Plans Change
This was supposed to be a fairly straightforward post about how to approach the budgeting process for marketing programs. I came up with a clever title, and then COVID-19 came along, and the topic seemed irrelevant. But in reality, it’s not, because the pandemic is impacting everybody and everything — including marketing budgets. It’s not only important to look at the impact to budgets already in place. It’s also important to consider how budgets will be developed in the future.
The Top is Down and the Bottom is Up
I like convertibles. Over the course of my lifetime, I’ve owned several, and while they look better with the top down, they’re more comfortable to drive with the top up, unless it’s a sunny day with no wind, and perfectly warm.
Budgets are like convertibles because they can be constructed either top-down or bottom-up. Top-down means you are given a budget number and have the discretion to allocate it to your programs. Bottom-up (also called zero-base) budgeting means you start with nothing and have to build up your budget based on your plans and requirements. Most budgeting is bottom-up because it forces planning, accountability, and a higher degree of transparency.
Here are some definitions of common technical terms in budgeting:
- Justification: Supporting evidence for your budget requests.
- Allocate: To divide funds among programs.
- Reconcile: To balance your budget.
- Cut, trimmed, slashed: Aftermath of a poor quarter, or anticipation of a poor quarter.
- Review, audit: Alignment of budget to expectations using metrics.
The Difference Between Marketing and Sales
While both marketing and sales departments have budgets, it’s important to note that in sales discussions, “budget” is used interchangeably with “quota” or “target.” A sales budget is a planning tool like a marketing plan or a strategic plan. It typically starts at a high-level, consolidated number for a given region or segment, and then is broken down into manageable chunks for smaller regions, and measured and tracked over a given time period, such as a quarter.
Sales plans to meet or exceed their budget, Marketing plans to spend their budget.
How to Allocate Your Budget
Campaign plans should be reasonable and executable. If you plan, you should execute according to the plan, which means responsibly spending the budget. If you plan, budget, and then don’t execute, your credibility could be called into question in the next budgeting cycle.
Allocating your budget should be done in general categories and then narrowed down to line items. Microsoft Excel is a great tool for general and specific budget planning. Your consideration should be given to the following:
- Core programs. These are sacrosanct programs critical to the marketing strategy, such as digital marketing and advertising. And these are two distinct categories — advertising is advertising, and marketing is everything else.
- Capital expenditures. Think CRM, website, e-commerce platforms, systems, SaaS, upgrades.
- Events. Includes trade shows, conferences (in person or virtual). There are two types of events: marketing events to promote your company, products and services, and professional events, such as marketing conferences for your marketing team to attend to sharpen skills and maintain relevance. Budget for both.
- Discretionary spend. Includes promo items, sponsorships, research, consulting, training, etc.
Too-Often Overlooked Budget Items
Time is the most overlooked budget item. Behind every identified budget item on paper is a time commitment that has to be captured. It would behoove you to add columns next to the items and costs to capture time requirements and responsibilities. If you consider your budget initiatives with time allocations, you may find you don’t have the time or the human resources needed to properly execute, and choices will have to be made: cut, reduce the scope, outsource, or add additional resources.
Another time trap is related to agency involvement. If you outsource elements of your marketing program, consider the time needed to review and approve initiatives. The expectation is that, as the client, you will allocate time for active participation in outsourced marketing efforts.
A second overlooked item which may or may not belong in the spreadsheet (but should be in your marketing plan) is the metrics for each initiative. If you budget for an item, be prepared to measure the return on your investment either directly or inferentially.
Future Budgeting
Right now, some assumptions can be made as you plan:
- Increase your focus on digital marketing and advertising.
- Review all live events. Chances are they will be suspended in the near term. Evaluate the value of virtual events. Budget accordingly.
- Plan your budget around ROI (return on investment) and ROT (return on time).
Budgeting may not be fun, but it is important to consider the cost and scope of your efforts. Profitability equals being on-time, on-budget, and delivering on the programs you outlined in your marketing plan.
If you need help with budgeting or strategic planning, contact us for a 30-minute consultation.
