The corporate world has always been characterized by its fast pace and volatile nature. As we slip from 2023 into 2024, the importance of having a great marketing strategy and a written plan cannot be over stressed.
A well-structured marketing communications plan starts with a budget. This provides workable guides for all marketing endeavors, dictating strategy, reach, impact, engagement, and ultimately, all marketing tactics.
This article dives deeper into various marcom budgeting methods and explains when one might be more appropriate than another.
Primary Budgeting Methods:
Top Down: Senior management sets the overall budget, which trickles down to individual departments.
- Advantage: Ensures that marketing spends align with company’s primary objectives and vision.
- When to Use: Especially useful for startups or companies going through restructuring where senior management has a very clear vision of the company’s trajectory.
Bottom Up: Each department drafts a budget based on its specific needs, which are then combined for the company-wide budget.
- Advantage: Often more detailed and tailored to departmental requirements, providing a ground-up view of needs.
- When to Use: Ideal for larger, well-established companies where departments have clear vision of their operations and future requirements.
Percentage of Last Year’s Sales: Budget is set as a percentage of the previous year’s sales.
- Advantage: Simplifies budgeting process, assuming conditions remain relatively consistent.
- When to Use: Best for industries with stable growth and few fluctuations.
Percentage of Projected Sales: Budget is determined based on forecasted sales for the upcoming year (may be called “advertising to sales” or A-to-S ratio):
- Advantage: More adaptable and forward-looking, accommodating for anticipated growth or changes.
- When to Use: Suitable for companies expecting significant growth, launching new products, or entering new markets.
Task-Oriented: Funds are allocated based on specific tasks or projects planned for the year.
- Advantage: Ensures each initiative has a defined budget, focusing on ROI for specific activities.
- When to Use: Best for companies with clear, defined marketing projects or campaigns in the upcoming period.
Zero-Based Budgeting: Every expense must be justified for each new period, starting from a “zero base.”
- Advantage: Encourages efficiency and scrutinizes all expenses, eliminating redundant or non-performing activities.
- When to Use: Ideal for companies looking to overhaul their marketing strategies or those in tight financial situations.
Competitive Parity: Budget is determined by analyzing competitor’s budget or industry standards.
- Advantage: Helps companies maintain competitive standing by aligning spends with industry norms.
- When to Use: Useful for industries with clear dominant players or when there’s a need to match the marketing power of competitors.
Selecting a budgeting method depends on your company’s size, industry, growth stage, product/service life cycle, and strategic objectives. For instance, startups might lean towards a top-down or task-oriented budget to ensure alignment with their growth objectives. In contrast, larger corporations might opt for bottom-up or zero-based budgeting to ensure efficiency and accountability at all levels.
The key is understanding your company’s needs, the market’s dynamics, and the financial landscape to develop a budget that drives growth and profitability.
Mid-Year Budget Adjustments:
We encourage our clients to reexamine their marcom budgets and the pace of their spending periodically throughout the year to proactively adjust for unanticipated mid-year learnings.
Regular reviews and corrections ensure that the budgeting tool remains sharp, adaptive, and aligned with the challenges and opportunities presented.
Reasons to Adjust Downward:
- Sales leads are coming in too fast and cannot be “sold through” on a timely basis. By reducing the marketing, leads would be reduced, allowing time for sales follow-up.
- Supply chain disruptions/lack of labor force. Unforeseen disruptions may impact product availability. Reduced inventory may necessitate cutting back on promotional activities, so timely customer delivery expectations can be met.
- Sales are pacing slower than anticipated. If sales aren’t meeting expectations, it might be necessary to reduce marketing expenditures to maintain profitability, although we recommend carefully considering if this adjustment simply leads sales downward with less support.
Reasons to Adjust Upward:
- Competitive advantage uncovered. When a rival faces issues, there might be a chance to capture a larger market share.
- New product/service innovation. If you develop a groundbreaking product or service mid-year, it may be worth investing more in marketing to lock in share and to maximize your timing advantage.
- Responding to competitor claims. If competitors are making claims that challenge your product’s position in the market, increased marketing spend may be necessary to counteract their messages.
A well-structured mar-com budget for 2024 is not just about allocation of funds. It’s a strategic tool that, when deployed effectively, can drive growth, profitability, innovation, and resilience in an ever-evolving market landscape.
Studio/D is a full-service marketing communications firm working with mid-market industrial and manufacturing clients, together with companies that support the manufacturing ecosystem. We’re a team of “makers” who simplify complex communication challenges with messaging that engages and drives results. Learn more about us at StudioD.agency, or call our president, Scott Dieckgraefe at 314-200-2630.