Marketing Procurement

5 actions to offset marketing budget reductions

Finding Value

“Price is what you pay. Value is what you get” ~ Warren Buffett

If you’re like many marketers, 2023 budgets have either been frozen at last year’s level or reduced considering what many organizations believe will be a soft economy in this year. That said, company expectations relating to brand development, customer acquisition and revenue generation goals can seem daunting.

The good news is that five key steps can be taken to offset budget reductions and refuel marketing budgets:

1. Review and revise annual Scopes of Work – Working in conjunction with your agency partners, representatives from the marketing and procurement teams should reassess project deliverables relative to approved spend levels and make the requisite adjustments. Focusing the extended team’s efforts on strategies and tactics that are critical to attaining the organization’s core business goals is the top priority. Out-of-scope work should be prohibited and, at a minimum, tightly controlled and non-essential programs postponed until business conditions improve or additional marketing funds are allocated.

2. Evaluate and improve Client/ Agency work processes – The opportunity for efficiency gains in this area are numerous, particularly in longer term relationships where too often bad habits, that drive costs up or limit market timing opportunities have become the status quo. Key areas to review include the creative and media briefing and client-side approval processes. Inefficient approaches to these basic tasks wastes time and increases project costs. Conversely, tightening brief development and streamlining the approval process can reduce fees associated with agency rework costs and decrease the time required to execute certain tasks.

3. Right size your agency network – Over time, an organization’s roster of agency partners can swell to unwieldy levels, leading to management challenges, overlapping resources and duplicative costs. Internally reviewing each agency’s roles and responsibilities to identify opportunities for focusing each agency’s resource offering and reducing overlap. Longer term, consider the creation of broadcast and digital production and content curation and production centers of excellence, consolidating activities in this area to generate scale economies and reduce agency fee outlays. Additionally, work with your agency partners to identify opportunities to remove links from the marketing/ advertising supply chain. In short, reduce the number of intermediaries involved in the production, placement, and trafficking of your advertising to reduce unnecessary (and often redundant) fees and costs.

4. Review agency financial management practices and contract compliance – Auditing agency compliance and financial stewardship can lead to the identification of billing errors, earned but unprocessed credits, unbilled media balances that should be returned, the application of unauthorized mark-ups and agency time-of-staff under deliveries that could result in financial recoveries. Additionally, the independent review of project management, job initiation and reconciliation processes can lead to cost avoidance strategies that result in meaningful savings.

5. Reconsider the “Estimated Billing” process – As interest rates have increased, so too has a company’s cost-of-capital. One key tenet of any organization’s treasury management practice is to retain control of its money for as long as possible. However, when it comes to advertising outlays, the industry tends to work on an “estimated billing” process where each agency bills for work to be done, services to be procured or media to be purchased upon approval, with the pledge to reconcile estimated costs to actual once a job has closed or a campaign completed. Unfortunately, this results in an advertiser’s funds being held and managed by others, with no economic benefit (e.g., interest income) and some level of financial risk. Consider reworking estimated billings terms that are more favourable or moving to a “final billing” process whereby invoices are submitted by the agency for payment once services have been rendered and third-party costs validated. In turn, advertisers should be prepared to tender payment upon receipt of these invoices, so that none of its agency partners is required to go out-of-pocket to compensate third-party vendors.

Taking some or all of these actions will help to offset the impact of budget reductions or freezes. As importantly, an open-minded review of a marketer’s partners and processes will generate financial recoveries and future savings that will improve your return on marketing investment.

About the author

Cliff Campeau, MBA, PCM®  is a Principal with AARM | Advertising Audit & Risk Management, a marketing transparency accountability consultancy and compliance auditing firm based in San Francisco, CA.  Campeau is a frequent blogger on topics related to optimizing advertisers’ return-on-marketing-investment through enhanced contract compliance and financial stewardship initiatives.