Latest / The CMO Podcast with Fexingo: Marketing Leadership, Budgets, and Executive Strategy / How CMOs Are Killing The Zero-Based Budget
Transcript
- Lucas: Look at most marketing budgets today and you will see the same old spreadsheet logic. They take last year’s number, add five or ten percent for inflation, and call it a plan. It is comfortable. It is safe. But in this quarter, with cost of capital rising and margins under pressure, that comfort is becoming expensive. Luna: Right, because if your base spend was inefficient last year, you are just scaling up inefficiency. You are paying a premium for bad habits. Lucas: Exactly. And what we are seeing now is a sharp pivot toward zero-based budgeting, or ZBB. It sounds like accounting jargon, but for marketers, it means starting every line item from scratch. No legacy carry-over. If you cannot prove the return on investment for a specific channel or campaign, the money disappears. It is not about cutting; it is about earning your seat at the table. Luna: That must be terrifying for anyone who has built their career on long-term brand equity. How do you defend a brand awareness play when you have to justify it as if it were a direct response ad? Lucas: You change the metric. That is the crux of the shift. For years, CMOs hid behind awareness surveys and reach numbers because they were easy to sell to a board. Under ZBB, those metrics have to link to pipeline influence or customer acquisition cost. We are seeing companies like Unilever and PepsiCo pushing this harder than ever, forcing their marketing heads to map every dollar to a specific business outcome. Luna: So the creative brief changes too. You can’t just write 'elevate brand sentiment' anymore. You have to write 'drive trial among segment X.' Lucas: Precisely. And this creates a massive operational shift. Marketing operations teams are no longer just supporting campaigns; they are building the data infrastructure required to track attribution at a granular level. If you don’t have the tech stack to prove that the TV spot drove the website visit, you don’t get the budget for the TV spot. It is brutal, but it works. Luna: It also puts a lot of power in the hands of the CFO. I imagine there is some serious friction during these quarterly reviews. Lucas: Oh, huge friction. Finance loves predictability. They want to see steady growth curves. ZBB introduces volatility because you are constantly reallocating funds to where the highest marginal return is. One month it might be social video, the next it might be email retention. The CFO sees that churn and gets nervous. The CMO has to explain why shifting ten million dollars from print to digital is actually stabilizing revenue. Luna: Yeah, explaining volatility to a risk-averse finance team is an art form. Do you see this working better for consumer goods or B2B? Lucas: Consumer goods is moving faster here simply because the data loops are shorter. You can test a new package design or a new influencer partnership and see sales lift in weeks. In B2B, the sales cycle is so long that attributing a closed deal to a specific marketing touchpoint six months ago is messy. So B2B CMOs are lagging slightly, but they are catching up fast. Luna: What about the agencies? If the client is doing zero-based budgeting, does that squeeze the agency fees too? Lucas: It absolutely does. Agencies used to bill on a percentage of media spend or a retainer that assumed continuity. Now, clients are demanding fixed-price projects tied to deliverables. If the agency cannot show they are driving measurable results, the client drops them. We are seeing a consolidation in the agency world because only the high-performers survive the audit. Luna: So the mid-tier agencies that rely on relationship rather than results are getting squeezed out. That seems inevitable given the current economic climate. Lucas: Inevitable. And it forces internal marketing teams to do more work. You can’t just hand off the creative and walk away. You need people inside the company who understand data analytics, programmatic buying, and financial modeling. The modern CMO is part creative director, part data scientist, and part accountant. Luna: That is a heavy hat to wear. Do most CMOs have that skill set already, or are they hiring for it now? Lucas: They are hiring aggressively. We are seeing a surge in demand for roles like 'Head of Marketing Analytics' or 'Chief Growth Officer.' These are people who speak both languages. They can talk to the creative team about storytelling and then turn around and talk to the CFO about EBITDA impact. It is a new hybrid profile. Luna: I wonder if this kills creativity though. When everything has to be justified by ROI, do people stop taking bold risks? Lucas: That is the big fear. But the smart ones separate their budget into two buckets. Eighty percent goes to proven channels with clear ROI mandates. Twenty percent is reserved for experimental plays where the metric is learning, not immediate profit. If you treat the experimental bucket like a core channel, you will fail. But if you protect it, you can still innovate. Luna: So it is not about killing creativity, it is about compartmentalizing risk. That makes sense structurally. Lucas: Exactly. And this brings us to a point where I want to pause and ask you something directly. If these conversations about marketing strategy and budget efficiency have sparked ideas you’ve actually put into practice at your company, consider supporting the show. A couple of dollars a month is genuinely what keeps these independent analyses going. You can find us at buy me a coffee dot com slash fexingo — that's F. E. X. I. N. G. O. Just a small contribution helps us keep digging into these structural shifts without corporate sponsorship skewing the view. Luna: Yeah, and it lets us keep this kind of detailed breakdown weekly. Thanks for listening. Lucas: Back to the budget. Let’s talk about the actual mechanics of the split. Most companies are finding that their traditional media mix is bloated. Television and radio have high reach but low attribution. Under ZBB, those lines get slashed unless they can prove a lift in search volume or store traffic immediately after airing. Luna: So the money moves to digital. But isn't digital also getting more expensive? Cost per click is up across most verticals this year. Lucas: It is. Which is why the allocation is shifting even deeper. It’s not just digital versus traditional. It is paid media versus owned media. Brands are investing heavily in their own communities, their apps, their email lists. Why pay Meta for access to your customers when you can nurture them directly through your own channels? The ROI on owned media is often higher because there is no middleman taking a cut. Luna: That sounds like a defensive move. Building a moat around your own audience so you aren’t dependent on platform algorithms. Lucas: It is defensive, but it is also offensive. First-party data is the most valuable asset a marketer has right now. With privacy regulations tightening and cookies disappearing, brands that own their customer data can personalize experiences in ways third-party platforms cannot match. It drives higher conversion rates and loyalty. Luna: So the budget is literally flowing from renting audiences to owning audiences. That is a fundamental change in the value proposition. Lucas: Yes. And it requires different skills. Managing a community manager is different from buying a banner ad. It requires empathy, content strategy, and rapid response. It is less about scale and more about depth. Luna: Does this mean smaller brands have an advantage? They can build community faster than the giants. Lucas: Sometimes. Giants have inertia. Their systems are built for mass distribution. A smaller brand can pivot to community-led growth overnight. But the giants are catching up because they have the capital to acquire community platforms and hire the right talent. It is becoming a war of agility versus resources. Luna: Agility usually wins in the short term, but resources win in the long term. I guess it depends on how you define success. Lucas: For ZBB, the definition is strict: sustainable cash flow. If you burn cash to acquire users who never come back, you fail the audit. The focus is on unit economics. LTV divided by CAC. If that ratio isn’t healthy, the budget gets cut. No exceptions. Luna: So the era of growth at all costs is officially over. We are in the era of profitable growth. Lucas: Officially. And that changes the tone of every marketing meeting. It is less about 'how do we go viral?' and more about 'how do we convert efficiently?' It is a drier topic, but it is far more important for the survival of the company. Luna: It feels like the maturity of the industry. We spent ten years playing with new toys and now we have to balance the checkbook. Lucas: That is a fair way to put it. And the tools are better now. We have ai driven attribution models that can give you a clearer picture than ever before. The technology exists. The question is whether leaders have the discipline to use it. Luna: Discipline is always the hardest part. Especially when the temptation to splurge on a flashy launch is so strong. Lucas: Always. But the market doesn’t reward flash. It rewards consistency and efficiency. If you can prove that your ten thousand dollar test yielded more revenue than your ten million dollar campaign, you have won the argument. That is the new currency. Luna: Small tests, big insights. It is a very different mindset from the old school of big media buys. Lucas: It is. And I think we will see a generation of CMOs emerge who are respected not for their creative vision alone, but for their financial acumen. They will be the CEOs of tomorrow because they already know how to run a P&L. Luna: That is a powerful image. The marketer as the ultimate generalist. I wonder if that makes the job more appealing to a broader range of candidates. Lucas: It does. People who love business strategy are drawn to marketing now because it offers a path to the top. It is no longer a support function. It is a core engine of growth. Luna: So if you are thinking about a career in marketing, learn finance. It sounds like the best advice you can give someone right now. Lucas: Absolutely. Learn the language of the boardroom. Because once you master zero-based budgeting, you are not just asking for money. You are telling the business how to make more of it. Luna: A compelling pitch. I hope more CMOs start speaking that language instead of just talking about feelings and vibes. Lucas: The vibe is nice, but the bank account is real. And in October twenty twenty-six, the bank account is what matters most.