Proving marketing value in the zero-based budgeting era

30 January 2020 5 min. read
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Marketers face a dual challenge. In addition to navigating an increasingly complex and competitive operating environment, they must also grapple with an emerging term that's essential in the industry lexicon: zero-based budgeting. But what does it actually mean? Dimitra Spiliotopoulou, Regional Vice President at Nielsen Marketing Effectiveness, explains.

Taking the wide view, it signals the dominance of a leaner era. With budgets cut for the first time in seven years, marketers must now more than ever build a robust case for how campaign strategy will benefit the business and justify spending needs as they go, instead of working from one big cashpot.

At a more practical level, it means short-term testing will and should become vital for marketers who need to prove campaign performance before they can scale more broadly.

Making a qualified contribution

Marketers are all too familiar with the need to evidence the impact of their efforts. As digital growth has added multiple new platforms, publishers and ad networks to the traditional marketing mix, identifying which channels, campaigns, and tactics are generating value is essential for determining how to best allocate existing budgets.

What is the return of marketing?

With the rise of zero-based budgeting, however, marketers can no longer base investment planning on last year’s spending levels. Now, they must earn their budgets. Marketers need to start with a blank slate and build up their funds by degrees; demonstrating success every step of the way before gaining approval for the next outlay.

At first glance, this continual justification might seem limiting, especially from an innovation and creativity perspective. In reality, it offers potential for greater growth and a healthy balance sheet in the long-term by zeroing-in on the business impact of specific campaigns.

The incremental path to success

Adapting and reinforcing zero-based budgeting across the organisation means every new initiative needs its own rationale. To build a compelling case, marketers require deeper incremental insight.

This isn’t to say evaluation methods such as marketing mix modelling and multi-touch attribution don’t provide a valuable window into effectiveness. Both are essential for measuring performance across multiple campaigns and programs – either to determine where and how much to invest, or to optimise the creative or tactics of campaigns in flight. But when it comes to justifying spend for targeted initiatives, the picture these tools produce can be too broad.

Much of managing a business day-to-day involves answering specific questions, such as: did my promotional campaign have a positive impact on sales? Did our campaign targeted at millennials actually get them to the store?

For marketers to maximise their chances of unlocking funds, they need access to granular data-driven information about whether specific targets were met, if their ads drove desired action, and what ROI was generated from  each campaign.

“For marketers to maximise their chances of unlocking funds, they need access to granular data-driven information.”
– Dimitra Spiliotopoulou, Nielsen Marketing Effectiveness

Putting marketing to the test

Measuring incrementality through short-term tests are the secret to answering these questions. Incrementality is the lift that marketing and advertising provide above native demand. In other words, the increase in leads, sales or other KPIs gained from marketing that would not have occurred without marketing efforts. A targeted test of a campaign or tactic – whether a local TV campaign or specific ad creative – can give marketers the performance insights they need to scale up if it performs well, or move on if it doesn’t.

While testing approaches can vary for each marketer and industry, the best options take one of two forms: test and learn, or a post-mortem. The first is ideal for illustrating the value of marketing efforts to secure the budget needed for scaling up, such as testing campaigns regionally before going national. The post-mortem is more about gathering ammunition for future decisions and funding requests.

The basic formula for both testing procedures is also relatively simple: select a control group of purchase points (online and offline stores), set parameters for the start and end of the campaign, capture a list of consumers who were exposed to ads and those who weren’t,  and calculate the impact based on the responses of exposed and unexposed consumers.

Regardless of the testing approach used, measuring the incremental lift driven by a campaign will provide marketers with powerful insights into which audiences and advertising elements fuel the greatest response, so they can make smarter decisions going forward.

Determining how to best allocate marketing budgets across an ever-increasing number of channels has never been easy. The increasing popularity of zero-based budgets has made this daunting task even more difficult, but not impossible. Using continuous testing, marketers can accurately trace the incremental lift produced by their campaigns and evidence their positive effect on the business bottom line. This in-depth insight not only proves their right to more budget, but also gives marketers the means to spend it well.