Zero-Based Outcome-Orientated Budgeting
Literally Brilliant can help you move from a marketing expense budget acquittal model to a zero-based outcome-orientated marketing investment model for budgeting.
Marketing return on investment has always been an issue for companies regardless of size. Company Directors and Chief Financial Officers struggle to understand the return they get from marketing expenditure. They know they need to spend money on marketing but they don’t know how to keep the Chief Marketing Officer accountable for how the marketing budget is discharged.
This situation is further complicated by the fact that many organisations offering marketing services to these businesses benefit from the magnitude of the marketing spend. Quite simply, the more they spend on marketing, the more money these companies make. There is no incentive to demonstrate how marketing budgets can be reduced.
In smaller businesses, business owners know that they need to spend money on marketing but, when every dollar is vital for running the business, how much should they allocate to the marketing budget?
We believe that the answer to this question is zero. The starting point should always be a marketing budget of zero.
Marketing budgets should address marketing problems that need to be solved or objectives that need to be achieved. This is known as an outcome focus. If the company understands the problem that needs to be solved or the outcome that needs to be achieved then an initiative can be devised to achieve that outcome. Budgets can therefore be developed as initiatives are costed to achieve the desired outcomes. The budget then becomes a series of targeted initiatives. If the budget total exceeds cash flow capacity, then the programme of marketing initiatives can be prioritised over time to identify the initiatives that can be pushed out so that the marketing programme can fit with cash flow constraints.
Rather than trying to measure a consolidated return on investment for total marketing spend, marketing spend can be evaluated on an initiative-by-initiative basis. If a marketing investment was successful in achieving the desired outcome, then the investment in that initiative is considered successful. If it doesn’t achieve the desired outcome, then that investment is not considered successful. Unsuccessful investments can be further analysed to determine if execution of the initiative played a role in underperformance. This analysis informs marketing initiatives of the future, helping to avoid repeating errors of the past.
Literally Brilliant can help you to identify key marketing outcomes that need to be addressed in your business, help propose and cost initiatives to achieve those outcomes, and then formulate a programme of marketing initiatives that match cash flow objectives of your company. We will help guide you through implementation through ongoing marketing mentoring and then help you to appraise performance of each initiative against stated desired outcome to give a holistic evaluation of your marketing investment.