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What does Zero Based Budgeting mean for agencies?
- 1. What does zero-based budgetingmean for agencies? Ged Carroll renaissancechambara.jp
- 2. In this presentation •What is zero-based budgeting (ZBB)? • Why are clients looking implementing ZBB? • ZBB is not cost-cutting • What does it mean for marketing? • How does it impact marketing holding groups? • How does it impact at the agency level? • How does it impact the creative process • ZBB versus the philosophy behind performance marketing
- 3. What is ZeroBased Budgeting (ZBB)?
- 4. What is ZeroBased Budgeting (ZBB)? ZBB isn’t a new management concept, the first mention I found of it was in Public Utilities Fortnightly in 1929. Peter Pyrr of Texas Instruments adoption of it in the 1970s drove its current popularity. President Jimmy Carter’s use of it, gave it wider public attention. 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 organization is analyzed for its needs and costs. - Investopedia
- 5. Why are clientsmoving to ZBB?
- 6. Low economic growth,mixed retail outlook -2 -1 0 1 2 3 4 5 6 7 8 9 2012 2013 2014 2015 2016 2017 GDP Forecast (World Bank) Global China U.S . Eurozone Developing World excluding BRICs -3 -2 -1 0 1 2 3 4 5 6 2012 2013 2014 2015 2016 2017 Retail sales (various sources) Global U.K. U.S. Eurozone
- 7. Cross-sector: growth isvolatile, hard to sustain -5 -4 -3 -2 -1 0 1 2 2010 2011 2012 2013 2014 CPG % growth (Euromonitor data) Packaged Foods Home Care Personal Care | Beauty -20 0 20 40 60 80 100 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Consumer Technology % growth (Various) Smartphones Tablets Smart TVs
- 8.
- 9. You can’t cutyour way to growth. You need to spend where the customer values it, to drive growth. That spend can come from savings made in lower value processes.
- 10. ZBB already hasmany adoptees
- 11. Brands have 6approaches to grow Product ChannelCustomer Revamp offering Get closer to the customer Pick your channels Protect core Innovate the business model Inorganic innovation Model via Accenture
- 12. ZBB is notcost cutting
- 13. … or pennypinching The zero base approach is not a cost cutting method or belt- tightening approach. It’s just a better, more strategic way to plan your marketing.. – Mark Ritson, Marketing Week
- 14. What your clientsare actually doing 1. Last year’s spend goes away in terms of planning– ‘zero’ 2. The marketing team do their research (and probably task some of it out their agencies – the media buying agency is the likely candidate) 3. They craft their marketing plan and conclude it with a budget in which they ask for a certain amount of investment and promise a specific ROI 4. Senior management vet the plan with two outcomes: approval granted or pushback and ask for changes
- 15. What does itmean for marketing teams?
- 16. What does itmean for marketing teams? • Category owners are involved earlier and in a more collaborative process of setting budgets • Senior management double down on marketers that they trust • Marketers become accountable • Transparency • Visibility • Responsibility • No sacred cows
- 17. Likely effect onthe marketing spend Strategy /Area Advertising Brand creative DM / eDM Social media marketing PR Revamp offering ✔ ✔ ✔ Get closer to your customers ✔ ✔ Pick your channels • Protect core • ✔ ✔ • Innovate the business model • ✔ ✔ • ✔ Inorganic innovation ✔ ✔ ✔ ✔ Likely increase in spend • Likely steady spend, no likely increase Blank box: likely budget reconsideration
- 18. What impact doesit have on marketing holding groups?
- 19. How does itimpact marketing holding groups? • Depends on the balance of their portfolio • For instance Publicis’ weakness in shopper marketing could leave it exposed on a channel strategy • Acquisitions and sales to focus on plugging gaps • Possiblity that social marketing is less critical in comparison • Increased focus on accountability likely to hone ad tech offerings further • Major account revenue less predictable as it no longer based on incremental increase planning
- 20. How does itimpact at an agency level? • Planning • Longer, more complex planning process • Justification is more important, particularly around ROI • Fresh thinking becomes more important • Shorter time to execute a given campaign • Campaign rather than ongoing activity orientation • Clients being held more accountable will hold agencies the same way • Increased transparency to ensure corrective action sooner
- 21. How does itimpact the creative process? • Greater degree of upfront research time • Tighter brief • Focus, less but better – ROI / effectiveness • Shorter time to execute • No guarantee of campaign continuity impacts storytelling 0 10 20 30 40 50 60 70 80 1 channel 2 channels 3 channels 4 channels 5 channels Average effectiveness success rate (IPA 2012) Average effectiveness success rate
- 22. ZBB versus thephilosophy behind performance marketing Zero Based Budgeting Performance marketing ROI across business Optimising cost per sale Long term sales benefit Short term sales benefit Channel agnostic Cross-channel Campaign-led Campaign-led Often focuses on customer loyalty Immediate customer satisfaction • Whilst both are about delivering ROI, there are differences • ZBB reducing customer churn is an ROI oriented goal in itself • Performance marketing is more about acquisition • ZBB doesn’t favour channels, its about the right one for the job
- 23. Creative commons attributions •What is Zero Based Budgeting image – Kokorowa Shinjin - flic.kr/p/4wqCvL • ZBB is not cost cutting image – Jenny Downing - flic.kr/p/9r3AWQ • What impact does it have on marketing holding groups image – Yahoo! - flic.kr/p/8CCeeJ Images not listed come from my own collection.
- 24. About me Amazon authorpage: amzn.to/1SeO5Il LinkedIn page: linkedin.com/in/gedcarroll About: renaissancechambara.jp/about Blog: renaissancechambara.jp Email address found here: scr.im/renaissance Twitter account: @r_c Sina Weibo: renaissancechambara WeChat
- 25. thank you |谢谢 | míle buíochas! | 감사합니다 | danke | ありがとう | merci | спасибо | cám ơn | whakawhetai | takk | ขอขอบคุณคุณ | terima kasih | σας ευχαριστώ | grazie | |شكرا þakka þér | დიდი მადლობა | kiitos | நன்றி | gracias
Editor's Notes
- #5 Title Public Utilities Fortnightly, Volume 3, Issues 7-13 Publisher Public Utilities Reports, 1929 www.investopedia.com/terms/z/zbb.asp
- #7 http://www.worldbank.org/en/publication/global-economic-prospects/summary-table Retail sales data, where possible I have tried to exclude petrol station sales and remove fuel price volatility – which is a measure of external circumstances rather than economic health.
- #14 https://www.marketingweek.com/2016/01/26/why-unilever-is-right-to-adopt-zero-based-budgeting/
- #19 The upshot was that media planning sat in different organisations from the creative side of marketing. And that had real consequences about how we thought on marketing to consumers.