By Mayer Becker
Principal Consultant
Budgeting. It’s that time of year. Marketing leaders everywhere are undergoing the often painful process of allocation. They’re giving the left side of their brains a workout to determine just how many dollars it will take for them to meet their revenue-generating activity goals.
Enabling this ability is what Zee Jay does for our clients as a matter of course. It’s a part of the strategic approach we take to the implementation and integration work we perform for the enterprise marketing organizations and in-house agencies we serve.
Getting marketing up and running using a work management program is the first step. After launch, our team makes sure core operations are stabilized, and we continue to monitor and adjust. Then we add functionality. Depending on specific needs, we integrate existing applications or introduce new ones, like DAM, CRM, Marketing Automation … and Marketing Performance Management (MPM) solutions, including Allocadia.
At Zee Jay, our consultants view marketing as a supply chain of ideas. The chain starts with program/campaign development and runs through response from the target audience. At each stage of the marketing supply chain, costs are incurred. These costs need to be estimated up front, along with desired results.
To understand marketing budget management, the principles of cost accounting come into play. Meant for those inside the organization responsible for making critical decisions, cost accounting projects and captures the direct costs, direct labor costs, and overhead costs involved in operating the marketing supply chain that in turn helps the enterprise achieve growth goals.
Costs are calculated for each production/marketing channel. For example, social media, demand generation, advertising, events, content, etc. These channels are used to generate the experiences needed to drive lead generation or brand awareness.
There are three categories of spend for each of the above channels:
1. Direct costs, i.e. agency fees, media costs, third-party costs, printing, postage and technology.
2. Direct labor, i.e. fully loaded personnel costs for people directly assigned to the production/marketing channel.
3. Overhead, i.e. a portion of centralized costs allocated to marketing, including:
a. Central services (creative services, channel and executive management, technologies such as the company website, localization services, memberships and subscriptions).
b. Regional services (similar to the above, but only at a regional level, such as for services provided by a regional marketing leader).
c. Production/marketing channel (similar to the above, but only for the specific channel, such as cost for Eloqua for demand generation).
Once the expenses explained above are collected, the number is divided by the total number of transactions that occurred in the prior 12 months. This results in a per unit cost that is used for planning future campaigns.
Zee Jay recommends its clients take steps to keep things simple. For example, adopting a percentage split of overhead instead of a massively complex algorithm saves effort up front, and over time.
Zee Jay’s experience helping marketing leaders benefit from budget management and planning capabilities is four-fold:
1. Identify and validate costs.
2. Discuss and align on allocation methodologies, and gain management approval.
3. Periodically review all costs, monthly at first, then quarterly after the selected solution stabilizes.
4. Review and update overhead allocations at least annually—three months before the start of the new fiscal year.
Striking the balance between spend and growth is key. Marketing leaders need visibility into both sides of the equation, giving them the ability to adjust their budgets quickly when circumstances require. Being able to plan, manage cost, and measure impact is the best way to accelerate marketing performance.
