Zero-based budgeting becomes the new normal
Several trends have coalesced to make zero-based budgeting an imperative for marketing teams in 2017. The practice requires marketers to justify spending on all new activity, rather than having set budgets based on revenues or the previous year’s spend. This carefully costed approach reflects the economically uncertain and austere conditions under which many marketers now operate.
The latest IPA Bellwether report forecasts that ad spend in 2017 is set to decline by 0.7% as business investment is pared back in line with the continuing uncertainty over Brexit. Moves to consolidate agency services, payment-by-performance agency models and increased scrutiny of digital metrics will also lead more companies to adopt zero-based budgeting as a way of keeping a closer check on their spend.
The motivations are not just financial, though, and are also driven by the need to work in a more focused and targeted way. Charles Ireland, Diageo’s new general manager for GB, Ireland and France, recently told Marketing Week that the drinks group adopted zero-based budgeting earlier this year as “a requisite of being a world-class organisation”. The company wants “to get the same services but more efficiently”, he said.
Marketers will face a series of challenges as zero-based budgeting becomes the normal way of doing business in 2017. Agency relationships will have to be renegotiated as tighter cost controls and targets increase the burden on both sides. Marketing Week columnist Mark Ritson has already suggested that clients should consider paying a pitching fee to agencies to account for a more onerous and complex pitch process.
Internally, marketing teams will require people who are both financially-minded and effective planners. They will also need to keep creative marketers happy and create working environments that do not feel too stifling or rigid as the purse strings tighten in 2017.
With the threat of influencer fatigue becoming increasingly real, seeking out the next wave of influencers who can establish an authentic connection with consumers is high on the marketing agenda.
Brands should look beyond celebrities like Kim Kardashian if they want to create viral campaigns, says global managing director at Social@Ogilvy, Thomas Crampton. He argues that while big influencers offer an initial boost, second-tier influencers give a campaign heft and momentum.
Beauty heavyweight L’Oreal has already tiered its influencer strategy into gold, silver and bronze categories. The gold group represents bloggers with the biggest online following, while the bronze group have fewer followers or are in the early days of growing their beauty blog.
L’Oreal is building relationships with these bronze influencers in anticipation that they may wield more influence in the future, according CMO for Western Europe Hugh Pile.
For Adidas, the next phase of influencer marketing is Tango Squads – communities of hyper-connected 16- to 19-year-old football obsessives operating on direct messaging apps such as Facebook Messenger and WhatsApp.
Adidas senior director of global brand communications Florian Alt argues that the message is far more authentic if you give it to 500 kids than one global influencer.
“It’s not about sheer reach. What the hyper-connected kids bring is mass awareness. They give it longevity and authenticity, because they are talking in a private messaging environment. If it comes as a referral from your mate, you’re much more likely to pick it up than if it comes from a brand.”
TV’s resurgence gathers pace
Next year, expect more marketers to reassess their opinion about the value of TV. Much has been written about the surging popularity of online video at the expense of more traditional media, yet in 2016 we have seen many online brands invest heavily in television content and advertising.
News and culture website Vice.com launched its first TV channel in the UK, Viceland, through a partnership with Sky, while Facebook Live and YouTube are both running TV campaigns to promote their services and self-made stars. Such advertising shows that while these brands live and breathe online, they also need the huge reach and pull of TV to attract consumers in the first place.
Recent research by Ipsos Connect and Thinkbox revealed a large disparity between advertisers’ assumptions of TV viewing habits and actual behaviour. According to the study, advertisers estimate the average person watches two hours 41 minutes of television a day, when in reality they consume three hours and 35 minutes.
Greater faith in TV will exist alongside more scrutiny of online advertising metrics. In November, Facebook admitted to a number of errors in the way it measures audiences across a range of its products and announced updates aimed at giving advertisers “clarity and confidence”. WPP boss Sir Martin Sorrell has already called for improved ad measurement and validation on social media sites, arguing that a three-second view on Facebook is not the same as a TV ad.
The online giants will continue to grow video views and advertising revenue next year, but they may think more carefully about how TV fits into their broader marketing strategies. At the same time, marketers from all industries will not be so quick to dismiss the value of TV in 2017.