{"id":145515,"date":"2020-06-09T15:15:05","date_gmt":"2020-06-09T14:15:05","guid":{"rendered":"https:\/\/www.smartinsights.com\/?p=145515"},"modified":"2020-06-09T15:12:35","modified_gmt":"2020-06-09T14:12:35","slug":"zero-based-budgeting-how-can-it-help-you","status":"publish","type":"post","link":"https:\/\/www.smartinsights.com\/managing-digital-marketing\/planning-budgeting\/zero-based-budgeting-how-can-it-help-you\/","title":{"rendered":"What is zero-based budgeting and how can it help you?"},"content":{"rendered":"
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Eliminate bloated bottom lines by adopting a zero-based budgeting approach<\/h2>\n<\/div>\n
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The ability to develop an efficient and effective budgeting and forecasting process requires extensive experience and on-the-job training that can take years before your boss finally - if ever - says, \u201cYou don\u2019t need me anymore.\u201d<\/p>\n

Accurate forecasting (even close to being in the ballpark) is the hallmark of the great marketers I have worked with. Sadly, I can count them on one hand. In addition to a wide-ranging combination of consumer, channel, process, and delivery knowledge, they were also comfortable and capable in the numbers department.<\/p>\n

Although we\u2019ve introduced different forecasting techniques to brief marketers on how to use a more data-driven approach, the concept of zero-based budgeting is becoming a popular technique.<\/p>\n

As campaigns running all around us right now prove, anyone, can invest\/spend\/blow (take your pick) money that flows from the magic money tree that makes a brief appearance each year during the annual budget review. During this use-it-or-lose-it process, financial plans for sales, revenue resources, costs, expenses, cash flows, etc are set for the coming year, based on last year\u2019s figures with a random percentage increase.<\/p>\n

This process ignores the fact that the coming year is highly unlikely to be a repeat of the last. The competition might finally get their act together. Someone might \u2018go Uber\u2019 in your sector. Suppliers might change their prices. Consumers might decide to shop elsewhere.<\/p>\n

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\n \n Zero-based budgeting for marketing briefing\n <\/a>\n <\/div>\n
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Zero-based budgeting for marketing briefing<\/strong><\/p>\n

Learn more about zero-based budgeting, including how to identify cost drivers and transition away from traditional budgeting processes by reading our detailed briefing available to Premium members.<\/p>\n

Access the Zero-based budgeting for marketing briefing<\/a><\/p>\n <\/div>\n <\/div>\n

By adopting zero-based budgeting, your business can create more accurate budgets that more accurately reflect your company\u2019s upcoming challenges, activities, and aspirations.<\/p>\n<\/div>\n

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What zero-based budgeting is and how it helps<\/h3>\n<\/div>\n
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Zero-based budgeting (ZBB) is an approach in which brand-new budgets are always calculated from a zero base, rather than estimating it based on past budgets.<\/p>\n

Traditional budgeting carries over the previous years\u2019 allocation, often accounts for a 2% increase, and then analyzes new expenditures that need to be accounted for. This means old expenses can be forgotten about and overall spending can inflate as teams adopt a \u2018use it or lose it\u2019 mentality to ensure the next period\u2019s budget is adequate.<\/p>\n

When you use zero-based budgeting, you start at zero every time and must justify all expenses to create an organization, business, or department\u2019s budget. By doing this, you scrutinize both old expenses and new based on your expected activity and only budget for what you need.<\/p>\n

In their article\u00a0Zero-based productivity\u2014Marketing: Measure, allocate, and invest marketing dollars more effectively<\/a>, McKinsey explains the rationale for zero-based budgeting as follows:<\/p>\n

Zero-based marketing\u2014a comprehensive approach that extends\u00a0zero-based budgeting principles\u00a0to marketing categories across the enterprise\u2014can uncover opportunities for savings worth 10 to 25 percent of spending in certain categories, and these funds can be reallocated to higher-value areas. In fact, with the rare exception of industries that are in a global state of decline,\u00a0a well-executed reinvestment\u00a0in high-ROI opportunities will deliver a greater return than \u201cbanking the savings\u201d will.<\/p><\/blockquote>\n

A recent McKinsey survey revealed businesses that are methodical about\u00a0investing funds unlocked through zero-based budgeting and other programs into growth<\/a>\u2014either proven winners or future products and services\u2014outperform the market. Notably, often more than 50% of these savings can be achieved in the first 12 months of a zero-based marketing effort, allowing for rapid reallocation.<\/p>\n

This visual from consultants Bain usefully shows how zero-based budgeting focuses on improvements using both \u2018what\u2019 and \u2018how\u2019 savings. They point out that the aim should be to reduce cost but at the same time avoid inhibiting growth.<\/p>\n

\"reduction<\/p>\n

Unilever brands are examples of consumer brands successfully applying ZBB. In a\u00a0recent financial report<\/a>\u00a0they say that zero-based budgeting is \u201cimproving our productivity in brand and marketing investment as we reduce the cost of advertising production and increase investment in media channels. ZBB is also eliminating waste in those areas where we have over-saturated traditional media channels, as well as reducing overheads.\u201d They introduced this program by test and learn in different markets. Unilever piloted zero-based budgeting for one year in Thailand, for instance, which reduced its overall spending by 2% as a share of sales.<\/p>\n

The potential of digital transformation projects, data-driven marketing strategies, and real-time targeting acquisition and retention tactics in digital channels is outpacing our ability to allocate budget and resources with a corresponding degree of agility. Zero-based budgeting is an attempt to focus our attention, budgets, and resources on existential opportunities and threats in the marketplace.<\/p>\n

Digital strategy in a time of crisis <\/h3>

Discover more blogs and ways to kickstart your organization's digital transformation strategy with actionable, practical online learning that gets results, fast!<\/p>See More<\/a><\/div>\"\"<\/div><\/span><\/p>\n

How zero-based budgeting can be applied<\/h3>\n

As an example, see how zero-based budgeting might affect a team\u2019s activities mid-campaign, using the Ansoff Marketing Opportunity Matrix as a framework:<\/p>\n

Market Penetration<\/strong>\u00a0\u2013 the ZBB team conducts an LTV audit and makes a temporal shift in acquisition budgets and resources to retention.<\/p>\n

Market Development<\/strong>\u00a0\u2013 the ZBB team discovers that local markets and segments have reached saturation point and temporarily reassigns budgets and resources to a 90-day expansion launch in an overseas target market.<\/p>\n

Product Development\u00a0<\/strong>\u2013 the ZBB team identifies an opportunity to introduce and new product line and temporarily reassigns acquisition budgets and resources to a rapid product update. Budget is re-allocated for this new opportunity.<\/p>\n

Diversification<\/strong> \u2013 the ZBB team has calculated that a recent brand campaign has created an opening in a new product category and temporarily reassigns retention budgets and resources to a sourcing initiative or collaborative partnership. An actionable and accountable plan is developed, delivered and optimized against KPIs, AMC and CPS targets<\/p>\n

As you will have noticed, ZBB only works if the working environment and the teams are collaborative, adaptive, and always focused on the collective objective. Not to mention collectively rewarded. You can\u2019t run a system like this without considering an aligned remuneration system.<\/p>\n<\/div>\n

 <\/p>\n

Mike O\u2019BrienMike O\u2019Brien is a serial start-up specialist and the CEO of Jam Partnership<\/a>, a consultancy specializing in digital transformation, marketing automation, and human integration training. He the Course Leader in Digital Marketing MSc at UWL and a Fellow of both CIM and the IDM. He has a unique combination of award-winning experience in brand, direct and digital marketing and has contributed articles on creativity and agency development in books by Dave Chaffey and P R Smith. He is an established keynote speaker at martech events where his subject is using AI to increase human productivity.\u00a0 He has worked as a professional trainer in Digital Strategy, Planning, SEO, PPC, Display, Affiliate, Email, Mobile, Social, Content, Briefing, Budgeting, and Forecasting for more than 20 of his 40 years in marketing.<\/div>\n","protected":false},"excerpt":{"rendered":"

Eliminate bloated bottom lines by adopting a zero-based budgeting approach The ability to develop an efficient and effective budgeting and forecasting process requires extensive experience and on-the-job training that can take years before your boss finally – if ever – …..<\/p>\n","protected":false},"author":96,"featured_media":154149,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_glsr_average":0,"_glsr_ranking":0,"_glsr_reviews":0,"footnotes":""},"categories":[346],"tags":[1246],"acf":[],"yoast_head":"\nWhat is zero-based budgeting and how can it help you? | Smart Insights<\/title>\n<meta name=\"description\" content=\"Eliminate bloated bottom lines by adopting a zero-based budgeting approach. 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