Zero-based budgeting is the highest indicator of marketing skill… if your team is not using this approach, you really need to be asking why…
I haven’t got a clue what you are on about? Don’t worry I hear that a lot… zero-based budgeting just means that the base of the marketing budget is zero. That means that each year, your marketing team is not given any money (aside from certain operating costs) unless they can justify why they need it. Makes sense right? It holds marketing teams accountable to their activities outcomes.
Many companies however simply allocate the same marketing budget each year (as an arbitrary percentage of projected sales volume), with only the extra activities having to be justified, sounds a bit like the archaic council budgeting approach. And we all know how successful that is. Those using a zero-based budget go back to the drawing board entirely.
In my own consulting career I regard setting up zero-based budgeting for several clients as one of my favourite and most satisfying experiences.
So why do it? Why get your team to present their marketing plans and the investment levels that is needed for both short- and long-term success?
Firstly it ensures the plan for the year is thought through and based on business objectives, then you can calculate what budget this entails and what return the business will see. Which is surely the whole point of marketing. If it won’t deliver a return on investment or enhance the brand why do it? The members of the company board then review this work and either grant the budget requested or query the plan.
It also gives you an amazing advantage over competitors who do not really know what to spend or how to spend it and it sets up the always useful context of internal competition for marketing funds, which, in my experience, invariably leads to better overall marketing and improved effectiveness.
This approach for a marketeer should actually be pretty exciting. Everything is on the table. You can bid for exciting new technology to work with to set you apart or embrace a certain campaign through all levels of the marketing mix to ensure strong results! It questions the status quo and encourages the board members to really think about marketing and the benefits it brings to company growth. Marketing is the life blood of a company so everyone’s involvement is critical to an authentic credible brand voice.
There are two reasons that I can see that more companies do not use the zero-based approach. One is simply the marketers and the brand plans they build each year simply are not good enough. Another is this approach is time and resource heavy. Fairly obviously, a more strategic approach requires some effort (from marketing team and senior managers), as does anything worth doing in life. Some companies combat this by doing zero-based budgeting every few years.
So, a hearty congratulations to everyone who does use this approach. You represent the very best of brand and marketing strategy and, hopefully, this can teach other marketers how to up their game too.
If this has sparked more questions or you now realise you need a more strategic, creative and authentic marketing strategy in place, it might be worth us having a chat.