Making News

(July 10, 2007)

IDEAS TO REMODEL YOUR BUDGETING STRATEGIES

By Shannon K. Benton

A dynamic marketing and advertising program relies on more than just brilliant ideas. Without a clear, consistent budgeting philosophy and process, a fantastic program can turn from greatness to garbage.

With more than 20 years in the advertising and marketing business, Hillary Zody, Director of Operations for K&A, has seen the best and worst in clients’ budgeting. Her core beliefs include proper budgeting (typically 10 percent of gross sales), careful implementation, and close monitoring of annual allocated budgets results in avoiding crisis, achieving goals and, ultimately, building credibility within your team.  

1. Be aware of causes for increases. “Always review the prior year’s budget for increase factors,” comments Zody. “Remember that you must be in line with market influences that can affect your numbers such as an industry slump, consumer trends and geographic market fluctuations. These factors can dictate if you should divert a greater portion of the overall budget to marketing efforts.” 

2. New products require special budgets. New product launches tend to require a greater spending capacity and allocated costs in order to educate the market, promote need and raise the motivation to purchase. Zody suggests having a segregated marketing budget for new product launch activities that differs from the general marketing budget. Moreover, sales hours should be outlined and tracked against that promotional activity. 

3. Realism trumps grandiosity. “Be realistic with your budget requests. If you overstate your budget requirements, chances are you will end up with less next year. This is where detail and accuracy become vitally important. If you are too conservative and understate your budget, you run the risk of not having adequate funds to execute all of the necessary communication programs for the fiscal year,” adds Zody. Tracking information (see item #1) improves your budget targeting.  

4. Prepare for rainy days and strategic zig-zags. Setting aside contingency funds protects the general marketing budget from unexpected disasters. For example, the current housing construction decline means companies must shift funds and tactics to adjust their focus or add to performing market segments. Contingency funds also protect a company from in-house issues, such as products recalls or defects that require massive replacements or reimbursements. And contingency funds are typically not wasted: if unspent, they can be rolled into the next year’s budget or used to take advantage of new opportunities prior to year end.  

5. Require reconciliations. Require that your marketing agency performs regular budget reconciliations in order for your company to stay on top of spending and the associated results.  (Kleber & Associates does this for clients every fiscal quarter.) Budget reconciliations ensure that if any errors can be corrected quickly.  

6. Stand firm. Zody reminds clients that they have to be prepared to fight for a substantial marketing budget. Company executives may be more concerned with spending dollars on operations, sales and distribution, but remind them of a simple fact: without sufficient budget to market the product and get the word out to customers and industry influencers, sales will suffer. People won’t buy a product if they don’t know it exists.


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