Marketing Spend, Budgeting and Forecasting Guide (free)

Forecasting, or better still zero-based budgeting, is a method of planning your marketing spend with
a clean slate at the beginning of the year and then monitoring performance regularly, rather than basing it on what has gone before. It is emerging as the model of choice for many firms, including Unilever and Diageo, as it allows marketing teams to think deeply about what will drive value in the year to come, instead of relying on assumptions – a risky approach in a rapidly changing market.

Despite the efficiency and flexibility offered by forecasting and zero-based budgeting, the research shows that there is still a large gap between those that do forecasting and those that are just being handed a budget to spend.

For this research, we designate marketing teams that are adopting best practices in the area of budgeting and associated activities as ‘Legends’ (i.e. Leaders) and their less sophisticated counterparts as ‘Loafers’ (i.e. Laggards).

Half (50%) of respondents labelled as ‘Legends’ have total control over forecasting, compared with 18% of Loafers, who are more likely to have their budget set by someone else and handed to them.

Why are some marketers not taking control of their own budgets? It may be due to current internal work processes, or because some marketing teams do not want the responsibility of owning a target. It may also be that marketing departments that are very brand awareness-focused have become responsible for the ecommerce channel and are selling direct to the consumer, yet struggle to build sales and marketing forecasts.

Key findings from the report include:
• 27% of Loafers never revisit their marketing forecast, while more than 90% of Legends revisit theirs more than twice during the financial year.
• 72% of Legends allocate more than 20% of their marketing budget to digital, compared with only 27% of Loafers.
• Loafers use benchmarking a lot less than Legends, who collaborate more, use published data and subscribe to a benchmarking platform.
• 55% of Loafers tend to use Google Analytics for basic metrics such as traffic volume, which is a rudimentary measurement, while Legends prefer to measure performance by using multi-channel funnels (in Google Analytics).

Legends are better at identifying the best KPIs and metrics. They have a better understanding of measuring ROI, they use benchmarking, and they build forecasts which they revisit on a regular basis, not just once a year, continually adjusting, improving and investing or re-allocating.

In the last financial year, revenue from digital channels increased by more than 10% for more than 57% of Legends, while for 46% of Loafers it remained more or less the same.

Financial officers are frustrated at the lack of commercial competence in marketing. This was evidenced in a 2014 report by Marketing Week which reported 83% of marketers were unable to quantify ROI, not only that but 49% of marketers insisted on being handed more control of the financials.

Financial officers expect marketers to:
• Understand commercial objectives
• Create realistic forecasts and predictions
• Have more accurate reporting, KPIs and metrics

The role of the CMO, and in some cases Heads of Digital, has expanded to include ecommerce, marketing technology, customer experience and more accountability for sales outcomes.
More senior marketers are accountable for supporting sales channels and driving more measurable sales outcomes deeper into the sales funnel.

This report looks at some of the behaviours that characterise Legends, how forecasting can deliver greater efficiencies, and suggest how you can adopt a better approach within your organisation.