How much do you need for marketing next year? Depends. How many customers do you want?
Budgets. Such an ugly word. So… constricting. There are multiple approaches to budget-building, but most are variations of either the top-down or bottom-up approach. As you begin your 2020 marketing plans, let’s talk about the differences, benefits, and downfalls of the two most common ways to budget for your marketing expenses.
When Should We Start at the Top? The Top-Down Marketing Budget.
In a top-down budgeting model, an executive team reviews data from prior years, sets revenue and profit goals for the upcoming year, and establishes target budgets to support those goals.
Advantages
The underlying premise is that the market will behave largely the same and that a similar marketing approach will drive similar sales results – possibly ignoring market or technology shifts, new competitors or changing strategy. Additionally, a top-down budget doesn’t invite buy-in from department managers, opening the door to defeatism or excuse-making. “We could have been more successful, if only we’d had a say in the budget.”
When Is Blue Sky Better? The Bottom-Up Marketing Budget.
In a bottom-up budget scenario, each department starts with a blank budget and blue sky. Marketers know their target audience and their target growth goals. Campaigns are planned. Expenses and results are estimated by line item, and a final budget number is produced. Sounds perfect, right? The marketers have a clear strategy, marketing calendar and tactics, and they have bought into the plan and have accountability for the results.
The Disadvantages
The disadvantages to a bottom-up approach are most visible when each department’s budget is brought together.
So, what’s the answer? In most cases, the size of your business will dictate the level of flexibility you have in the budgeting process. Even in top-down environments, though, the bottom-up approach can be useful. As tactics are refined or removed to align to the top-down target, the bottom-up approach provides immediate insight into the impact of the marketing results.
Not sure where to start? The following resources should give you a great starting point for goals, data structure, and marketing plans in 2020: