‘Triple-Cooked Marketing Budgets’: The full recipe
Marketing budgeting is flawed. Marketers are more confused about budgeting than ever before. Here’s your complete three-step guide to fixing it for 2023.
I love a bit of physical interaction with fellow marketers. That always sounds dodgy, no matter how I phrase it. Like I’ve just finished giving your CMO an overly vigorous backrub. But you know what I mean. Whatever we call the ongoing recent activity of staring at Teams on a monitor, I prefer the opposite.
You know, physical stuff. A speedy pint. An unexpected encounter. A crafty cigarette. A download of dirty gossip. A new friend. An old enemy. A bit of business. Your greatest hour on Google Meet never came close.
And that was very much the way of it last week at the Festival of Marketing. I crammed three missed years of interaction into 12 hours of intense banter. There were all kinds of outcomes from my rotations, but perhaps the most important was getting some perspective. Marketers I knew and respected were all around me and I could ask them what they made of X or what they thought the Y of 2023 was likely to be.
Perhaps my favourite interaction of Festival happened the night before. I flew out to Dublin to give a talk for LinkedIn and then had a bazillion pints of Guinness with old friend, B2B supremo and fellow Marketing Week columnist Jon Lombardo.
Lombardo is very well connected with a lot of very big marketing companies and is always quick to shoot down my ideas. Which means when he likes one or suggests I look at something, I am quick to take the advice. When I talked to him about budget-setting, I immediately expected a bullet. But the more I talked, the more animated and supportive he became.
So animated that he did not notice when I whipped out my iPhone and captured the exact moment I realised I was going to write this column.
So here goes. And if this does not work, I blame Lombardo and eight pints of the black stuff.
I think marketing budgeting is fucked. I think it has always been a bit fucked. But it seems generally more fucked now – more than ever. And it’s not getting any easier. For all our acronyms and case studies, I think most marketers are more confused about 2023 budgeting than at any point in our history.
Excess share of voice (ESOV), marketing mix modelling (MMM), objective and task, zero-based and a barrel-load of econometrics have just made things worse. Insecure and inexperienced marketers will disagree and claim they have “scientific” methods for setting exact marketing investments. Older, more experienced heads will shake and admit the process is a calamitous, moving bag of snakes.
Marketers have failed in what is one of their most important, yet basic, challenges. And there is a great parallel here with chips. Yes, chips. About 30 years ago, wonder-chef Heston Blumenthal had come to a similar conclusion about potato chips. Despite their ubiquity and importance to British diners, they were often abysmally bad.
Three data-led pointers for marketers during budget season
Blumenthal became “obsessed with the idea of the perfect chip” and a method that always resulted in perfection. His research went in a hundred different directions until it settled on a simple three-stage approach that the Sunday Times now describes as the chef’s most influential culinary contribution.
First, you simmer your potatoes for 20 to 30 minutes then put them in the freezer. Second, fry the chips for about five minutes at around 130C then put them back in the freezer to cool again. Finally, put them in the deep fryer for approximately seven minutes until crunchy and golden.
The beauty of triple-cooked chips is that the outcome is always amazing. Always crispy and golden and lovely. Yet, despite these results, the method of achieving them is far from exact or expert. Anyone can do it. You can be approximate in most aspects of the simmering and frying and still end up with the best chip you’ve ever tasted. The simplicity and approximation of the three stages always delivers the deep fried goods.
Triple-cooked chips were on the menu at the Dublin restaurant that night when Jon and I went out. And the synchronicity of the chips, and the conversation, and the ongoing pain I feel from most marketers when it comes to budgeting, resulted in a new approach to budgeting I would like to call ‘Triple-Cooked Marketing Budgets’. I offer it up here for your delectation.
Step 1: Simmer at 10% of revenues
Grace Kite is a rare one. In a move that sets her very much against the majority of marketing thinkers, my fellow Marketing Week’ columnist’s thinking exceeds her fame. This is unfortunate because many of her best ideas don’t get the airtime they deserve. Recently, for example, she wrote a wonderful monograph about budget-setting, in which she made a rather revelatory observation. In looking across the ARC database, Nielsen data and the work of Paul Dyson, she found the same consistent pattern.
According to Kite, a “good rule of thumb” is to spend between 5% and 10% of your revenues on advertising. That proportion will usually enable you to achieve competitive excess share of voice and ensure the maximum return on investment. Let’s set the dial at 10% and move on to our second step.
Step 2: Long-and-short pan-frying
Too many marketers have tried to study their own brands, categories and market share to ascertain the optimum future spend, and the balance of that spend that should go between brand and performance. But unless you are Diageo or P&G (and maybe even if you are Diageo or P&G) you are likely to run short of data, money and clarity on your quest for the magic numbers.
So why bother? Why not use the extensive array of historical case studies to develop a less customised but altogether more practical approach to budget allocation? Rather than predicting the optimum future for your brand, look back at historical lessons from numerous similar brands and steal their approach instead.
Despite the Dark Lord of Penetration, Byron Sharp, dismissing Peter Field and Les Binet’s work on The Long and the Short of It as “just a number”, it’s much more than that. It’s lots of numbers. The so-called ’60:40 rule’ that recommended spending 60% of your budget on branding and the rest on performance was based on early agglomerated FMCG data. In the subsequent years, Field and Binet have altered their titular split with all kinds of contextual variables, which move the brand and performance spend up and down depending on industry type, pricing and category maturity.
Rather than a six-figure ramble in the jungle of dodgy econometrics, why not trust this data – which is, after all, built from hundreds of previous case studies? It can provide very useful parameters for how much of your 10% of revenues should go to brand building versus the amount dedicated to the performance team. The New Zealand brand tracking firm Tracksuit has even produced a super-cool, super-simple calculator that takes all the Field and Binet variables into account for your business and spits out an ideal split between long- and short-term investment.
Apply these proportions a priori to your marketing budget, to gain the optimum approximate balance between brand and activation. And then move on to the final part of the recipe.
Step 3: Deep-frying with two timers
For our final stage, you need to assess the impact of your investments. Here, again, we could enter the maze of marketing mix modelling, which leads to so many ulterior conclusions that it may confuse more than it clarifies. And for most marketers, the simple cost of such things is prohibitive.
So don’t bother. Most marketers get confused assessing their performance because they are fundamentally trying to measure two completely different investments with the same metric. Using a thermometer to track both daily temperature and miles travelled.
I’m often asked for the ‘killer metrics’ that all brand managers should be measuring. And I always point out the impossibility of that question. The only correct answer is to step back from metrics and examine the initial objectives that formed the original intent. The way to measure any marketing activity is by revisiting the objective it was designed to achieve. You should have a benchmark taken before the activity and a goal; with your analytics, go and see if you achieved it.
Marketers have failed in what is one of their most important, yet basic, challenges. And there is a great parallel here with chips.
In the case of performance marketing, the metric is simple and essential. How much money did you invest in each tactic and how much did each generate in ultimate profit for the brand. Short-termism, and the ability to atomise overall budgets into each individual campaign cost and result, means that ROI is the metric you need to apply here to justify overall spend and assess individual campaign and media metrics. What pulled best?
But for brand investments, the average marketer simply cannot show an (accurate) financial return from their efforts. That does not mean that a financial return is not an eventual result of the work, or that it is not a crucial investment for any businesses.
Back to my point about metrics being a direct expression of the objectives that spawned them; it is clear that, if we invest money to build our brand, we should measure that investment in brand metrics, and those metrics will depend on what aspect of brand your strategy is focused on. For example, an improvement in category entry point associations. Stronger brand associations. Increases in whatever stage in the funnel you deem essential. An increase in price insensitivity. Whatever the objective, make that your metric.
Ah, but what about the dreaded spectre of the suspicious CFO, which haunts every marketing conference session ever run? I remember an achingly gorgeous French girl I met 30-odd years ago and how I tried to impress her with my terrible French. The more I tried to converse en franglais, the less impressed she became. And I started out pretty fucking low on the ‘Je suis impressionné avec Mark’ scale.
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I fear many marketers make the same mistake with their financial colleagues. Desperate to ‘talk the language’ of the boardroom, they produce dodgy financial metrics and specious econometric estimates of return – probably making their already uncomfortable CFO all the more concerned with these weirdly derived, poorly explained analyses.
Instead, do what others do at board level. Have you ever seen a McKinsey partner in full flow? They aren’t leaning on data they do not understand. They declare assumptions, embrace the imperfections of forward investment, and use history and extant data to make their case. Do the same with your next budget. Do a basic literature review and make the simple case for Triple-Cooked budgets: 10% will suffice, and the proportion of it that other successful brands in our position used for brand building will also serve us equally well.
Of course, I am well aware how badly the Triple-Cooked method will go down with quant jocks and the esteemed abstract expertise of ‘marketing Twitter’. But it is not to them that I propose this simplistic approach. Let them glory in their complexity and revel in the continued confusion they elicit in others.
Instead, it is for the forlorn marketer – trying their best to work out the optimum investment levels and how to make a case for them – that I enter the kitchen. If a hundred average companies adopted a Triple-Cooked marketing budget for the next three years, the vast majority would be in a much better marketing place by 2027.
I believe in ESOV. I abhor the approximation of advertising to sales ratios. I think a zero-based approach is a perfect starting point. But I also think most marketing budgeting is totally fucked. We need to acknowledge that marketing is a practical pursuit, and that 50 years of budgetary advice and advances have not helped the everyday marketer in this all-important stage of the process.
Hence Triple-Cooked marketing budgets. Approximate. General. Basic. But effective too.