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In this edition:

• Column: The Strategic Importance of Knowing Your Numbers

• Inspiration: The Economist’s Timeless “White Out of Red” Campaign

• Timeless Wisdom: Einstein on Mastery

Column: The Strategic Importance of Knowing Your Numbers

One of the most critical steps in strategic planning is landing on a budget that will help you achieve the objectives you’ve set out to go after.

Far too often, this most dreaded step by brand managers and strategists becomes an afterthought due to their misconstrued assumption that they have little control over it.

But today I’ll show you that marketing budgets can be influenced with the right approach.

But first, we need to understand how to build them.

Budget Planning Deconstructed

Contrary to what most marketers think, budget planning isn’t rocket science.

It’s a fantastic exercise to pressure test your plans and validate whether or not what you’re putting forth is feasible and viable.

It’s the ultimate acid test of any plan — and a slide that clients most care about.

There are two well-established approaches to devise a marketing budget: the triple cooked approach and the zero-based approach.

Triple Cooked Approach

1. Determine your industry’s benchmark for share of revenues that go toward marketing spend;

2. Allocate 60% of it to long-term brand building initiatives, and the remainder to short-term activations;

3. Use brand tracking to measure the success of the 60%, and ROI metrics to measure to success of the 40%.

This method is the one that most small and medium sized business resort to (when they actually set marketing budgets in the first place).

Depending on the industry you operate in, you can easily find benchmarks of what share of revenues typically get allocated to marketing initiatives.

Countless surveys have been done on this, and each yields a slightly different number depending on market conditions, but the below from Statista’s CMO Survey in the U.S. conducted in 2023 gives you a good starting point:

As you can see, not every industry is created equal, and the “sexier” industries typically have more competition and therefore require more marketing investment to break though.

Once you land on your company’s number, next you need to move 60% of that amount into long-term initiatives such as brand-building campaigns, whereas the remaining 40% goes to short-term plays such as lead-gen.

This breakdown is a safe assumption to go off of because giants of our field such as Les Binet and Peter Field have done extensive statistical analyses of high performing campaigns from the UK and around the world and noticed that the brand-building/lead-gen ratio begins to taper off in effectiveness at around the 60:40 mark.

Several others have done other studies independently, and they’ve landed on similar numbers. However, factors such as a company’s growth stage can have a slight impact on this ratio (which could fluctuate from 50:50 to 70:30).

Now, when I say brand-building, I mean:

• Strengthening mental associations between your brand and key buying occasions in the minds of customers

• Influencing future sales by gaining and sustaining share of mind

• Driving broad reach of messaging through mass media (TV, radio, OOH, etc.)

• Measuring results in the long-term (1-3 years)

• Creating communications that are emotive and memorable

Meanwhile, short-term activations mean:

• Exploiting those mental associations built over time

• Communicating with the small share of customers that are in-market to buy now

• Buying tightly targeted media to reach customers at the right place and the right time (paid search, email, social media, direct mail, etc.)

• Measuring results in the short-term (1-6 months)

• Creating messaging that’s rational and persuasive

Once you’ve done the above, you’re now in a good place to at least justify the majority of your marketing budget (which oftentimes falls on advertising activities). If the task at hand involves more than marketing communications (such as product innovation, pricing comms, and distribution decisions) then this budget will look a bit different (the next method addresses this potential problem).

Zero-Based Approach

1. Start from zero amount;

2. Flesh out your strategy and marketing objectives for the next 12 months;

3. Calculate the incremental value that these objectives will yield to your business if achieved;

4. Brief media and creative agencies to calculate estimated spend to reach those incremental targets.

This method is a lot more sophisticated and oftentimes used by the top marketing organizations in the world because it is forward-looking and results-driven.

In this approach you start your budget from zero.

First, you need to flesh out your marketing strategy. I’ve written extensively about this on my newsletter and broken down each phase of the strategic planning process in reasonable detail. But in summary, you need to:

• Conduct marketing research;

• Segment your market;

• Determine which audiences you’ll be willing to overinvest in;

• Flesh out your positioning;

• Understand how you’re performing at each stage of your funnel, and;

• Land on 3-5 marketing objectives that will drive the business objectives forward.

Once you have your marketing objectives in place you can then calculate the incremental value that reaching them will likely yield for your business.

This isn’t an easy exercise and you’ll like need to get support from your finance and sales departments to understand the historical performance of past initiatives.

Once you have a clear grasp of how much you need to grow in incremental sales the following year, you then brief your creative and media agencies with your objectives for the next 12 months.

These fine folks will work away day and night to land on a relatively confident answer of how much you’ll need to spend in media to be able to drive the lift in sales and brand metrics desired. This recommendation comes from years of experience running brand and lead-gen campaigns and access to amazing tools that enable them to model out and compare competitor historical relative spend to then be able to infer where dollars should be allocated to in order to yield x amount of business effects.

Once your media budget is locked and loaded, then it is recommended that for net-new brand-building creative to allocate around 30-40% of your total brand-building budget to ideation/production in Year 1, and the remainder of it to the recommended media spend.

Whereas the split between lead-gen media buys and lead-gen creative can straddle closer to 80:20 (media:creative).

Sounds awfully complicated, because it is. But folks that have been doing this for years can easily help you get there in 2-3 months’ time.

Securing The Bag

Landing on a budget is arguably the easy part of the process.

The harder portion is convincing your organization to then give you the money.

But here’s the thing: if you’ve done the above and have the receipts to show for, your executive leadership team will be much more inclined to give you the money than some other department or brand manager who hasn’t done their due diligence.

However, if you do end up getting less than you asked for, make sure to re-run the calculations for your objectives because there’s no free lunch in our business.

If you’re being asked to do the same with less, something’s got to give. And this will typically be one or a combination of the following:

• Reducing your target audience’s sizes;

• Reducing the incremental value you’ll be able to generate.

Budget, audiences and targets are all interconnected like a triangle. If one moves, the other two move as well.

And that’s the beauty of proper budget planning — when done properly marketers can operate with confidence and focus on executing with excellence.

Budgets are the first place strategists go to understand a company's priorities and their level of understanding of how marketing actually works.

Inspiration: The Economist’s Timeless “White Out of Red” Campaign

Back in 1988, most print publications such as The Guardian, the Financial Times, the Independent, and others were losing readership at unprecedented rates.

At that time, The Economist chose to zig when others were zagging.

With a meagre £1 million budget, which for large companies looking to run massive brand campaigns, this is peanuts and would have required an extraordinary breakthrough to reach the campaign’s objectives, AMV BBDO uncovered a piercingly resonant insight:

“You don't want to be seen on the tube reading the Mail but you'd be rather pleased if you were spotted with a copy of The Economist under your arm.” — AMV BBDO Qualitative Research, 1988

Meaning, there was nothing new about the weekly magazine that warranted building communications around, however by dramatizing the emotional benefit of reading The Economist they landed on one of the most awarded campaigns ever.

And to join this exclusive club of successful people, it wasn’t enough just to advertise to these so-called successful businesspeople. What makes an exclusive club exclusive is as much defined by who’s a part of it as it is by who’s not.

Therefore, they bought OOH at train stations and wrote some of the most iconic copy every written.

Since then, they have updated this campaign several times and used it continuously for over 15 years, growing its circulation by +64% from 1988 to 2001, while competitors experienced double digits declines.

Timeless Wisdom: Einstein on Mastery

“If you can't explain it to a six year old, you don't understand it yourself.” — Albert Einstein

More of PPA:

• 🤝 Connect with Pedro on LinkedIn and/or X

• 💌 In case you missed it:

  • What Marketers Get Wrong About Social Media

  • Fostering A Culture Of Creativity In Efficient Times

  • Strategic Thinkers Are Playing A Different Game

PPA 

Pedro Porto Alegre is a seasoned marketing professional with in-depth experience building brand and communications strategies for top-tier B2C and B2B organizations across Canada. His repertoire extends from crafting and executing integrated multi-media brand marketing campaigns to the commercialization of performance-driven innovations for multimillion-dollar and nascent brands alike.