Offsetting Marketing Budget Reductions

30 Dec

budget cut“Price is what you pay. Value is what you get.” ~  Warren Buffett

If you’re like many marketers, 2023 budgets have either been frozen at last year’s level or reduced in light of what many organizations believe will be a soft economy in the coming year. That said, company expectations relating to brand development, customer acquisition and revenue generation goals can seem daunting.

The good news is that there are five key steps that can be taken to offset budget reductions and refuel marketing budgets:

  1. Review and revise annual Scopes of Work – Working in conjunction with your agency partners, representatives from the marketing and procurement teams should reassess project deliverables relative to approved spend levels and make the requisite adjustments. Focusing the extended team’s efforts on strategies and tactics that are critical to the attainment of the organization’s core business goals are the top priority. Out-of-scope work should be prohibited and or at a minimum, tightly controlled and non-essential programs shelved until business conditions improve and or additional marketing funds are allocated.
  2. Evaluate and improve Client/ Agency work processes – The opportunity for efficiency gains in this area are numerous, particularly in longer term relationships where too often bad habits, that drive costs up or limit market timing opportunities have become status quo. Key areas to review include the creative and media briefing and client-side approval processes. Ineffective and or inefficient approaches to these basic tasks waste time and increase project costs. Conversely, tightening brief development and streamlining the approval process can reduce fees associated with agency rework costs and decrease the time required to execute certain tasks.
  3. Right size your agency network – Over time, an organization’s roster of agency partners can swell to unwieldly levels, leading to management challenges, overlapping resources and duplicative costs. Internally reviewing each agencies roles and responsibilities to identify opportunities for focusing each agencies resource offering and reducing overlap. Longer term, consider the creation of broadcast and digital production and content curation and production centers of excellence, consolidating activities in this area to generate scale economies and reduce agency fee outlays. Additionally, work with your agency partners to identify opportunities to remove links from the marketing/ advertising supply chain. In short, reduce the number of intermediaries involved in the production, placement, and trafficking of your advertising to reduce unnecessary fees and costs.
  4. Review agency financial management practices and contract compliance – Auditing agency compliance and financial stewardship can lead to the identification of billing errors, earned but unprocessed credits, unbilled media balances that should be returned, the application of unauthorized mark-ups and agency time-of-staff under deliveries that could result in financial recoveries. Additionally, the independent review of project management, job initiation and reconciliation processes can lead to cost avoidance strategies that result in meaningful savings.
  5. Reconsider the “Estimated Billing” process – As interest rates have increased, so too has a company’s cost-of-capital. One key tenet of any organization’s treasury management practice is to retain control of its money for as long as possible. However, when it comes to advertising outlays, the industry tends to work on an “estimated billing” process where each agency bills for work to be done, services to be procured or media to be purchased upon approval, with the pledge to reconcile estimated costs to actual once a job has closed or a campaign completed. Unfortunately, this results in an advertiser’s funds being held and managed by others, with no economic benefit (e.g., interest income) and some level of financial risk. Consider moving to a “final billing” process whereby invoices are submitted by the agency for payment once services have been rendered and third-party costs validated. In turn, advertisers should be prepared to tender payment upon receipt of these invoices, so that none of its agency partners is required to go out-of-pocket to compensate third-party vendors.

Taking some or all of these actions can offset the impact of budget reductions or freezes. As importantly, an open-minded review of a marketer’s partners and processes will generate financial recoveries and future savings that will help refuel and improve their marketing investment.

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