Zero-based Budgeting for Brands

zero-based budgeting

A lot has been written about zero-based budgeting since Unilever announced that it had adopted the approach including a blog in Marketing Week by Mark Ritson who offered his usual no-nonsense take on it.

For six years I taught brand business planning to relatively new marketing people from around the world as part of a marketing fundamentals course.

This was one of the topic areas that the delegates were naturally less excited about as the brand planning process for them was fraught with lots of mostly frustrating hard work. They would have to come up with a plan that was often changed by top management once they’d consolidated the numbers. So it was perceived as an un-rewarding process for most people.

The bad habit that I notice a lot of brand teams get into is to pitch for a brand budget that is based on the expectation of the previous year’s budget with a bit added on “because we never really got what we wanted last year”. In other words it becomes a negotiating start point based upon expectation rather than any real justification. You can tell that this bad habit exists because the place that these brand teams go to start their brand planning process is to dust off last year’s plan!

To introduce the topic what I would say in those classes was that “brand planning should start with this critical tool” and then showed them a blank screen. I looked at them. They looked at me. They looked puzzled thinking I’d screwed up my slideshow (a reasonable thought). Then some brave soul would say “But it’s just a blank screen!” Aha. “And how can that help?” I’d ask. Eventually the penny would drop. This was not in fact the ramblings of someone that can’t work a presentation but actually a salient point about brand planning. That then opened up a discussion about zero-based budgeting that I have to say most of them had never heard of before despite having a hefty MBA contingent in those classes.

So what exactly is zero based budgeting? “It’s a method of budgeting in which all expenses must be justified for each new period. Zero-based budgeting starts from a "zero base" and every function within an organisation is analysed for its needs and costs.”

In other words, start with the assumption you have nothing and work up from there with a clear strategic, commercial or tactical rationale for why each element is included. Implemented to its fullest extent it can become a whole company culture, not just for marketing, although there’s a popular misconception it is just about cost cutting.

I would argue that even if senior management later come back to you asking you to hit the “number they first thought of” if you have adopted a zero-based approach at least you are in a position to make rational decisions about how to prioritise having built the budget from the ground upwards.

So if you are not using it already I’d recommend the concept of zero-based budgeting for your brand and let’s hope they don’t start applying the same mind-set and approach to your bonus payments! But then again who knows….