The purpose of marketing is to fulfil the business objectives of an organization. It therefore follows that:

  1. Marketing expenses should result from marketing plans, which should be focussed on accomplishing the firm’s business objectives; and
  2. Before creating a marketing budget (and before that, a marketing plan), you need to know the firm’s business objectives.

For many firms, marketing budgets do not logically flow from plans, and plans do not logically flow from a firm’s business goals. In such firms, marketing budgets are often a compilation of various “asks” from throughout an organization, none of it connected or strategic.  In such firms, it’s rare for there to be accountability for results tied to the budget.  Any accountability that exists is more of an accounting exercise: have you under spent or over spent.  Under spending is seen as positive; overspending is seen as negative (whereas in a strong marketing culture, under spending could be seen as a lack of commitment to actively pursuing business objectives).

The simple tabulation of budget requests is allowed to occur because it’s relatively easy, and it’s been done for many years. Change is hard – not simply because of the process adjustments change requires, but also because of the corresponding emotional adjustments required.  Who wants to be the one who tells Paul that he can’t have $8,000 to go to London in the spring just because he’s always done so?

Think about it this way: your personal income is spent on a number of key items. Some are pure expenses: food, the car, clothing, entertainment.  And some are investments: the mortgage on property you own, certain types of insurance, your RRSP.  When dealing with expenses, we consider our options carefully, negotiate assertively, and monitor expenditures carefully. Before making our personal investments we seek good advice, strong data of past results, trend predictions, etc.

At work, we deal with expenses in much the same manner.  But when it comes to investments, it’s often shocking how little strategy or checks and balances are put into place.   It’s time to put discipline back into our marketing budget process. Here’s how:

  1. Start with the business objectives of the firm and build a marketing plan (or plans if by segment) that seek to work toward accomplishment of those objectives.
  2. Consider additional goals that might not be part of the firm’s business objectives that year, but are necessary for the efficiency and integrity of the firm’s overall marketing.  An example would be upgrades in CRM technology, establishment of a new marketing position if needed (i.e. event manager), any advertising or directory listings required, etc.
  3. Create a marketing plan that is focussed on points 1 & 2.
  4. Within the plan, identify specific tactics to achieve each goal.  A specific tactic clearly identifies a task to be done, by whom, and by when.  Drill down until your tactics identify specific tasks.
  5. For each task, identify if funding is required and if so, how much.  Do not fund goals; fund tactics.  A plan should not have a $15,000 funding request beside a goal that expresses a desire to get more work with real estate agents.  Funding should not be at the level of what we wish to achieve, but rather, at the level of how we wish to achieve it.  This ensures that a. we’ve thought about how we’re going to achieve that goal and delivered enough tactics to reasonably get there; and b. we’ve taken the time to figure out how much money we really need, so that the item will be actionable when the time comes.
  6. Create an addendum to your plan consisting of all line items requiring a budget, and total the funding amounts at the bottom of the page.  There is your budget request.

I want to reiterate that the driving force here is the plan.  Many – perhaps most – items in a plan will not have a funding request attached to them.  And a plan is not an excuse for budget.  A budget is simply a consequence of a plan.

During the approval process the budget might be reduced. At that time, the approval body can decide to comment on which part of the plan to remove, or leave that up to the plan architects.  However it will be understood that with less funding, the full plan cannot be accommodated.

The plan architects should review the plan and budget on a monthly basis to ensure all are on-track. On a quarterly basis, it is a good practice for the plan architects to prepare a report to the firm executive with a status of the plan, budget and revenues to date.

Paul may or may not go to London next year under this new process. But if he does, it will be because the probable outcome of the trip directly relates to a business goal of the firm; the firm will know precisely what meetings and other activities Paul will be doing over there and for what purpose; expenses for the trip will have been budgeted for and held to; and any outcomes will be tracked back to the trip.  And who knows?  Perhaps the firm will discover that Paul should be going to London twice a year from now on.