Tuesday, April 28, 2009

Tracking Marketing Budgets - Use it or Lose It?

There are many ways to track the success of marketing's planning process. One metric that is often mentioned by marketing operations teams is the percent variance of actual vs. budgeted marketing investment. One of a few good metrics to track if your processes and systems have matured to the point of being able to do this. . . even if you use Excel today. What variance is acceptable? I've seen targets range from 2 to 10% variance. 2-3% variance of actual expense vs. budget would be considered "very good" for a 1B+ revenue company.

Assuming that marketing budget allocation is optimized throughout the year, it makes sense that managers should motivate their staff to spend all monies that they are allocated; including ensuring that certain percentages of budget are targeted to specific segments, campaigns, etc. This leads to a "use it or lose it" mentality if not an official guideline. The problem with this strategy (or culture) is that market shifts requiring budget changes may occur at a faster pace than the company's ability to react to these changes by reallocating budgets. The result is that market opportunities may be missed as a result of insufficient distribution of funds to where they're needed most.

Today, few companies encourage different business units, countries or functions to reallocate budgets amongst each other based upon changes in demand, priorities, etc. In fact many companies penalize marketers for not being "on budget" regardless of the circumstances. Will we or should we ever encourage our marketing teams to increase the transparency of their budgets or to even share budgets amongst each other based upon the needs of the market? And who will provide the objective market insight to help these teams best optimize budgets from a more macro perspective? One thing is for sure -- the increased optimization of marketing planning processes coupled with greater adoption of marketing automation will improve marketers' ability to react appropriately to these challenges and reduce reaction times to changes in the company and/or the market.


  1. Pretty often the problem of an adequate tracking of marketing budgets is part of an overall inconsistent and fragmented marketing planning process. In this vein, the marketing plans are only inadequately synchronized with business planning as a whole; too limited to the planning of strategies and measures, while neglecting content-based planning at a topic level and program level or lack accurate KPIs agreed between marketing and other affected company areas (such as sales and distribution, international branches, etc.).
    The result: also the budget tracking and potential budget shifts over time is pretty problematic - how should one decide if it makes sense to shift budget from one program or campaign to another if the logic - based upon marketing strategy - being cascaded from the corporate strategy downwards is not clear. The prerequisite for a proper budget management and reallocation (as well as cuts in these weird economic times) is (in an ideal case) a cascaded marketing planning from target segments/brands to program, campaign and tactical/activity levels always with proper budgets and KPIs behind.

  2. Thanks for the comments Ralf.

    Here's a prior post about planning from a best practice study we did in the Fall: (full study available for CMO Advisory Service clients or at www.idc.com (Feb. '09, doc. #216134))