The Ultimate 5 Step Marketing Budget – Part 4

Non-Working Budgets that Work Hard

Welcome to Step 4 of the Marketing Budget Process.  By this point, we already have a top level monthly budget of $48.2M.  Now we just have to figure out how to spend it and we’re going to start with the non-working budget.  In some circles the concept of a non-working budget is considered passé, but call it what you will, some of the marketing budget needs to be allocated to creating the marketing assets. As a reminder, this is the full process.

5 Step Marketing Budget

1. Business Goal Setting
2. Finance Constraints
3. Total Marketing Budget
4. Non-Working Budget
5. Brand, Activation, and Channel Strategy

While this week is primarily focused on the non-working budget, we need to cheat a little and dig into channels enough to at least understand which channels we will be running and when.  The major plans for this year include supporting a new product launch in March, peak summer season, and a holiday sale.

The major events will be supported with mass media, including TV, radio, and out-of-home, as well as high-impact digital and digital lower funnel support. This is enough information to tell us we need to set aside a significant portion of the budget for brand media as well as production.  We also know that at this level, we are likely to want to use creative and media agencies and should set aside money for agency fees. Finally, with a budget of this size, we will also want to invest in measurement against activation AND brand metrics.

Ask ten marketers how much of the budget to set aside for production, and you’re likely to get back fifteen different answers. With that said, we can use ranges and average production costs to arrive at a baseline assumption.  The most common range for production spend is 5% on the very low end to 25% on the high end.   

What Is Included in a Non-Working Budget

Here is a list of common elements in a non-working budget:

• Creative Concepting
• Creative Production
  • Video
  • Photography
  • Digital Display
  • Out-of-Home
  • Radio and Streaming Audio
  • Trade show booths
  • Native Ads
  • Print
  • Email
• Public Relations & Events
  • Press Kit
  • Live Events
• Marketing Research
  • Brand Trackers
  • Brand Studies
  • Product Research
• Agency and Consulting Fees
  • Creative Agency
  • Media Agency
• Platform Fees

I won’t cover all of these in this article, but let’s dig into a few of the bigger elements.

Production Costs

WebFx offers a great resource on marketing production costs by channel. Of the channels in play for the upcoming year, production costs for TV are the most expensive by far, with an average cost of $342K for a 30 second ad. In addition, there will be 15 second spots, variants to run a YouTube.  The ad created for the product launch should be able to carry through the bulk of the summer sale.  A second creative concept will be used for the holiday sales period and we can budget for similar expenses.

Television ads are just one type of asset.  Be sure to set enough budget aside for all of your content needs.

Creative and Media Agency Fees

Could you run without an agency?  Maybe.  If you already have exceptionally developed in house creative development and media buying teams, and your brand budget is on the small side, you could forego the agency and manage the work internally.  It does require a candid assessment as to whether or not the internal team has the ability and the bandwidth to create and run a major campaign.

According to extensive studies by the IPA in The Long and Short of It, investing in outstanding creative significantly increases the brands chance of creating large business and brand effects. Is it a guarantee? Certainly not.  In fact, the Gunn Report shows creatively awarded campaigns have lower direct business impact in the first year, but by the second year in market, creatively awarded campaigns show ESOV (estimated-share-of-voice) efficiency over 9x that of non-creatively awarded campaigns.

With regards to media agencies, many brands balk at the idea of paying 10% or more on media buying fees, and indeed, if a brand is running a lower budget on a limited number of channels, dollars spent on agency minimums may have been better spent on buying more media.  It makes more sense to invest in a media agency when their fee based on ad spend is in little jeopardy of falling below the minimum.  Often, and especially with larger media buying agencies, discounts on media rates earned by the agency help defray the cost of the management fees.  In addition, a dedicated team of media planners and buyers can better amplify the message of the new creative.

Marketing Research

In this scenario, we plan for an in-depth brand tracker 2x per year, as well as an ongoing monthly tracker to measure the campaign.  Why do both?  The semi-annual in-depth tracker should be viewed as the official word on brand health.  The monthly tracker measures the campaign specific impact on brand health.  Noone wants to spend millions of dollars on a large campaign only to find out it had negligible impact on the business and to not know why at the same time.  Was it because of poor creative or ad recall?  Was the media plan not hitting a wide enough audience or applying enough frequency? The more frequent monthly tracker allows the brand to make sure they are tracking to goals, to plan for future cycles, and to improve the creative and media mix.

Public Relations & Live Events

Do you have an internal comms team or are you outsourcing? Earned media is often overlooked, but should be a key player in any brand’s strategy as this traffic often outperforms other sources.

Platform Fees

Platform fees can range widely, and even within an organization, there can be a lack of consistency as to which types of platform fees are considered part of the marketing budget vs. hitting another P&L.  This budget assumes martech, as well as labor costs, are handled in a different P&L.

How much should be allocated to non-working?

But just get to the point already, how much should be allocated to non-working media?  Start with a bottom’s up recommendation

In this sample budget, 15% of the total budget is allocated to non-working media.  Agency fees are based off brand spend and PR is a percentage of total non-working media budget.

15% Non-Working

Using the same top-level budget, but allocating 20% to non-working media significantly increased the amount of money available for content creation.  This budget may support two major brand efforts, or a single larger effort than the previous budget.  

20% Non-Working

Media agency fees, which are most often based on a percentage of media spend, decrease in proportion to the working media budget. This begs the question as to why a business would remove more money from media spend to apply to non-working media.  What is missing in the calculation is the impact of earned media. A more developed spot can increase high-quality earned media impressions at more efficient rate than paid media. For further reading, AgencyMania covers this topic in more depth.

Throughout this process, be sure to leverage the experts on your team to estimate the specific line item budgets. This ensures team buy-in and alignment against objectives that will undoubtedly be a part of their individual goals in the coming year. 

Now that the working budget is set, we’re ready for the final article in the series where we will allocate budgets by channel between brand and activation efforts.  At that point, the working budget will be ready for a final review and share out.  See you next week.