The importance of zero-based budgeting
Many people dread the annual budgeting cycle, crafting the annual operating plan (AOP) and designing programmes to spend the budget. But what if your budget was not guaranteed?
Zero-based budgeting (ZBB) is a method of budgeting which literally starts from zero. All expenditure has to be logged, justified and approved before boots hit the ground or e-mails fly.
Sounds easy, right? Well, not for all departments. If you are solely a cost centre with headcount, this might have minimal impact. If much of your budget is incremental to headcount, it might be quite a culture shock.
McKinsey , the global consulting and insight business, points out that a zero-based budget is much more than starting from zero. The cultural shift towards cost management means that unproductive cost or low marketing return on investment (MROI) are stripped out, leaving a leaner business with savings being taken to profit or invested in other areas (e.g. sales commission or new products) with higher returns.
What if you have no marketing budget or your marketing budget is cut?
Zero-based budgeting means it is a very real possibility for some marketing departments. Yes, you have your marketing team, but your spend has to be justified and every activity put through governance to seek approval. At best, this will slow down some marketing activity until marketers are familiar with the process. At worst, marketing campaigns and activity will grind to a halt because of a lack of data and an inability to demonstrate ROI.
Thinking about your marketing spend today, for how much of your expenditure can you reliably demonstrate return? Do you have experts in marketing science analysing data to produce KPIs, metrics and a marketing dashboard that you share with senior management? Can you articulate the ROI of each campaign to the CFO/FD, CEO or business owners? Can you link activities such as social media posts, e-mails and events to increased sales leads and conversion rate?
Why you need a marketing consultant focussed on ROI
Here at Think Beyond, the team of chartered marketers are focused on partnership, using the science of marketing to increase your marketing ROI. Operating in Wilmslow and Alderley Edge in Cheshire, Think Beyond work with business owners, CEOs and senior management teams to ensure marketing is at the heart of business strategy.
The CFO won’t really take away our marketing budget, will they?
Yes, they will. Accenture’s whitepaper , Getting Ahead by Cutting Back, recommends building cost structures based on what is needed now, not looking back at what you had before.
The rationale for creating a zero-based budget is compelling. Here are some of the reasons it has gained increased traction in the last few years:
- A volatile (Brexit?) and changing landscape (trade wars)
- Reducing complexity
- Defending from takeover threats
- Re-investing proceeds from cost saving exercises
- Detailed and transparent forecasts
ZBB is key to sustainable competitiveness and to embed cost savings for the long-term. With companies like McKinsey and Accenture driving adoption, departments like marketing may have to adapt quickly.
Is your marketing strategy and marketing goals aligned to business strategy?
Every business should have a marketing strategy, yet nearly one third of B2B businesses have no formal marketing plan and nearly one fifth believe their documented strategies are ineffective.
The marketing strategy is the marketing logic by which your marketing goals will be achieved. A fully-formed and properly conceived strategy will have a marketing plan that outlines the activities you will undertake, the cost and metrics used to evaluate their success. If you don’t have a marketing plan that works or do not have marketing at the boardroom table, the zero-based budgeting process could be a shock to marketing and have a detrimental effect on the organisation as a whole.
Think Beyond can get you ready for zero-based budgeting
The benefits of business consultation are well-documented and SMEs are reaching out to specialist consulting partners in greater numbers to find the expert support they need to accelerate their sales into orbit. We operate in Wilmslow and Alderley Edge in Cheshire with clients across the North West, including Lancashire, Merseyside, Yorkshire, Manchester, Derbyshire and beyond. Our chartered marketers work with business owners, CEOs and senior management teams including sales and marketing directors to help you get the most out of your marketing.
A Think Beyond marketing consultant can get your marketing working for you, cultivating your customer insight, increasing your sales and measuring your ROI.
For a free one-hour initial consultation with one of our experts on zero-based budgeting, marketing strategy and marketing budgets, call us on 01625 682110 or complete our easy contact form to request a call back.