Marketing expenditure and events
Our World | On 06, Jul 2009
The focus always seems to be on budget and what can be achieved within the budget. Surely any marketing expenditure, whether within budget or over budget should be made based on a targeted return. I sometimes think that companies who zero budgets and then make managers build a case to spend money based on the potential ROI have got it dead right.
Of course not everything can always be measured in £ROI, particularly if the issues to be tackled are brand awareness, staff motivation, culture etc but nevertheless there must be objectives and the budget should reflect the value of achieving those objectives to the company. This is not rocket science, it’s just plain old common sense – something which is sometimes forgotten. If all business expenditure were based on a justification principal, there might just be no such thing as “can’t afford it”. If you know it’s going to produce a profitable return then it’s worth the investment. Unfortunately too many marketing departments sit down and decide how to allocate their budget, knowing that they have to spend it to ensure it isn’t cut for next year. Most, if not all, put together a great plan creating a balance between above and below the line activity properly profiled and researched. It’s not that their doing a bad job, it’s just where they are told to start from. Instead of the board saying here’s your £500k to spend this year, can you submit a plan to show what your doing, the board should be saying to the marketing team, this is what we want you to achieve, go away and tell us how your going to do it and what it’s going to cost. People say that this would waste time as the board might not sanction this level of spend so they give them a budget to use as a guideline – obvious really, but of course you’re right back at square one. How do we spend the budget and what can we afford to do? Fixed budgets inherently create management by short term objectives.
This all sounds quite simple, so why don’t more companies do it? The key flaw in the argument is based on a known return. Currently the only way of guaranteeing a fixed return on an investment is to put it in the building society – companies are supposed to deliver better returns to their share holders so there has to be an element of risk. How do you know what will work and how effective will it be. A fantastic Christmas party at let’s say £100 a head might boost morale by 10%, but would a £120 party increase it by 15% or would you still get 10% if you only spent £50. I could show you case studies to prove all of the above!
So if we can’t guarantee a fixed return, what can we do? We can measure the impact by analysing sales, morale, market share etc pre and post the event to gauge the impact. After the horse has bolted? Potentially, but incredibly powerful profiling and of course if you talk to an agency who have been doing this for 20 years, they should have a pretty good idea from previous experience about what works and what the probable impact is. Not the answer you were looking for, then maybe you should read the Da Vinci Code, it tells you where the other Holy Grail is!