Marketing Week outlines 12 trends, predictions and issues that will gain pace over the next 12 months. We look at Zero-based budgeting and the impact it will have.
Several trends have coalesced to make zero-based budgeting an imperative for marketing teams in 2017. The practice requires marketers to justify spending on all new activity, rather than having set budgets based on revenues or the previous year’s spend. This carefully costed approach reflects the economically uncertain and austere conditions under which many marketers now operate.
The latest IPA Bellwether report forecasts that ad spend in 2017 is set to decline by 0.7% as business investment is pared back in line with the continuing uncertainty over Brexit. Moves to consolidate agency services, payment-by-performance agency models and increased scrutiny of digital metrics will also lead more companies to adopt zero-based budgeting as a way of keeping a closer check on their spend.
The motivations are not just financial, though, and are also driven by the need to work in a more focused and targeted way. Charles Ireland, Diageo’s new general manager for GB, Ireland and France, recently told Marketing Week that the drinks group adopted zero-based budgeting earlier this year as “a requisite of being a world-class organisation”. The company wants “to get the same services but more efficiently”, he said.
Marketers will face a series of challenges as zero-based budgeting becomes the normal way of doing business in 2017. Agency relationships will have to be renegotiated as tighter cost controls and targets increase the burden on both sides.
Internally, marketing teams will require people who are both financially-minded and effective planners. They will also need to keep creative marketers happy and create working environments that do not feel too stifling or rigid as the purse strings tighten in 2017.