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How to... craft a budget on a budget

Marketing budgets are not what they used to be. Now that the recession has hit,

it should be your mission to extract more bang from a shrinking buck

They say every cloud has a silver lining, and this downturn is no exception. For

marketers, the hoary edge to the cumulonimbus of recession is the overhaul

currently taking place in the industry.

It means, in future, youll be able to hold your head up high and stroll confidently

through the accounts department. The finance director will see you in a new

light: as a shrewd maven of profit, not someone who draws pictures for a living.

At last, marketing is being professionalised. Dont fret creativity is not out the

window just yet, and there is still room for imagination, but from now on

businesses need to rationalise every last penny spent.

As we all know, there was small incentive to fix the marketing roof while the sun

was shining; companies were less obsessed with tangible returns on investment

(ROI) five years ago than they are today.

But the salad days are over and bleak economic realities have sunk in. Boards

want to all but know that when they invest one pound they will get two pounds

back and some will insist on a considerably higher return than that.

Demonstrating profit after a campaign has ended is no longer good enough.

Finance chiefs are demanding an unprecedented level of certainty to be front-

loaded and displayed clearly in a budget forecast.

At this very moment your FD is squinting over your predictions for future spend,red pen hovering. A well-crafted, realistic and detailed budget is your best

defence against cuts.

Redefine what a budget is

For the old school among you, a budget is not a piece of paper with the words

five million pounds please written on it. It s a set of data based on research

that shows the investment required to make money for your organisation.

Chances are your board will want to read about efficiencies this year so you

might have less to play with from the outset. But if you find yourself short of a

few bob, comfort yourself with the thought that others are in the same boat.

Budget planning for marketers has taken on an increased significance, claims

Chris Murphy, chairman of integrated marketing agency Balloon Dog.

In almost all cases budgets are less than they have been. Marketing is and

should be linked to the sales and profit of the company, and when both are down

marketing spend invariably follows suit.

A well-crafted,realistic anddetailed budgetis the bestdefence againstcuts

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Planning,

research and theintelligent,flexible use ofdata are

w to craft a budget on a budget - The Marketer magazine http://www.themarketer.co.uk/articles/how-to/how-to-craft-a-budget-on...

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Drawing up a budget on a budget is not just a case of removing 10 per cent from

your headline costs. It should involve a piecemeal approach to spending. If you

have, say, 10 areas where you allocate money, take a fresh look at which ones

provide the best yield.

In some cases there are conspicuously large amounts of money being spent by

marketing departments for reasons no one seems completely clear about, says

Dr Robert Shaw, author of Marketing Payback and contributor to The Institutes

Return on ideas report briefing (see page 45).Generally speaking, there is room to rein in spending, he says.

You should gather evidence about where money is to be spent. It could be a 10

or 20 per cent cut in one channel, but a 40 per cent increase in another. Some

companies are not spending enough in areas that work even in a recession

that makes no sense at all.

David Meliveo, marketing director at Autoglass, agrees with this assessment.

His 15m budget is increasing year on year because it is used to target media,

localities and demographics that work.

For Autoglass, radio advertising has generated the most sales in recent years.Motorists are the companys target market and this medium is the best way to

reach vehicle owners while they are in their cars.

Radio advertising is very cost effective and is one of the cheapest media out

there. It lets us talk to customers in their cars. We dont sell sexy products so

we need to create interest when customers are captive, admits Meliveo.

For the last four years, radio advertising has constituted 90 per cent of our

budget, but it only reaches between 40 and 50 per cent of our market, so this

year we are placing additional money on TV ads and a small amount online.

Targeting is good

Whether you have less, more or the same to allocate, your budget will need

some detail. In previous years marketers could hit and hope with big splashes

not so now. Budget allocation must have intelligent thought behind it in this

lean period dont be afraid to trim the old, wastefully fleshy ideas.

In good times reasonable plans can deliver excellent results, explains Tim

Knight, director at Nunwood, a customer strategy agency. But in a recession

you need excellent plans to demonstrate excellent outcomes.

There is a big emphasis on back to basics: customer behaviour has changed

radically, main drivers of a strong relationship have changed, and people who

are used only to the good times are having to relearn their jobs.

Knight believes in a bottom-up approach to researching a budget. Talking tocustomers, he believes, coupled with an analytical approach to sorting the

information you receive from them, will give you informed leads on where to

reallocate money.

This even works when your marketing attack is already producing results. Knight

recalls the example of a supermarket delivering a 5:1 return on spend. Having

assessed its budget and derived where certain channels had reached saturation,

the supermarket is now expecting a 7.3:1 return this year.

In stark contrast, Shaw cites the example of a large brewing company that had

completely lost track of its approach to customers: They couldnt even tell me

how much money they had spent on ashtrays in pubs, he chuckles.They had a big pot of money for marketing campaigns that they couldnt break

down statistically. No one had ever thought to ask the finance department to

number crunch in that way.

Become a statto

essentialcomponents ofan effectivemarketingattack

Dos and donts

Do take a scientific

approach and number

crunch like the wind.

Do focus on

performancerelated

results.

Do understand that your

marketing needs are

unique.

Do think short-term gains

and put the pretty stuff

on the back seat.

Do calculate what everymarketing pound will

convert

to in sales.

Do be flexible and

prepared to change

campaigns that dont

work.

Do meet regularly with

your FD and operations

manager.

Do keep up to date with

KPIs and scorecards.

Don't believe that

customer responses stay

the same.


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Youre going to have to look at the stats before you run your campaign, because

if you dont the FD will. Theres no such thing as guaranteed ROI just a range

of relative measures, most of which are individual to a business, even within the

same sector, claims Nigel Vaz, head of Sapient Interactive Europe.

In laymens terms, Vaz says there is no catch-all solution or marketing silver

bullet that guarantees a return. Even organisations that appear to be very similar

often require radically different approaches to marketing; its important that your

budget reflects your uniqueness.

To ascertain a marketing thumbprint youll need to get intimate with the market.

That means a mathematical approach to understanding the way customers

interact with your brand.

Glenn Granger, who heads up Lane Clark & Peacocks marketing analytics

division, takes this to a forensic level. Granger (a mathematics graduate)

compiles models that predict the range of risk around a forecast of ROI.

We wanted to innovate in the area of marketing analytics by adding the concept

of risk to projections, Granger explains. If a company is expecting a three-fold

return on its investment then we can predict the likelihood that it will happen.

We measure the spread of risk. Different marketing channels have different

risks and different spreads when applied to specific marketing campaigns.

Take the example of a breakfast cereal brand. The response to its marketing will

change across media, in different geographical areas and will evolve over time:

what worked for banks three years ago certainly wont work today.

Modelling and using scientific data is the best way of creating a tangible return

during a recession. As search marketing firm Greenlight COO Andreas Pouros

points out, the moneymen think short term and are hungry for quick returns.

Partly for this reason, Greenlight has so far been untouched by the recession

and has even seen client demand grow. Through a combination of software and

third-party reporting, it gives a detailed account of how investment translates into

sales.

Accountability and transparency are vital in todays market, he argues. We

can track the search terms in Google that are most likely to translate into

clickthroughs and conversions for clients.

Search marketing is doing very well this year because it allows you to be

scientific, rather than generate ambient ROI.

But a word of warning: strip out all that is creative and long-term in your

marketing budget and you risk deflating perceptions of your brand over time.Scientific is good, but not at the expense of customer brand recognition and

respect.

As Vaz argues: Advertising, in particular, is not just about whats measurable,

and if we throw out the power of compelling creativity for that which is purely

quantitative, then we are not serving our businesses, or our clients businesses,

well.

Dont keep it to yourself

There is no point cultivating a winning budget strategy if your intention is only to

placate the finance wonks. This document will deliver an upswing in sales, somake sure the business is prepared operationally.

We have 2,500 employees around the country and they need to know what

interest is being generated, explains Meliveo.

Don't focus on

ambient returns.

Don't forget about

long-term brand building.

Don't ignore fresh data

that contradicts your

current campaigns.

Don't refresh marketing

collateral unnecessarily.

Don't ignore the

recession.

Don't ignore your FD.

Don't forget to mention

to the rest of the

company the big

increase in sales thatscoming.

Don't forget to include a

facility for earning a

quick buck.


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Case study: Rolling in cashSonys dancing MP3 player shows that budgets dont need to be high to deliver

the best results, they just need to be clever

Rolly, a dancing MP3 player, was created by Sony. However, when launched

in the US, the product was poorly received; the technology journalists

dismissed the product as a pointless novelty item.

A similar reaction was anticipated in Europe if the same tactics were employed

(primarily a product unveiling at a technology conference that engaged

technology press).

With 1,000,000 initially allocated to the European launch, Sony Europe, along

with digital PR agency immediate future (IF), decided on a different strategy.

This involved engaging a select group of online influencers with the hope of

developing a groundswell of interest for the product, and cultivating a group of

advocates who would protect the reputation of the product should it come up

against negative backlash.

IF identified a group of individuals, known as slash slashers due to their

multiple interests and professions, such as musician/dancer/dj. These

individuals are typically 18 to 24 year olds, creative, social, and highly active

online.

A group of 120 slash slashers were contacted across Europe, via their social

network pages. They were loaned a Rolly and multimedia equipment, and

asked to film creative videos of the product.

These videos were then distributed to bloggers, posted on video sharing sites,

and placed on the social network pages of these slash slashers.

The approach was a resounding success. The online campaign only required190,000 of the original 1m budget, the videos were viewed 400,000 times,

more than 16,000 blog posts on the product ensued, and sales were 150 per

cent higher than forecast.

Finally, 100 per cent of subsequent product reviews were positive, and Rolly

was crowned cool toy of the year in the 2008 Stuff awards.

Our previous marketing director ran a successful campaign, but we were unable

to fulfil half of the demand generated because he failed to communicate the

upturn in business to the rest of the company.

Now I meet with directors weekly to explain where demand will increase and

where it will fall. We have a great relationship with media owners and can ramp

up or hold campaigns regionally according to our capacity.

If you take one thing from this article it should be that planning, research and the

intelligent, flexible use of data are essential for an effective marketing attack.

Fail to include a facility for earning a quick buck in your budget and you could find

yourself out on your ear before you can say P&L.

Dan Matthews is editor of LaunchLab.co.uk and writes for titles including the

Financial Times


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