Turning the Fixed Marketing Budget on its Head

in an article published by iMedia Connection on March 23, 2007 and entitled “The 2007 Direct Marketing Forecast,” Denise Zimmerman wrote the following.

“Many marketers -- but particularly direct marketers -- are working with a fixed budget that was developed in the C-level suite rather than in response to testing and opportunity, which demands a more rolling type of budgeting and forecasting. The fixed budget approach is being challenged as marketers deliver proven tests, but it challenges many organizations at the highest level, creating necessary dialogue and intersections between operations, finance and marketing. The approach to metrics, budget setting and management -- and even how to measure the success of a business -- are being re-evaluated.”

If direct marketers contribute nothing else to marketing as a whole other than budgeting savvy, then they have accomplished much.

As Denise states, the direct marketing philosophy of testing and reliable sales projections turns the fixed marketing budget approach on it’s head.

As long as marketing maintains the allowable cost per sale, then companies should plan for budget expansion to achieve full potential. In other words, marketing budgets shrink or expand on the fly based on the overall allowable cost per sale.

The investment and CPA world need to reconsider how they view marketing. It is an investment and not an expense.

How does your firm view the advertising budget? On what basis do you develop your company’s marketing budget? What challenges have you encountered when your marketing budget is treated as an expense rather than an investment? Why do companies resist the idea that marketing is an investment?