How to Thrive in the Era of Zero-Based Budgeting

September 20, 2019 Ginna Hall

Today’s advertisers, large and small, operate in a complicated and fragmented environment. At the same time, the rise of zero-based budgeting means that many brands face an on-going need to prove the value of their marketing tactics. Testing is one key tool that meets both challenges.

Gathering Evidence

Over the last few years, there’s been an explosion in digital advertising. The growth in publishers, ad networks and platforms has made ad space more competitive and more confusing. Despite the growth in digital advertising, traditional marketing isn’t going away anytime soon.

Every stakeholder in this ecosystem needs evidence for what’s generating value, whether it’s a digital or traditional tactic. Without it, publishers can’t prove the value of their offerings. Advertisers are left guessing about what’s working and if their ads are reaching the best audiences.

In this complex landscape, successful brands may find themselves ripe for takeover by competitors or investment groups. They fend off acquisition by managing expenses, trimming costs, and staying lean. Acquired companies are forced to cut budgets and lay off staff to boost stock prices, using zero-based budgeting.

While most businesses plan a new budget based on the previous accounting period, zero-based budgeting requires executives to begin with a blank slate and justify every expense. An environment in which you need approval for every outlay can stifle innovation and creativity. But the upside—long-term growth and a positive balance sheet—can outweigh the downside.

Marketers are not immune. While most plan a new budget based on the old one, zero-based budgeting requires marketers to begin anew with a rationale for every ad and asset. Before launching a new campaign or diving into a new tactic, they must build a case for how it will benefit the business.

The Secret to Proving Your Value

Budget constraints and marketing complexity mean the need for accurate measurement has never been more pressing. When marketers can show that their efforts are generating positive ROI, they give leadership the ammunition to get funding for the rest of the year.

Marketers have a variety of solutions to measure their efforts. Common approaches such as marketing mix modeling and multi-touch attribution provide insight into marketing and advertising performance. They provide a glimpse of the big picture, but may not be the right tools for marketers who need to justify costs every step of the way.

With marketing mix modeling, you can see how each channel has performed historically and adjust your budget accordingly. With multi-touch attribution, you can see how a particular channel or tactic is working in-market.

The focus of these approaches is measurement across multiple campaigns and programs, either to determine where and how much to invest, or to optimize the creative or channels of campaigns in flight.

But so much of managing a business day-to-day is answering specific questions, or supporting targeted initiatives, such as: “Did our rebranding campaign work?” “Did the Back-to-School campaign make us money?” “Did our ads targeted at millennials actually get them into the store?”

Getting Answers

Short-term tests are the secret to answering these questions. A targeted test of a campaign, using actual credit and debit sales data, loyalty card data, or store sales data, can be a great strategy for deciding thumbs up or down. When you test something that’s new or small scale—specific ad copy, offer or local TV campaign—you can scale up if it does well or move on if it doesn’t.

Two common types of tests are a test and learn and post-mortem. The first tests a specific campaign tactic (offer, creative, message, etc.) in a region before rolling out nationally. The second shows the impact of a national campaign on your buyers to see what kind of lift in sales you achieved.

The requirements for a test are straightforward:

  1. Identify a control group of stores.
  2. Capture a list of consumers who were exposed to ads and who weren’t.
  3. Mark the beginning and ending dates of the campaign (ideally at least six weeks).
  4. Calculate the impact based on responses of exposed and unexposed consumers.

For marketing analysts, brand managers and channel managers, measuring lift provides powerful insights into the consumer segments and campaign elements that are driving the greatest response, so you can make smarter decisions going forward.

The Transformation of Marketing

Over the past decade, consumers transformed their lifestyles through omni-channel shopping, and now expect the same experience from every brand.

That expectation has propelled marketers to compete for consumer dollars differently. Pre-internet, marketers sought to capture consumers at the “First Moment of Truth.” Procter & Gamble described this as few seconds when a consumer first encounters a product on shelf and chooses it over a competitor’s offerings.

The buyer journey now begins well before a person sets foot in a store, when the consumer researches a product online prior to purchase. Google calls this decision-making moment the Zero Moment of Truth. This change has forced brands to shift conversion tactics from in-store promotions to upper funnel channels such as TV, online video and digital marketing.

Marketers in every industry have one common goal: Prove that marketing efforts help the company drive more revenue. You need to demonstrate that your tactics motivated buyers to take some action—visit your site, request a quote and/or plunk down their hard-earned money.

Measuring incremental lift through short-term tests of campaigns is a surefire way to demonstrate value. This gives you the confidence that you’re communicating with the right consumers at scale and delivering the profitable marketing ROI you need to thrive in the era of zero-based budgeting.

Learn More

To learn more about how we can add value, contact one of our solutions consultants today.

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