by Jim Lenskold

The Dreaded Annual Planning Process

What will you do differently for this year’s plan?

Most large and midsize corporations go through a major effort in their annual planning process. You know the drill – draft projections, submit, revise, revise, revise…

As long as marketing is viewed as a discretionary expense and not an investment, setting marketing budgets will remain far from efficient. Many companies use last year’s budget factored up or down by some percentage. Others budget marketing as a fixed percent of sales revenue which will never work since declining sales will mean only less marketing to help turnaround the company’s position in the market.

The question is, what can you do differently for your upcoming planning and budgeting process? Here are some points to consider for those who not only want to increase marketing ROI but also want to shift the budgeting process for future years.

  1. Allocate budget for market testing and more thorough measurements of marketing effectiveness. One of the key barriers to measurement is the lack of budget and commitment to testing and analytics. Building insight to increase performance is critical to creating a competitive advantage and maximizing ROI.
  2. Allow enough flexibility in your planning to apply low-budget testing techniques. Varying the core strategy or media mix throughout the year can often provide insights to guide better performance, without requiring control groups or heavy analysis. Getting more scientific in your marketing sometimes requires creativity!
  3. Invest in marketing automation. Take some steps forward with your technology. Add campaign management, marketing investment management software (i.e., marketing ROI technology), or modeling software — or make better use of the technology if you have it.
  4. Ensure proper staffing for marketing analysts. This is a key role in drilling down into the results and bridging the gap between traditional marketing metrics and financial impact.
  5. Plan for greater integration. Generating higher ROI is dependent on integrating all marketing and sales activities directed to each customer segment. Take steps such as better aligning targeting efforts, coordinating timing, and mapping the customer buying cycle to identify points of leakage that marketing tactics must address.
  6. Make initial estimates of incremental ROI or profit. Even if you are not prepared to measure and manage your budget using ROI, start going through the analysis and exercise to get a better understanding of the process. The goal is to be prepared for inevitable day when ROI measurements and greater financial accountability become common practice.
  7. Understand your key profit drivers. Running your assumptions through several ROI scenarios can help identify where strategic and tactical changes can have the most significant impact on your profit potential.
  8. Revise key metrics and prepare your dashboard. Take a close look at the metrics used to drive performance in your organization. Often these metrics are driving behaviors that don’t align with profitability (although they might be intended to do so). Along with the key metrics that align with profitability, you should identify the predictive metrics that can alert you to upcoming shortfalls in marketing performance. Your marketing dashboard should serve as a management tool that leverages insight on short-term performance and long-term trends to optimize decision-making.

Finally, recognize where the marketing organization itself contributes to the inefficiency of the budgeting process. It’s common to request more budget than is necessary, and then to ensure the excess is spent in order to protect the amount allocated in next year’s budget. Ultimately, power and prestige should not be based on the size of one’s budget but on their ability to effectively deliver the maximum return for that budget.