Latest / The CMO Podcast with Fexingo: Marketing Leadership, Budgets, and Executive Strategy / Why CMOs Are Killing The Brand Fund
Transcript
- Lucas: The silence from the boardroom has been louder than any ad campaign this quarter. We are seeing a wave of CMOs across the consumer staples sector voluntarily dismantling their brand funds, those discretionary pools of cash traditionally set aside for awareness and emotional connection. Luna: It feels like they are trading soul for spreadsheet accuracy. Why now? Lucas: Because the margin squeeze in Q three 2026 has forced a brutal triage. When input costs remain sticky and consumer price sensitivity spikes, CFOs are demanding immediate, attributable returns on every dollar spent. The brand fund, by definition, lacks that granular attribution. It is the first line item to get the axe when the P&L looks red. Luna: So they are killing the very thing that makes customers loyal just to save ten percent on this year's costs. Lucas: Exactly. And here is the dangerous part. They are not just cutting waste. They are cutting the top of the funnel. They are replacing broad narrative campaigns with hyper-targeted performance ads that only speak to people already looking to buy. It is efficient in the short term, but it starves the pipeline. Luna: Starves the pipeline. That is a vivid way to put it. What happens when the competition still has money left to spend on storytelling? Lucas: That is where the vacuum opens up. Let us look at a specific case. A mid-sized beverage company, let us call them RefreshCo, decided to cut their brand awareness budget by forty percent last month. Their CFO called it rationalizing spend. On paper, their cost per acquisition dropped immediately. Luna: Did the stock go up? Lucas: It ticked up two percent on the news. The market loves immediate efficiency. But we have seen this movie before. When you stop feeding the brand engine, you do not just lose new customers. You lose the buffer that protects your existing ones. Share of wallet starts drifting to competitors who are still spending on memory and affection. Luna: And the data shows that drift happening faster than most executives realize. Lucas: Right. Because brand equity is a lagging indicator. You cannot see the damage on Tuesday's dashboard. It shows up six months later as churn. So the CMO is getting praised today for saving money while quietly preparing for a crisis next quarter. Luna: It is a deferred payment problem. Paying less now means paying more later. Lucas: Precisely. And the interesting twist is that these same CMOs are terrified of losing their jobs if they don't show results now. So they are trapped. They have to optimize for the quarterly report rather than the five-year horizon. Luna: Is there any leader out there resisting this trend? Who is holding the line? Lucas: A few. There is a premium snack brand that actually increased its brand fund by five percent this quarter. They argue that because their category is crowded, differentiation is the only moat left. If you compete only on price and performance, you become a commodity. Luna: Commodities are race to the bottom races. No one wins. Lucas: No one wins except the algorithm that pushes the cheapest option. But raising the brand fund requires immense courage. It requires telling the CFO that you need to spend money you cannot directly track. That is a hard sell in this environment. Luna: What kind of numbers are we talking about? How much does it actually cost to rebuild that trust once it is gone? Lucas: Rebuilding is exponentially more expensive than maintaining. Industry studies suggest that acquiring a new customer can cost five to seven times more than retaining an existing one. But when you let the brand fade, retention drops, so your acquisition costs skyrocket just to fill the hole. Luna: So the 'efficiency' saves pennies now but costs dollars later. Lucas: It costs dollars and it costs time. Speed matters in this market. If you miss a window where your competitor establishes emotional dominance, you might never get it back. Consumers are lazy. They stick with what they know and love. Luna: Love is a metric that doesn't fit neatly into an Excel sheet. Lucas: Which is why it gets cut. But here is the reality check for listeners in marketing leadership. You have to start framing brand spend as risk mitigation. It is insurance against commoditization. You are not buying ads. You are buying optionality. Luna: Optionality. I like that. It shifts the conversation from cost to value. Lucas: Exactly. And it aligns with what the CFO cares about: downside protection. If you have strong brand equity, you can raise prices without losing volume. If you are weak, you have to discount to move product. Which strategy protects margins better in a recession? Luna: Clearly the one with the brand. But convincing a CFO to pay for insurance they think they don't need is tough. Lucas: It is tough. That is why some CMOs are failing. They are trying to defend brand spend using creative arguments instead of financial ones. They need to talk about pricing power. They need to talk about customer lifetime value. They need to speak the language of the boardroom. Luna: So the skill set for the modern CMO is expanding. It is not just creativity anymore. Lucas: It is becoming finance-adjacent. The best CMOs today are fluent in both storytelling and unit economics. They can explain how a narrative campaign drives margin expansion through price elasticity. That is the new bar. Luna: If you can't prove the link between story and spread, you're vulnerable. Lucas: You are. And right now, many are getting burned. We are going to see some headlines next quarter about companies that thought they could coast on past goodwill. They will find out too late that goodwill does not pay for inventory. Luna: A harsh lesson for those who confused past success with present resilience. Lucas: It is a harsh lesson. But it also clarifies the path forward. For leaders willing to invest, the opportunity is massive. If your competitors are retreating, you can capture share simply by staying visible and relevant. Quiet confidence wins in noisy markets. Luna: Or quiet neglect loses everything. It really comes down to discipline. Lucas: Discipline to hold the line when the pressure is on. Most people panic and cut. The disciplined leader doubles down on the core differentiators. They remember why people chose them in the first place. Luna: And remind everyone else, including themselves, of that reason. Lucas: Exactly. The market rewards patience. It punishes impulse. As we head into the holiday season, watch which brands are speaking softly and consistently versus which ones are screaming discounts. One builds a legacy. The other builds a liability. Luna: Legacy or liability. Two very different outcomes for the same budget decision. Lucas: Two very different outcomes. And it all starts with the courage to say no to the easy cut. To protect the asset that matters most: the relationship with the customer. Luna: Relationships are built over years. Destroyed in a quarter. Good reminder. Lucas: It is a good reminder. And it leaves us with a question for our listeners. In your own organizations, are you protecting the brand fund, or are you tempted by the quick win of efficiency? Where do you draw the line? Luna: We would love to hear how you are balancing the books with the brand. Stay tuned for the next deep dive.