According to Marketing Week columnist and Mini MBA founder Mark Ritson, marketing budgets these days are "totally messed up." As marketers enter a tough budget season amid economic uncertainty and a growing recession, this is no easy feat.
Speaking at Marketing Week Marketing today (October 6), Ritson said: “With all the talk about ESOV (over-voice), MMM (marketing mix modelling) and economics, everyone's budget is very challenging. We failed. And the more we try to fix it, the more we fail.
However, Ritson believes that, inspired by the triple chip baking strategy, it may contain a formula that will help marketers optimize their budgets and grow their businesses.
“Chefs have been frustrated by the way people make chips for years. Everyone mistreated them. "So they developed a serious strategy, a three-step process that produces perfect chips every time," he said.
Boil the potatoes, fry them in a pan. "What could go wrong?" Ritson asked.
"No matter how long you wait, it works and makes amazing chips. So we can do the same with the budget. Just get rid of all the complications and make it better and simpler.
Here's Ritson's three-step approach to marketing budgets:
Step 1: Aim to earn 10% referrals
Most importantly, marketers need to know how much money is needed to drive growth and gain the best competitive advantage in the market, Ritson says.
To do this, Grace Keith, an economist and founder of Magic Numbers and Marketing Week, examines three different popular sources for how to adjust budgets based on company size, suggesting a rule of thumb for marketers to follow. The goal is to maximize return on investment (ROI).
"I found something incredibly useful," Keith said in a Marketing Week column earlier this week.
"The conclusion of three popular sources was very similar. For the best return on investment, spend 5% to 10% of your revenue on advertising. "Three data-driven indicators for marketers in budget season
That was true in the ARC database, a joint venture between IPA and Magic Number to collect hundreds of business results from six discount stores, as well as Accelero founder Paul Dyson and Nielsen's 2022 ROI study budget updates, according to Keith. :
Ritson suggests that marketers should aim for 10% efficiency in their business to achieve "maximum efficiency and results" and possibly a competitive advantage.
"This is step one," he said.
Step 2: Adjust Long and Short
The next step for marketers is to determine how much of their budget should be spent on long-term brand building and how much should be spent on short-term performance/activation. It's important for marketers to invest in both to ensure sustainable growth, Ritson says.
"The most important thing is the long and the short of it" and "in". “You need both. Brand sells, activation/performance closes the sale. If you have the exact amount mentioned above, you win," he said. Explained.. Ritson. Can you be both long and short at the same time? Usually not.
According to a study by performance experts Peter Field and Les Binet, the ideal budget mix for the average B2C brand would be 62% branding spend and 38% activation spend. For B2B, the weight shifts 46% to brand, 54% to activation.
However, according to Field and Binet's research, the optimal budget mix also varies by category. For financial services, for example, it should be 80% brand, 20% sales, as consumers in the market only change their financial service provider every five years.
In retail, the optimal budget mix is 64% brand, 36% business, and in FMCG, it is 60% brand, 40% business.
"Many of you probably think I'm way off that number," Ritson said. "The facts are clear. If you spend that kind of money on a brand, you make a lot of money, but no. This is an incredible failure."
Clear information. If you spend that kind of money on a brand, you'll make a lot of money, but no. This is an incredible failure.
Mark Ritson
So why are companies not investing enough in their brands? The main reason, according to Ritson, is that companies and marketers "fall into the trap" of achieving short-term results in 12-month cycles.
"Get a higher ROI by investing all your money in performance marketing," he said.
“[But] short-term returns simply do not come back, and dramatic actions cost our company billions of dollars in lost profits.
Category is one of several drivers that best alter long- and short-term costs, and marketers should position themselves based on their business needs, he adds.
“You don't have to scrimp to get the perfect size. Pete and Lace's work is very realistic. Find your category, the age of your brand, how long it's been online, how long it's been offline. This will give you the percentage. The target is 10 percent [foreign exchange] interest,” he said. He should have worked normally for 10 years.
Step 3: Measure success accurately
The final step in Ritson's "triple cook" marketing budgeting approach is to measure the results of these long and short pots differently.
Last month, Marketing Week's "The Specific Language of Performance" survey found that more than a third (36.9%) of the 1,610 marketers surveyed had paid special attention to ROI monitoring in recent months.
Nearly half (48.4%) of marketers say ROI is the most important metric to their CEO, CFO, and board of directors, and just over a quarter (28.4%) say marketers always measure ROI when analyzing their campaign performance. .
While ROI is a "perfect" way to measure short-term marketing effectiveness, Ritson says marketers should stop trying to measure a product's long-term ROI.
"Let's stop measuring brand stature and make it a stupidly complicated and ridiculous dollar valuation," he said.
“Just because you can't show up doesn't mean I won't. But these fictitious calculations do not help convince our CFO. They are very embarrassing. Believe in the highest percentage of income and grow your brand. Measure branding efforts with branding metrics.
"Short-term performance indicators, total ROI. It's pretty decent. Just don't get caught midway."