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By now you should be close to having all of your top-line budgets approved and be heavily into the detail of spending the marketing funds you've just been entrusted with. Yet before you rush off to fill the pockets of agency wizards and media-moguls, I'd like to stir things up a bit. Here are 7 budget recommendations against which to benchmark your decisions....
While the exact % split is indicative, I'd be interested in how many of you agree this is the way to go (and if you don't want to comment publicly, feel free to drop me a mail).
Here we go :-)
Spend 10% on aligning the people in your organization to your strategy
Even though you think you have explained it, most employees around you are oblivious to the brand strategy you have developed. At the same time, they are expected to deliver on the promises you make in your marketing initiatives. As marketer it is your job to ensure they are capable of doing so. This means you need to get involved in employee communication, people development and alignment workshops and initiatives. Most HR departments won't be able to do or pay for this by themselves. So join forces and if required "take the lead".
Focus 10% on research yet shed the orthodoxies to focus on metrics that matter
These days it's perfectly possible to predict the impact of GRPs bought on the sales of the brand. To truly understand what drives consumers, rather than make guesses based on focus groups and surveys. To measure the impact of customer satisfaction on word-of-mouth and future sales. To connect your marketing initiatives to your bottom line. Yet the number of companies that do so remains embarrassingly low. Break out of the research orthodoxies and focus your budget on metrics that allow you to make more money and differentiate your business. De-clutter your life and get rid of all the rest.
Allocate 10% to boldly go where no marketer has gone before
We all know that the existing marketing model is out the window, yet no one knows where it's going to land. The only sensible thing you can do in this situation is experiment. Try new things and see what happens. Explore branded content, do in-game advertising, launch a blog, go into Second Life, open a flagship store. You didn't join the marketing profession to rehash the same media-mix each year, so use the opportunity to break new ground. And if for financial or political reasons you cannot go it alone, join a lab or consortium with non-competing brands. The important thing is to start.
Take 15% to spread your online media across the long tail
As online marketing budgets grow, most advertisers will flock to the same media. This will reduce effectiveness and drive prices through the roof. You need to break the mould and spread your investment over an as wide, yet relevant net of digital media as possible. Most media buyers and even some advertising groups won't like this. After all, existing commission structures and some people's creative skills aren't really structured for truly "unbundled" advertising. Still, there is no other option. In the world of the long tail, even Yahoo is only a "blip". So put your foot down, and if required renegotiate your agency compensation package (let's be honest on a 1-2% buying commision, no one can do a decent job)
Focus 45% of your spend on traditional media, yet break with your GRP addiction
With all the unconventional moves above, I'm not saying you should stop doing traditional media. Still, the big step to take is to let go of the illusion that media planning based on GRPs actually has any value (and yes, we've got the numbers to back this statement). With some planning and research it is quite do-able to cut 20 to 50% of your traditional media budget without affecting your sales line. This should fund a lot of the actions I described above, and allow you to focus your traditional spend where it really matters. And if you have some left, remember that the real action is in customer service, sales support and point-of-sales. Any penny you can save should go there.
Keep 10% in reserve for when the next YouTube comes along
Don't spend it all. While even before the internet I've been a strong proponent of keeping back some money to make agressive moves when opportunities arise, these days this is more important than ever. This time last year no one would have imagine YouTube to be what it is today, yet chances are a similar "something" will crop up in 2007. When it does, you want to have the funds to move fast and hard, so you can be first to leverage what ever the new medium will be.
So, does this look like your 2007 budget ?
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Comments
Alain,
Thank you! I believe all of us, from large corporation to entrepreneur, spend too little time creating, executing and managing marketing budgets. I am especially pleased that you listed "Spend 10% on aligning the people in your organization to your strategy." I believe this is the first and last step to marketing success, and that it requires a 24/7/365 effort.
Posted by: Lewis Green | 01.09.07
Alain, I like the idea of reserving some the marketing budget for "experimental" tactics, however I'd probably pick just 1-2 tactics and make sure they aligned with an existing marketing program.
The 10% you allocate to aligning people to your strategy could also be termed "internal comms" and is easily overlooked as far as importance in the marketing budget.
Last note, this might be difference of opinion, but I wouldn't keep any money in reserve. I'd spend every last dime and I'd do it in the beginning of the year. We all know marketing budgets tend to get cut, and thus I'd spend it all early and often--of course on programs that drive revenue for the company. The risk is that you miss those "opportunities that crop up" however I'd balance that risk quite nicely with the high probability that marketing budgets will be cut mid-year.
Posted by: Paul Barsch | 01.09.07
What about spending a part of the marketing budget on design and innovation? Communicating through products are underrated.
Posted by: David Carlson | 01.09.07
A good read, and in our case certainly not too late.
There are serveral key words in your title that we are definately working hard at here in China. These would be budget - yes actually planning a budget is somewhat of a new concept and then these is marketing/sales which is really a new concept to our folks.
I already have too many secrets here to deal with so I will not focus on that word.
You and your readers should know that we are just beginning with the more traditional forms of marketing media; that eCommerce and internet use is still very low; and that we are searching for our brand story so that we can indeed tell the employees and the guests.
However like everything else here in PRC, we are moving along very quickly indeed, growing up in a new international world of marketing.
Posted by: Christopher Sheldon | 01.11.07
Alain: a few thoughts.
If you need to spend 10% on alignment, you need to fire your front line managers. They are failing in their primary jobs, which is managing the people, strategy, and money of their businesses.
The relative percentages of research, online, traditional, etc., are highly dependent on the size of your budget. If you're sitting on a $250 million budget, you don't need to spend $25 million on research. It might actually be impossible to spent $25 million on research unless you bought a few firms.
Holding 10% in "reserve" is like dangling a flank steak in front of finance. It will just go away and be given to another group with firmer plans. I applaud the idea, but you have to hide that money somewhere.
You neglected to mention where most of your money will be parked, namely your channel -- coop, marketing development funds, training your channel, consumer and trade promotion, merchandising, etc. You'll spend at least 50% here if you do business through retail, regardless of your category. Hopefully, if you've done your job well, little of this will be entitlements and most will be driven by you, and will be aimed at revenue increasing activities.
You make more money focusing your dollars at the channel than you do at buying more advertising. The vast majority of ad dollars fail to produce a better than break even ROI. I've measured this often in many, many companies and have read a lot widely available research on the subject (but it sure is fun to shoot commericals, let's agree).
Design, product management, etc., all (in my world, at least) have fallen in other groups and other budgets.
The reality is that you need to focus your dollars on what makes your business grow. Many marketers tend to spend money on things that are intellectually interesting and that don't move the needle. You need to protect yourself from this thinking, experiment frequently with well constructed data traps, and scale up when you hit it right.
Good luck!
Posted by: Stephen Denny | 01.14.07
What do you mean by GRP ?
Posted by: M. Pelz | 01.17.07
I wish it was that easy!!!
Posted by: Ziad EL Kerdany | 01.18.07