deal metrics, and reduced support costs. Use time-decay or participation models to reflect its impact across buyer stages.

Finance metrics that marketing teams should understand

When working with marketing teams, CFOs need to explain the key financial metrics that marketing can impact, such as:

• LTV (Customer Lifetime Value): Calculates a customer's total expected revenue over their relationship with a business.
• CAC: The total cost of acquiring a new customer, covering marketing and sales expenses.
• LTV/CAC ratio: Compares the long-term value of a customer to the cost of acquiring them.
• CAC payback period: Shows the time needed to recover customer acquisition costs.
• Pipeline velocity: Measures how quickly leads move through the sales pipeline to generate revenue.
• Conversion rate: The percentage of leads or prospects that complete a desired action, such as purchasing or signing up.

‍"The assumptions that go into your budget need to be measurable...we want to make sure that when we put this assumption in the budget, you will be able to later tell if it is working or not." - Christian Wattig. For a deeper dive, check out our budgeting webinar with him.

It’s also important to help marketing leaders understand how finance identifies which marketing activities directly influence revenue.

The art of CFO-CMO collaboration: negotiation and communication strategies

Successful allocation depends on effective collaboration between finance and marketing leaders. You can use the following strategies:

1. Establish a shared language between finance and marketing: Misalignment occurs when teams speak different operational languages. Invest the time needed to “connect the dots.” Marketing teams have their metrics. Finance teams have theirs.  Building an effective budget is easier when marketing teams understand and translate the ROI of their activities in financial terms, and finance understands key marketing metrics like customer lifetime value and brand equity.‍
2. Promote transparency and two-way accountability: Trust grows when marketing shares both successes and failures, and finance communicates the business context and budget constraints.
3. ‍Keep communication informal and consistent, not limited to quarterly check-ins: Frequent informal check-ins help address issues early and build stronger relationships. Avoid delays from waiting for annual or quarterly reviews.‍
4. Use structured business cases to evaluate budget requests: Budget proposals should follow a clear framework, including business opportunity, market rationale, outcomes, financial impact, risks, and alternatives to ensure objective evaluation.

Industry benchmarks and budget structure best practices 

When it comes to marketing budgets, there is variation with factors such as your stage, GTM strategy, and company size. Here is a quick summary of some signals in the industry:

B2B SaaS marketing budget benchmarks

SaaS industry benchmarks commonly present sales and marketing (S&M) expenses as a percentage of revenue. While it’s not possible to tease out marketing budget data specifically, given the heavy emphasis SaaS businesses typically place on marketing, these benchmarks offer a reasonable proxy for benchmarking. They show that: 

• Large companies spend more: OpenView SaaS benchmarks report shows a median S&M of 45% for companies with >$50M ARR, with observed ranges from 28% to 59%.
• Smaller companies are cyclical: ICONIQ’s 2024 analysis found that S&M spend nearly doubled between 2020 and 2022 for smaller businesses.

Marketing budget benchmarks in other industries

Deloitte’s Spring 2025 CMO survey found that marketing budgets can vary significantly by company type and industry. The report estimates marketing spends as:

• Companies selling B2B products spend 7.4% of their total budget, or expressed as a percentage of revenue, 6.4%.
• ‍Companies selling B2B services spend 6.7% of their total budget, or expressed as a percentage of revenue, 9.0%.‍
• Companies selling B2C products spend 21.5% of their total budget, or expressed as a percentage of revenue, 15.5%.‍
• Companies selling B2C services spend 11.7% of their total budget, or expressed as a percentage of revenue, 6.0%.

Structuring your marketing P&L for better visibility 

Must-haves for finance teams are:

• Clear cost centers: Use a granular chart of accounts segmented by campaign, channel, and cost type. Separating core demand-generation from discretionary spending lets you measure incremental impact and reallocate quickly.
• Chart-of-accounts design: Develop marketing-specific account codes capturing expense type and strategic intent. Create separate codes for customer lifecycle stages for lifecycle-based ROI analysis.
• Reporting and KPI tracking: Set up monthly reports and executive dashboards to track marketing performance. Perform strategic trend analysis using metrics like CAC, lifetime value, marketing pipeline contribution, and channel ROI.

Leveraging AI and automation for more strategic marketing budget allocation 

AI and automation are rapidly transforming budgeting for finance and FP&A teams, making processes smarter, faster, and less prone to manual error. 

AI-powered FP&A platforms like Drivetrain offer AI-driven scenario modeling, real-time data flow and transformation and AI-driven scenario modeling that make building your budget faster. And with a platform-wide AI assistant, you can dig into any and all the details—asking and instantly getting the answers to questions you need to strategically optimize it.  

Here’s a look at some of the features in Drivetrain that will help you create a smarter, more  effective marketing budget in record time:

• Automatic data consolidation that unifies financial, CRM, and marketing data for more accurate insights.
• Real-time forecasting that allows you to make budget adjustments at the pace your market requires. 
• Advanced multi-scenario planning to quickly test budget changes across channels and what-if analysis to see projected ROI, pipeline, and risks all in one view.
• Ability to link marketing spend to sales and cash flow through funnel modeling that tracks progression and conversion rates.
• One-click, dynamic dashboards and variance analysis that help clarify spend effectiveness, risk exposures, and forecast accuracy.
  

Discover how Drivetrain’s budgeting tools enhance transparency, control, and alignment for fast, efficient, and scalable marketing budget planning.