Planning for 2015 – Why Budgets Don’t Matter

I am being a little tongue in cheek here, but the focus on “budgets” is very overblown and somewhat destructive to the mission of the marketing group. Why?

Most of marketing success is not budget related – you can’t buy your way to success
If you align budgets with the people accountable for success, only a few people actually get a budget
Its hard to put money to work effectively. Finding programs that work is more an issue than budget availability
Getting a budget provides people an entitlement to spend it
Not getting a budget provides reasons for people not to accomplish tasks for reasons that have nothing to do with budgets

Old school marketing was all about budgets. The belief was that the more you spent, the more revenue you generated. That is just not the case today. True, there are some marketing programs where if you are lucky enough, you can show a direct link between program spend and revenue. And you can spend almost limitless money and get the same yields. But in most cases, even the best programs have limits to how much money can be effectively put to work. Pay per click, linked in advertising, even physical trade shows have upward limits on:

Number of available impressions
Number of people in the network that match your target profile
Number of people who attend an event

Hence the focus on budgets as a way to marketing success is just not as tight as most of us would like to think. Other factors drive the success of the efforts:

Organic traffic through great content (maybe procured through spending, maybe not)
Product reputation in the market
Influencer mentions
Being part of a growing and active customer or prospect community
the ability to track and determine what is working or not across all your marketing programs and efforts

So the budgeting trick is to:

Figure out how much program dollars can be effectively put to work for each program area
Determine the point of diminishing return
Find a new program when you hit the point of diminishing return

To support these efforts, the members of my team responsible for success in each of the four markets we compete in don’t have budgets. When they want to run a program, they ask for money, I make sure there is money left for the quarter from a financial perspective, and they spend it. I ask a couple of questions on their expected yield, and off they go.

The result has been no one but me and finance, knows the budget targets for the year or quarter. Which is fine. I have yet to find a program that we can’t run to the point of diminishing return. Conversely, the team doesn’t make giant commitments to programs that ultimately don’t pan out. When you don’t have a budget, you don’t feel entitled to spend it. You ask for money to be put to work, you make sure it works, then you ask for more. Of course there are some fixed costs to the marketing team that I budget. These include systems costs, agency fees, analyst fees. But most of our marketing spend is not budgeted.

Now despite all this, we track our spending closely. We use Allocadia and I will write about this at a later date.

Not “budgeting” has resulted in the following behavior:

Small pilot programs to see if they work before major financial commitment
There is always money around to try new things
Consistent under spending of the marketing budget resulting in the savings dropping direct to bottom line of the company
Higher revenue per marketing dollar spent
Less time sitting in meetings rolling up budgets
Lower than industry average marketing spend to revenue

This all sounds counter intuitive and maybe it is. I just don’t like talking and worrying about budgets, I want the team focused on winning and getting new customers. Money is just one aspect.