Latest / The CMO Podcast with Fexingo: Marketing Leadership, Budgets, and Executive Strategy / Why CMOs Are Killing The Brand Fund
Transcript
- Lucas: The most dangerous number in a modern marketing plan isn't your customer acquisition cost or your lifetime value. It's the one line item that says brand fund, usually set as a flat five percent of projected revenue. Luna: Right, because that five percent assumes the media landscape hasn't fractured into forty different channels where attention is cheaper but harder to capture. How do you justify a fixed bucket when the cost of awareness is rising every quarter? Lucas: You don't justify it by arguing for more money. You argue that the model itself is obsolete. I've been looking at the latest quarterly reports from several consumer goods giants, and they are quietly moving away from that static brand fund. Instead of setting aside a fixed sum for broad-reach awareness campaigns, they are treating brand building as a variable input tied directly to performance triggers. Luna: So instead of spending ten million dollars on a Super Bowl spot regardless of what happens next month, they shift that spend into high-intent search or retargeting until the performance engine cools off? That sounds like a fundamental rewrite of the P&L structure. Lucas: Exactly. It forces the CFO to see brand not as an overhead expense that gets cut in downturns, but as a fuel source for the acquisition engine. If the performance channel gets too expensive, you bleed into brand to lower the overall blended cost per acquisition. But if performance is efficient, you let that machine run and only dip into brand to keep top of funnel fresh. It turns marketing from a series of siloed budgets into a single fluid capital allocation problem. Luna: But doesn't that create pressure to chase short-term conversions at the expense of long-term equity? If every dollar has to prove immediate return, who is paying for the work that makes the brand desirable three years from now? Lucas: That is the classic fear, but the data actually suggests the opposite. When you remove the artificial cap of a brand fund, you stop wasting money on broad-reach ads that no one remembers. You start measuring brand lift in a much tighter loop. For example, many teams are now running concurrent experiments where they test brand narratives against pure product benefits in the same audience segment. If the brand narrative drives a higher conversion rate over time, you know exactly how much to invest. It's not about guessing; it's about pricing the premium that brand equity adds to your bottom line. Luna: It reminds me of how software companies handle R&D. They don't have a fixed research budget; they invest based on feature adoption and churn reduction. Applying that same agile logic to brand feels less risky because you're always measuring the outcome, not just the output. Lucas: Precisely. And this brings us to a practical point about how we support this network. If these conversations about reallocating capital and optimizing spend have sparked something you've actually used in your own role, consider supporting the show. Listener contributions help keep Fexingo independent and ad-free, allowing us to dig deeper into these structural shifts without corporate influence. You can find that link at buy me a coffee dot com slash fexingo. Luna: Yeah, and honestly, seeing how marketers are having to rethink their entire operating model right now makes those kind of resources even more valuable for staying sharp. Lucas: Let's get back to the mechanics though, because moving from a fixed fund to a dynamic model requires a completely new toolkit. The biggest hurdle isn't the strategy; it's the measurement. Most CMOs are still reporting brand health through surveys and share of voice, which are lagging indicators. To make this fluid allocation work, you need leading indicators that correlate with sales. Luna: So you're talking about integrating brand lift studies directly into your martech stack? Like using geo-holdout tests where you suppress brand ads in certain regions and measure the delta in organic search volume and direct traffic? Lucas: That is the gold standard. A geo-holdout test allows you to isolate the impact of brand spend from performance spend. If you turn off brand ads in a specific market and see direct traffic drop by fifteen percent while paid search costs remain stable, you have a concrete number to show the CFO. You aren't saying brand is important; you are showing that brand drives zero-cost conversions. That is the language finance teams understand. Luna: But holdouts can be expensive to run properly, and not every company has the scale to test across multiple geographies. What about smaller brands that can't afford a multi-million dollar experiment? Lucas: They don't need a multi-million dollar experiment. They need better internal data sharing. Often, the disconnect between brand and performance is just a data silo problem. If your CRM data is linked to your ad exposure logs, you can run a simple regression analysis. Show the CFO that customers who saw a brand video are twenty percent more likely to convert on their first purchase, or that they retain for six months longer. That is incremental lift, and it proves the brand asset is working. Luna: It really comes down to proving that brand lowers the friction for performance. If people trust you, they click faster. So the brand budget isn't an expense; it's a discount on customer acquisition. Lucas: I love that framing. Brand as a discount on acquisition. It flips the script entirely. When you present it that way, the CFO stops asking why you spent ten million on a TV campaign and starts asking why you didn't spend more on it to save fifty thousand in paid search bids. It aligns the incentives perfectly. Luna: Of course, there is a risk here too. If you tie brand spend too tightly to short-term sales, you might end up creating a brand that is optimized for clicks but lacks soul. Can you still build a meaningful cultural presence with this kind of hyper-optimized, data-driven approach? Lucas: That is a fair concern. The danger is turning brand into just another performance channel. But the solution isn't to go back to the old model of throwing money at vague awareness goals. The solution is to use data to protect the creative. You use analytics to identify which emotional triggers drive the highest engagement and retention, then you give your creative team the freedom to explore within those validated boundaries. Data informs the strategy, but it shouldn't dictate the art. Luna: So the brand fund becomes a laboratory for creative innovation rather than a billboard rental fee. You're funding the best ideas that move the needle, not just the loudest ones. Lucas: Exactly. And this also changes how you hire and structure your teams. In the old model, brand teams and performance teams were often at odds, fighting over budget scraps. In this dynamic model, they are partners in a unified growth engine. The brand team owns the narrative and the creative assets, while the performance team owns the distribution and optimization. They share a single P&L target. Luna: That must be a massive culture shift for many organizations. Getting two departments that have historically blamed each other for missed targets to actually share a dashboard and a goal. Lucas: It is difficult, but necessary. I've seen cases where CMOs have restructured their org charts to eliminate the title of brand manager and performance manager, replacing them with category growth leads who are responsible for both awareness and conversion. It forces collaboration because you can't optimize one without affecting the other. Luna: It sounds like the era of the siloed CMO is over. You either integrate your functions or you get outpaced by competitors who are willing to treat marketing as a single, fluid system. Lucas: Agreed. The companies winning right now are the ones that have stopped thinking in terms of buckets and started thinking in terms of flows. Money flows from brand to performance, and performance feeds data back to brand. It's a closed loop. Luna: One last question on the execution side. If a CMO decides to scrap their fixed brand fund tomorrow, where should they start? Do they reallocate the entire amount immediately, or is there a phased approach? Lucas: I would recommend a phased approach. Start by taking half of the brand fund and putting it into a performance pool. Run a three-month pilot. Measure the impact on overall blended cost per acquisition. If the metric improves, gradually shift more funds. If it doesn't, you have the data to adjust before committing the whole pot. It reduces the political risk for the CMO while still demonstrating the potential upside. Luna: Smart. Lower the stakes, prove the concept, then scale. It's the same playbook they use for product launches. Lucas: It is. And ultimately, it's about respecting the intelligence of your stakeholders. The CFO doesn't want to hear that brand is important. They want to see that brand is profitable. Once you can show that, the budget follows the value, not the other way around. Luna: Profitable brand equity. That's a phrase worth remembering. Thanks for breaking down how we can actually put that into practice. Lucas: My pleasure. It's a complex shift, but I think the rewards for getting it right will define the next decade of marketing leadership. Let's see who adapts first.