How to Conduct Marketing Spend Analysis — and Its 4 Benefits

Genevieve Mills Feb 03, 2023

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Analyzing marketing spend data is crucial for any business, as procurement professionals and marketing teams can derive key benefits from understanding how much they spend on advertising and marketing.

Managing spend on marketing activities helps companies make better strategic financial decisions. For example, knowing how much money is allotted to different areas of a marketing campaign means the company can spot where too much money is being spent and where it could be better allocated.

Marketing spend analysis supports spend optimization. It helps businesses develop the marketing plans that will deliver the most value.

The guide below shows how to perform a marketing spend analysis and its benefits.

What Is Marketing Spend?

Marketing spend is the amount a marketing department spends on content marketing, paid advertising, social media, SEO solutions, and trade shows.

Spend is typically delineated in a company's marketing budget, including items like advertising, public relations, and promotion. This budget depends on the size of the business, its sales, and the amount its competition spends on advertising. Marketing budgets can range from as low as 1% of sales to more than 30%.

A marketing budget may include:

website development
print and digital advertising
design and printing costs for any print materials such as press releases
trade shows
any other ad spend and services

Managing marketing spend on a campaign is often referred to as marketing expenditure. This may include money used on specific campaigns and advertising sets. Also called advertising spend, it can be calculated for different approaches, including the costs for advertising operations personnel and advertising agencies as well as the cost of the campaign placement.

How to Conduct Marketing Spend Analysis

A spend analysis is a tool companies use to help increase profitability, reduce inefficiencies, and improve supplier relationships during the procurement process. Analyzing spend data helps marketing teams identify the spending areas that significantly impact profit.

The analysis is performed by collecting, cleansing, classifying, and examining spend data, usually through dedicated software. This process also helps find any wasteful spending and flags contracts that can be renegotiated.

Then, with a complete view of what they’re spending, marketers can develop a cost-saving go-to-market strategy.

Identify Multiple Data Sources

The first step of spend analysis is creating an overview of what spend sources will be covered. Identifying multiple data sources allows the analysis to be more comprehensive.

The best way to conduct this analysis is to segment advertising spend into different groups and then establish all the spend data sources available, such as digital ads, Google, Twitter, and Amazon.

Review Historical Data

Historical spend data should be reviewed to find potential inaccuracies and remove redundancies from a data set. This process, also called cleaning data, includes identifying and eliminating errors in accounts and transactions to ensure accuracy.

Organize Data

Once data sources are identified and reviewed by the marketing team and procurement department, the spend data can be organized into a primary database. Unfortunately, data is often in different formats, so collecting it into one database may take time. Spend analysis software programs are available to make this step easier.

The data can then be organized by identifying “spend categories.” These categories can vary but should focus on advertising. For example, marketing software, such as subscriptions with Adobe Photoshop, InDesign, and Illustrator, can be grouped together.

Joining assorted spend data into clearly defined categories makes spend management easier and is often referred to as data normalization. Classification creates better visibility into a company’s spending to improve sourcing decisions.

Analyze the Marketing Budget

Once the data is organized, it’s important to analyze the marketing budget to get a clear picture of opportunities for saving and how the supply chain can be improved. Data analysis can also help identify better supplier rates.

Analyzing advertising results includes metrics like traffic, conversion rates, and investment return. These three indicators can determine how well a campaign performs on different platforms.

Make and Implement Saving Decisions

After the spend analysis process is complete, procurement and saving decisions can be made. To enhance operations, marketers can look at the credible data gathered during the analysis.

The data from a spend analysis is valuable as it provides a new understanding of marketing purchasing decisions. However, these insights must be applied to develop strategies that lead to savings and better advertising results.

After a spend analysis is performed and saving decisions are made, it’s essential to ensure they will be converted into savings opportunities. Good spend management includes acting on a new spend analysis solution.

4 Benefits of Marketing Spend Analysis

The different benefits of analyzing marketing spending include streamlining business objectives, increasing efficiency, improving visibility, and gaining actionable insights.

1. Streamline Business Objectives

The marketing budget can be determined by estimating the expenses needed to accomplish specific marketing objectives. Analyzing spend helps businesses realize how their marketing aligns with sales objectives and where marketing can be improved to match those objectives.

A formal budget helps define the marketing needs of any company. Monitoring marketing costs and results throughout the year also help determine the budget’s effectiveness.

2. Increase Efficiency

Identifying inefficiencies is essential to improving marketing efforts. It requires deep data analysis and past trend breakdowns. Strategic sourcing involves finding the best vendor for business needs and creating a long-term partnership to streamline procurement.

Additionally, a comprehensive spending analysis helps identify areas for savings opportunities, whether it’s time or money.

3. Improve Visibility

As the marketing team cleans data during the analysis process, a clearer idea of what’s driving sales versus what’s costing the business is formed. In addition, through process optimization and controls, regular analysis of the spending process guarantees that spending visibility is improved.

Spend visibility is particularly helpful when it’s organized by category, purchaser, and supplier and when it is available in real time. It can consolidate spend across different teams to reduce data silos.

4. Gain Actionable Insights

When analyzing spending, business units learn the boundaries of their target market. Marketing and procurement teams can use this information to create actionable insights such as altering prices, personalizing what platforms are being used, improving strategic sourcing, or enhancing customer reach.