How to figure out the size of your brand’s media budget

Posted on Posted in How to Guide for Marketers

media planBalance your media budget by looking at media efficiency, quality, impact, and fit with the brand. The efficiency of media math starts with reach and frequency. Reach is the number or percentage of different households or people exposed to the ad at least once, over a specific period. Frequency is the number of times that household or person will be exposed to the ad within a particular period. Be careful to avoid relying on efficiency alone. You need to balance efficiency with the quality of the media choices. I always set aside about 10 percent of my media budget to create a high impact. I may want to generate early attention to a new campaign or product innovation.

Use your strategic thinking to understand how much you can invest. Focus your limited resources on a distinct opportunity point you have identified based on a change in the market.

The reasons you would strategically invest in the media include:

  • Discovery of a new brand message you know will motivate consumers to buy your brand.
  • Identified change in consumer needs, motivations, or behaviors, which will benefit your brand.
  • Shift the competitive dynamic, with an opportunity to make gains or a necessity to defend.
  • Continue to fuel brand growth with a window to drive brand profits.
  • New distribution channel you can use to move consumers through before competitors do.
  • The launch of a breakthrough product innovation offering a competitive advantage to your brand.

To make the media investment pay off, you need a performance result that pays back with an increase in brand power you can use in the future or an immediate increase in brand profit.

Here are six factors to help guide you on the size of your media budget:

  1. Brand profit situation, looking at margin rates and the size of the business.
  2. Past media ROI projected forward as a forecast of the potential.
  3. Impact of your current creative advertising tracking results
  4. Future investment opportunities or future threats to battle.
  5. The degree of competitive pressures in the marketplace and their levels of media spend.
  6. The comparative opportunity cost for investing elsewhere.

Control the marketing and selling costs

Marketers are protective of marketing budgets. As the leader, they usually want as much money as possible to carry out the activities on their priority list. The strategic brand leader should act as the owner/CEO by using budgets to manage the profit and not act like a subject-matter expert trying to protect their turf.   

  • Marketing cost decrease: Many times companies look at cost-cutting to counter short-term changes happening within other parts the P&L (price, volume or COGs). However, many of the best-run brands keep the investment strong, aligning with the longer-term strategy instead of a short-term situational need.
  • Marketing cost increase: Used when there is an opportunity to gain share against a competitor or as a defensive position trying to hold share. The brand should see an opportunity where significant revenue gains can cover off the lower profit ratios.

media budgets

Always bring an ROI mindset to your brand’s marketing budget. In the example, the investment of $1.5 million generates an incremental sales of $5 million. After subtracting the cost of goods and the marketing investment, your brand generates $500,000 in incremental profit. To calculate the ROI, take the profit and divide it by the investment. In this example, the ROI is 33%; if it holds, the investment will take three years to pay back.

Media budget levels

media budgetsThere is a term called zero-based marketing budgeting, which starts off each new year assuming all brand budgets are zero and the brand must prove their case to earn its budget level. While it makes perfect sense in theory, with 20 years of experience with marketing budgets, this is not an easy concept to implement. One risk I see is that a zero-based budget could lead to short-term and highly transactional advertising. 

A brand needs to balance brand-building activities, which add to the long-term connection with consumers with transactional call-to-action messaging intended to trigger purchases. For instance, if you tell me “Buy two, get one free” for five straight years, your consumers will eventually forget why they should buy your product at all, let alone two. There is a degree of uncertainty in making investment decisions. Get comfortable with your instincts to balance the degree of ambiguity to make the smart decision.

Blowfish media budget

When you feel the risk/reward of the media investment is unknown, it might be wise to start with a smaller investment level. Use what I call a “blowfish” media plan. Among those consumers you target, you appear to be a large brand. Pick a tight target market with a limited media choice or geographic focus to replicate how a more substantial media investment would appear. When the unknown is very high, get smarter by using test markets with various media spend levels to gain the necessary consumer response data before you make a full investment.

Medium level media budget

You should use a medium investment level when your brand faces only a couple of the media investment factors listed above, yet your brand has the size and margin to invest. With this level of spend, you should use a selective media plan by making smart choices of the target market who you know will respond to those media choices proven to pay back.

High-level media budget

You should use a high investment level when your brand faces many of the investment factors, including profitable brand, reliable messaging, product innovation, and an intensely competitive situation. You can afford to take a mass approach. However, just because you have a lot of money does not mean you should waste it. I still recommend using one lead media choice and then use support media to supplement. Figure out your lead paid media and your lead earned media to provide focus and alignment with your strategy.

Watch out for escalating production costs

One important consideration with any investment plan is to balance media spending and the creative production costs. Your brand’s working dollars are those investments that directly reach and influence the consumer. You can directly see the impact and measure the payback. Media is considered working dollars. This costing method is one of the reasons you do not want to spread your brand across too many media choices. If most of your brand’s advertising budget is spent making TV ads, billboards, and radio ads or paying for talent in the ads, then you will not have enough spending left to reach the consumer.

 

You will find this type of thinking in my book, Beloved Brands.

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