Get Out the Green Eyeshades: Budget Season Looms

Every year we go through the process of setting the next year’s marketing budget. Even though we know it’s coming, we are seldom prepared. As a result, the budgeting process becomes a defensive scramble to justify spend, and often the way it’s approached is to open this year’s budget spreadsheet and click on “File/Save As” to create next year’s template. Besides the fact that the document you just copied is probably not an accurate reflection of spend to date, just re-spinning last year’s model isn’t going to help drive your marketing organization to greater levels of efficiency and effectiveness.

Here are a few suggestions for getting the budgeting process off to a better start:

• Strategy first, then budget. Identify the goals that will impact marketing’s actions for the next year. Look at corporate, sales and business unit goals and identify the interlock points with these other groups that drive marketing’s priorities.
• Determine your marketing priorities. Use the goals to drive your plan. When you understand your key marketing initiatives, consider defining a needs-based campaign strategy and identify the key areas of focus.
• Communicate your choices. Gain agreement from sales and the business units (or product/solution teams) that will be impacted by the choices that marketing makes.
• Choose a budget model. From centralized to solution-oriented, there are important trade-offs to make. If you are using a campaign model, then you can build your budget around the principles of campaign design, prioritization and allocation.
• Put on those green eyeshades. Build a top-down budget allocation model based on proportional distribution of your budget to the different areas of priority.
• Take a pass at a bottom-up approach. Even though you won’t be able to define all the activities, you can identify a big proportion of your required spend. Start thinking about seasonality – your finance department will appreciate any insight you can offer about quarters that are more or less expensive to operate.
• Question tradition. Look at your activities from the current year and ask yourself if you would fund them at the same rate. Don’t assume an activity category (e.g. events) needs the same level of funding as last year. Look for performance and influence based on results, then decide whether to spend in the context of next year’s goals.
• Focus budget measurement on outcomes, not activities. While it’s easier to assign budget measurement to activities, this doesn’t help you focus on your all-important business priorities.

Getting ahead of the annual budget panic will give you the opportunity to design a marketing plan rooted in your company’s objectives. Thinking through your organization’s objectives in terms of corporate, sales and business unit goals will give you the basis for effective decisionmaking. With a focus on driving outcomes, not just activity, you will be able to better align your marketing plan with the priorities of sales and other internal groups.