Is zero-based budgeting right for you?

Do you use zero-based budgeting (ZBB) for your marketing? If not, should you?

Coca-Cola announced last week that it would use the technique to allocate marketing budgets (among other operational spending) from 2015 onwards.

ZBB essentially requires marketers to act as if they are starting from an expenditure of zero and justify all spend rather than simply calculating incremental increases or decreases on previous years.

For a company with marketing budgets the size and complexity of Coca-Cola’s – it reportedly spent $3.3bn (£2.05bn) on advertising in 2013 and is spending more than $4bn this year – ZBB will be a major operational undertaking.

It seems unlikely, however, that Coca-Cola will implement ZBB to its fullest extent, as might be possible in a smaller organisation. With such enormous and complex budgets and relationships on a global scale, it can be hard to be zealous about truly starting again from zero in each budget cycle.

Many companies using ZBB consider that, in reality, there are certain relationships, practices and basic functions that require investment without throwing out everything already established. Coke has so many established relationships and functions, I would suspect that it will use the ZBB philosophy as a guide, rather than dismantling everything each time it sets its budgets.

Even as merely a philosophy, though, ZBB is an interesting and provocative idea. It challenges marketers to think again about what they spend and why.

But the skill is in the execution. ZBB should be about being free to spend in the way that makes sense for your brand at that moment. Done badly, ZBB can take up a great deal of precious time on rethinking spending endlessly rather than rethinking strategy.

But whether your organisation has officially implemented ZBB or not, it’s definitely a useful way of thinking to change what you do. If you were starting from zero, what and where would you spend? The answers might surprise you.

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