When interviewing a marketer for a job, I usually asked him (or her) what he would do the first day of the job. This simple question is nicely helping you to understand personal and professional skills and behaviours of the person. If the interviewee is not coming quickly with the word budget, I will probably not hire him. Why? because at the end, you should start from your budget and finish with it.
Long story short, you should as a marketing leader be mastering the budgeting exercise. I am saying Mastering on purpose because it has a tremendous impact on your professional daily life! Not easy! Scared! Don't know where to start. This article might help you.
Marketing expense budget is 7% of revenue in 2017.
In 79% of companies, marketing has a budget for capital expenditures — primarily, for infrastructure and software
Marketers are managing a P&L and generating revenue from digital advertising, digital commerce and sale of data
Please find some guidelines that could help you when you are working on your budget:
The budget is your main Tool for managing your activities and your team. Each action of your Marketing Plan is linked with your budget which is linked with the company financial plan. If the link is wrong or worst if there is no link, you have a high risk of not delivering what you should (and it could cost you your job).
The budget is your Story! You will have to explain it, justify it, defend it! Thus be ready to make it solid-proofed and robust! Some questions like where can we cut? why do we need this? will certainly be asked.
The budget is supporting your Strategy. You should keep and magnify what contributes to your objectives and eliminate what is not effective. You might receive a budget based on historical trends (like we always spent 25% of our OPEX on TV, thus we have planned 25% for TV next year). While history is important, future will probably be different, therefore you should challenge each line. As said in the WSJ article:
It’s time to retire the age-old process of building marketing budgets by tweaking last year’s plan up or down a few points. Start with clear objectives, an aggregate affordable investment number and a blank sheet of paper. Challenge your team to create channel-agnostic budget allocations that give you the best chance of hitting goals while challenging assumptions of causation that rely on historical models of customer behavior. Be careful that this process is used for optimizing marketing investment allocation rather than as merely a cost-cutting exercise, which has happened at more than a few corporations.
The total budget is based on Real market assumptions. The simple test is MKT OPEX/REV and compare this ratio with industry and competitive benchmarks. The starting point for this ratio could be 3% but you should really check your case.
The budget is Organised. Why did you put this amount for this campaign and that amount for that one? One way to do that is to create categories of action having each a specific budget and allocate each action under the right category. Have a look below (Some definitions) and you will see that you should organised your budget in Paid, Owned and Earned Media for each action.
The budget is Seasonal. If there is 28 days in the month, it is not the same as 31 days. July is not March!
The budget is Managed. Each spending has to be tracked and compared to your plan. If you underspent, you should decide what you will do with the extra OPEX.
The budget is Communicated. Each corporate culture is different but my advice is to start with aggregate numbers (like total advertising) and not giving all the tiny details at the start. Why? The more you give, the more questions you get!!!
The budget is Finalised. If your target date is September 24 at 8 PM, Deliver it September 24 at 7.59 PM Why? If you deliver it before, most probably you will have to adapt it because you will receive questions ;-). This is assuming that you have fully respected the original guidances and that your budget is respecting all previous points.
AND FINAL RECOMMENDATION: You should SPEND all your budget! unless a budget revision asked you not to do so.
Fees - Budget for Media, CONTENT AND DISCOUNT
- Do you know how much you have to spend on Paid non-digital media (off-line)?
- Do you know how much you have to spend on Paid digital media (on-line)?
- Do you know how much you have to spend on Earned media?
- Do you know how much you have to spend on Content?
- Do you know how much have to spend on Acquisition Costs, Stimulation Costs and Retention Costs (Promotion, Discount on Price, Giveaways) ?
PEOPLE - BUDGET FOR PEOPLE
- Do you know how much employees you need in your team for delivering your revenues objectives (short-term, long-term)?
- Do you know how much you plan to spend for outsourcing your strategic & creative work?
- Do you know how much you plan to spend for outsourcing your product development?
- Do you know how much you plan to spend for outsourcing your operations?
- Do you know how much you plan to spend on rewarding your staff ?
KNOWLEDGE - BUDGET YOU SPEND FOR INCREASING YOUR KNOWLEDGE
- Do you plan to invest in Marketing Training ? How much?
- Do you plan to invest in Marketing Research & Intelligence (User testing, Survey, Focus Group, Reports, Seminars, Competitive analysis)? How much?
- Do you plan to spend on creative exploration (Workshop, ideation lab , Fab lab)? How much?
CAPABILITIES - BUDGET YOU SPEND ON MARKETING TECHNOLOGIES
- How much do you plan to invest in Data and Analytic tools?
- How much do you plan to invest in Customer relationship tools?
- How much do you plan to spend in Commerce & Sales management tools?
- How much do you plan to invest in Content and Experience management tools?
- How much do you plan to invest in Adtech & Social tools?
Quite simply, it’s all the advertising you pay for. Basically anything that you’ve paid for in order to drive traffic to your ‘owned media’ properties. The audience for paid media is generally made up of strangers to brand and its services. This includes amongst other things:
- Print ads
- TV ads
- Display ads
- Paid search
- Promoted posts on Facebook
- Sponsored tweets
All the cool properties that belong to your brand which you control. It’s down to the strength (quality, persuasiveness, relevance) of these properties to determine whether the strangers driven to your owned media by paid media will become customers. This includes amongst other things::
- Your website
- Mobile site
- Retail stores (online and offline)
- Social media channels
The strength of these owned media experiences will also determine whether your customers will then become fans of yours. Fans drive ‘earned media’.
It’s the free publicity generated by your fans. You didn’t pay for it, because you earned it… Good work! Either your hilarious online video, your superior ecommerce experience or your constantly engaging Twitter account has been good enough for someone to create a positive piece of content for you or share your original content further. This can include:
- Facebook Likes
- YouTube comments
- Bloggers writing about your product
- Online reviews
- Word of mouth
- If a video ad that you paid to make is shared by someone on social media this ‘sharing’ is still called earned media.
Unlike paid or owned media, you can’t really control the above examples (no matter how hard you wish to try). It’s in the hands of your ‘fans’. However earned media is how your brand may become wildly popular, so if you trust your own brand and products than you should trust in earned media.
- Facts, Gartner, CMO Spend Survey 2016-2017: https://www.gartner.com/smarterwithgartner/gartner-cmo-spend-survey-2016-2017-shows-marketing-budgets-continue-to-climb/
- The CMO Survey, August 2017, https://cmosurvey.org/results/august-2017/
- Forbes, Three Steps To A Solid Marketing Budget, http://www.forbes.com/sites/davelavinsky/2013/06/07/three-steps-to-a-solid-marketing-budget/
- HBR, How CMOs Can Get CFOs on Their Side, https://hbr.org/2013/11/how-cmos-can-get-cfos-on-their-side/
- WSJ, Outside Voices: Marketers Need To Modernize, Not Just Switch Their Agencies, http://blogs.wsj.com/cmo/2015/08/21/outside-voices-marketers-need-to-modernize-not-just-switch-their-agencies/
- Forrester, Defining Earned, Owned And Paid Media, http://blogs.forrester.com/interactive_marketing/2009/12/defining-earned-owned-and-paid-media.html