The biz squeeze – some options on budget setting

Having had a number of conversatoins with very interested parties the last couple of days I thought I would add my 6 pennyworth to the budget setting debacle. Marketing is all too often a cost centre – they bid for budgets and spend them – and ask their agency suppliers to demonstrate that the money was well spent. This year is hardly one where anyone is going to take 2009 add 10% and pop that into the next board meeting. So how to divvy it up?

The progressive loss of nerve in spending on conventional media is likely to continue – clients who have spent almost all their advertising budget on above the line channels are now thinking twice.

During recession time clients often switched budgets into promotions to drum up short term sales (and keep retailers sweet). But after a decade of almost continual promotions marketers are having to wean themselves off the promotional calendar which patently benefited their retailers more than it benefitted them and delivered their customer an endless stream of offers – no one ever had to buy at full price as long as you were happy to keep brand switching to get the latest offer.

Thinice1 Another habit during recessions was to put more budget into direct marketing – expensive but when used well it drove business.Direct marketing is starting to look rather expensive – of course nothing is expensive if it works. But now we have email lists we can mail more frequently and for a fraction of the cost (and a fraction of the response quite often) So unless we return to old fashioned DM (gulp) it can feel as if we can spend modest amounts but with the perceptoin that we have been emailing out fliers for microscopic returns. What else is there?

Digital has been well placed to pick up the slack. So we have a proportion of the budget which is assigned to experiment with new media channels. Search engine optimisation and key words. So far so good.

But now the marketing director is on facebook as are most of his friends. So he wants to put a portion of the budget into social media to see what can be done with it. Digital agencies are getting very nervous about the landgrab that social media agencies are making on budgets often with the flimsiest of business cases about what business this kind of spend it actually going to build. Tackling your naysayers and getting mentions on line is jolly PR but relatively intensive – there's a new way of working here but case unproven guys.

The danger is that a modest amount of the marketing budget is going to be spread so thinly that nothing gets done properly.

So my advice – the priority is some proper business casing and setting of ROIs. If you can prove you will get a return then go for it. However the experimental portion of the budget is in real danger of being stretched too far. What did you learn from last year? If nothing then why repeat what you have not yet proven. Test something else and make sure you measure it. You may have to make a choice between doing 1or 2 things well and parking the rest.  It certainly seems as if we are moving towards a far more return driven way of doing business. But having said that there are still lots of marketers who won't get fired for putting their budgets into conventional media and measuring them the conventional ways which will keep a lot of agencies and research houses in business.  But the measurement tools used to justify this kind of spend are not transferrable to the other channels – digital and promotional and DM spend is based on behavioural change.

So we could end up with 2 step cultures – old style campaigns measured with tracking studies. And more contemporary initiatives using behavioural meaures. This isn't going to keep everyone happy. And it places more and more doubt on advertising – we know it does something but it continues to be difficult to show what exactly.  As soon as someone comes up with a behavioural form of tracking which accounts for all channels then conventional ad measurement may collapse quite quickly. Dunn Humby's tracking system fused with clubcard data could be one such killer application. After all if you know what people have bought its a lot easier to sort out the data about what advertising they remember seeing and what they don't. 

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