Are marketing budgets crushed?
Expectations on ROI are growing
Budgeting, budget cuts and the need to show that every penny is spend effectively keeps many marketers awake at night. If you can relate to this, do not worry, a good night’s sleep is nearer than you think.
Research *shows that the answer lies in marketing focussing on the impact to the bottom line.
Roughly there are two methods marketers use to plan for their budgets.
- Use historic data and plans as the basis for new budget requests
- Zero based and/or activity-based marketing planning
Past plans and data
This method is still common practise within many companies we speak and work with.
- When marketers use historic data to base their new budgets on, they are believing that the data and assumptions made in e.g. 2016 are still valid in 2017, 2018, etc. In an era of rapid change this can be tricky. The risk is that historic issues and data flaws are carried on into the future. Furthermore, this process does not help to explain the contribution of marketing to the bottom line.
For less budget cuts use zero based and/or activity-based marketing planning
- Marketers who use corporate targets, recent data and insights are well positioned to achieving set goals. This requires allowing difficult choices, be it divestment decisions or others and diverting budget to activities and projects that have the greatest impact on the business goals. All of it needs clear processes and the ability to deal with internal politics and bureaucracy that might complicate maximisation of marketing ROI.
- Both our daily practise, working with Asset Managers, and external research*) show that marketers practising a zero based or activity-based approach hardly suffer severe budget cuts whereas marketers that hand in plans and budgets based on last year’s planning do.
Embrace activity-based budgeting.
Pro-actively rebalance your budget and fund the activities and projects that drive the greatest contribution to business goals with budget savings from other areas.
If you are not sure how to change the process in your company, talk to us. We are happy to help.
*Gartners 2017-2018 CMO spend survey