My hot take on what happens to a brand with zero-based budgeting

Posted on Posted in How to Guide for Marketers

Zero-based budgeting starts off each new year assuming all brand budgets are zero and the brand must prove their case for why it should earn its new budget level. It’s a tool used recently by Kraft Heinz. While zero-based budgeting might make sense in theory, the risk is you become so fixated on ROI and certainty that you choose the short-term sure-thing that delivers a transaction. You begin to fear the unexpected or the unpredictable work that has the chance to touch the hearts of consumers. This logic works for all marketing budgets, but I’ll focus mainly on media budgets here.

Marketing research suggests the right balance between brand-building and transactional advertising should be a 60/40 split that favors building your brand first. Let me use the analogy of the jar we keep at our front door, where we put our loose coins. Brand building is like adding a few coins for when you need it, whereas transactional ads are like taking a few coins from the jar. If all you do is trigger sales transactions, eventually you will have no coins left in the jar. Same for your brand. If all you do is keep telling consumers to buy your brand now, eventually they will forget why they should ever buy your brand.

The best brand-building takes a chance on what greatness that creates a pent-up desire.

Greatness should tempt the consumer’s soul and hope we make them feel “that’s exactly how I feel, I thought I was the only one who felt that way.” If I had a choice between the certainty of Ok and the chance at greatness, I’d always push for greatness. We should never settle. 

The process of zero-based budgeting forces us to our comfort zone where we’ll choose certainty. I’d rather us uncomfortable in the hope we find the unexpected and unexplainable work consumers will love.

zero based budgeting

 

What is the size of your brand’s media budget?

Balance your media choices by looking at media efficiency, quality, impact, and fit with the brand. The efficiency of the 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, as you need to balance it with the quality of the media choices.

I always set aside about 10 percent of my media budget to create a high impact to generate early attention to a new campaign or product innovation.

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

The reasons you would strategically invest in 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 to be able to drive 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.

Six factors to help guide you on the size of your media investment:

  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.

Blowfish Plan

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 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. Try various media spend levels to gain the necessary consumer response data before you make a full investment.

Selective Plan

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.

Mass Plan

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.

Production Costs versus Media

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.

 

To read about where zero based budgeting has been used the most, read this story about Kraft-Heinz.

Brand Managers are rejoicing at the demise of Kraft-Heinz

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

Beloved Brands Book

I wrote my book, Beloved Brands, as the playbook for how to build a brand your consumers will love.

Beloved Brands has everything you need to run your brand. You will learn how to think strategically, define your brand with a positioning statement and a brand idea, write a marketing plan everyone can follow, inspire smart and creative marketing execution and analyze the performance of your brand through a deep-dive business review.

Available on Amazon, Apple Books or Kobo

We have the paperback and e-book version on Amazon. Click here to order: https://lnkd.in/eF-mYPe  

We are also on Apple Books, which you can click here to order: https://lnkd.in/e6UFisF

If you use Kobo, you can find Beloved Brands in over 30 markets using this link: https://lnkd.in/g7SzEh4

 

At Beloved Brands, we help build brands that consumers love and we make brand leaders smarter.

🎈Help create a brand positioning statement that motivates consumers to buy, and gives your brand an ownable competitive advantage.

🎈 Build a marketing plan that forces smart focused decisions to help organize, steer, and inspire your team towards higher growth

🎈Align your marketing execution behind a brand idea that tightens our bond with consumers and moves them through their buying journey

🎈Use a deep-dive 360-degree assessment of your brand’s performance to trigger richer thinking before you write your brand plan

🎈Our brand training program will help realize the full potential of your brand leaders, so they are ready to grow your brand.

 

To learn more about our coaching, click on this link: Beloved Brands Strategic Coaching

To learn more about our training programs, click on this link: Beloved Brands Training

About Graham Robertson

As the founder of Beloved Brands, Graham has been an advisor to the NFL Players Association, Shell, Reebok, Acura, Jack Links, Miller beer, Earls restaurants and Pfizer. He’s helped train some of the best marketing teams on strategy, brand positioning, brand plans, and advertising.Graham Robertson

In his marketing career, Graham led some of the world’s most beloved brands at Johnson and Johnson, Coke, General Mills, and Pfizer, rising up to VP Marketing. He has won numerous awards including Marketing Magazine’s “Marketer of the Year”, Businessweek’s best new product award and four Effie advertising awards. His book, Beloved Brands, is the playbook for how to build a brand consumers will love.

We live by the beliefs that guide us

We believe the best answers are inside you already. My role is to get those answers out, and make your answers even smarter. I never give you the answer. I will ask more questions that challenge your answers to be better.

We believe investing in your people pays off. With my training program, I know I will make your people smarter, so they make the right choices, and produce exceptional work that will lead to higher brand growth.

You have my personal promise to help you solve your brand building challenges. Above all, I will give you new thinking, so you can unlock future growth for your brand.

If you need our help, email me at graham@beloved-brands.com or call me at 416 885 3911

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