Determining Your Budget Is Your Obligation, So Is Sharing It

Written by in Strategy on

You’ve heard it, or you’ve said it...

“You tell me what it’s going to cost.”

Here’s the thing. It doesn’t work that way. And deep down inside, you know it. An agency cannot be your CFO. Every business has a unique financial position; from planned CapEx to monthly SG&A and profit margin. Because of this, budgets must be set internally based on your company’s market position, goals, and cash flow. After all, there’s a lot of middle ground from Pepsi’s $1M logo overhaul to a 99designs special.

Once you know what you have to spend, it’s possible to formulate an approach. That approach, when mapped against goals, resources, and time, is what defines cost.

Need a Starting Point?

Determine where you are in the corporate lifecycle. We know that companies traditionally fall into three buckets:

  1. You’re looking to build a brand consumers will love
  2. You’re looking to maintain current year over year growth
  3. You’re looking to kick-start stalled or plateaued revenue growth or market share

According to a Gartner 2015-16 CMO Spend Survey, digital marketing budgets centered around 11% of revenue on average, but tended to vary widely with 46% of companies spending less than 9% of revenue, 24% spending between 9% and 13% of revenue, and 30% spending more than 13% of revenue. When you look at overall sales and marketing budgets combined, a 15-20% of revenue allocation is quite realistic. In highly competitive markets with commoditized products or for brands that must focus heavily on sales enablement AND marketing (“digital” and “traditional”) 20% or more is not out of the question.

Fight the Urge for Secrecy

We’ve all been in the room or on the call, dancing around the 800-pound gorilla in the room. At times it feels like that dreaded conversation when your partner asks you how many people you’ve been with before them. But, unlike your personal life, playing coy regarding budget doesn’t help either party keep the relationship going.

Don’t be Ashamed of Your Number

If you want to compare value equally across the agencies you’re talking to, you have to share your number. Resistance not only hurts your chances of getting quality work product, but it can contribute to a feeling of Buyer’s Remorse, increasing the likelihood one, if not both, regret working together entirely. Let’s look at some of the most common reasons companies are unwilling to share budgets up front:

You don’t want to share because you’re looking for the most competitive price:

Most of the time you get what you pay for. If you go bargain hunting you’re only eliminating the majority of companies that could produce the highest caliber of work and achieve your goals. It’s like going to the bar and only talking to people that offer to buy you a drink. Good luck.

You don’t know what it will cost and want an agency to tell you:

Cost varies based on approach. Great agencies can alter their approach to meet your needs and stay within your budget tolerance. It’s the difference between a CMS theme and a custom solution, or a national media campaign versus a hyperlocal focus. Responsible agencies will be up-front with you if they feel as though your allocation is not going to deliver the results you desire. Irresponsible agencies will often low-ball budgets to get the account and execute whatever is possible for that allocation irrespective of results and return goals. If an agency can’t point to a partnership longer than a calendar year, raise a red flag.

The timing does not align with your fiscal cycle so future budgets are unknown:

Time to pump the brakes. Take any remaining budget for the current fiscal and invest in research and analytics to learn more about your customer and their behavior. Work with an agency to set up a communications plan and marketing strategy for the next fiscal year and include budget allocation as a key point of discussion.

Budget is fluid because multiple internal departments are pooling money:

You need to get aligned. Pooling can be great as it increases the available budget and the potential impact marketing initiatives can have. If fixed commitments aren’t determined pre-agency-search, there lies too great a risk of certain departments feeling as though they had no say in the matter, which can cause a toxic working relationship.

So long as you see return you’ll put back in additional dollars:

STOP! You can use return as a way to optimize spend once a plan is in motion, but you cannot throw a pebble in the ocean and expect to see the ripple come back to you.

Ensuring a Healthy Relationship, Long Term

A budget is an internal corporate “thing.” It’s a framework that successful initiatives can evolve from, provided there is a lens of reality applied to fiscal constraints. The key is to transparently work with your resources (both internal and external) to understand whether you have a Fiat or a Ferrari budget, and how to best allocate funds and pace work. As we all know, there are many ways to “win” the race.

Everything starts with a conversation. Let's have one about how you can strategically plan and execute your marketing budget — as long as you share your number.   

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