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A finger in the air still widespread when it comes to budget setting

Setting budgets based on gut feel, intuitionMeasurement ROI and previous year’s spending levels is widespread among brand owners according to a survey of CMO’s conducted by Columbia Business School. Of the 243 executives surveyed 57% don't establish their budgets according to ROI measures.

Sixty-eight percent of respondents said they base their budget decisions on historical spending levels, while 28% said they go with instinct. 7% said most of or all their spending decisions aren't based on any metrics at all.

The results of this work were picked up by Advertising Age this week, and perhaps this survey reinforces the widespread approach to the issue. ROI and Metrics tend to be several steps removed from the brand owners experience- and undoubtedly there is a place for going with your feelings in many instances.

The survey noted that ‘22% use the most basic measure -- brand awareness -- to gauge marketing ROI without necessarily determining even whether the awareness is positive’.

Brand effectiveness and brand value are often confused- there is little agreement within the industry as to how this should be analysed, while the latter by contrast has spawned significant entities (Interbrand, Millward Brown's BrandZ, CoreBrand and Brand Finance) that rarely agree with each others valuations. I guess this is why the ratings agencies land in such hot water when they tinker with the triple ‘A’ standards of European nations.

It would make sense to agree a global standard for marketing effectiveness, and should that ever become a reality there will be significant relief expressed on both sides of the discussion.

Measurement is at the core of the debates raging within PR, Social Media and Design, and in my view the important principal is to be prepared to apply a range of measures at all the stages of intervention. Take for example Mintel’s consumer funnel model used in the car purchase process. At each of the twelve steps there is an action that is influenced by marketing, so arguably all twelve points should be measured to see how far along the decision process the consumer has reached.

While generally this idea of a journey has been replaced by smarter ways of thinking (McKinsey’s Consumer Decision Journey- nicely illustrated by Robin Grant at WeAreSocial) nonetheless the more data the brand owner or agency can collect in advance of the purchase the stronger the conclusion that can be drawn as to the effect of the communication.

Capturing and tracking those interventions is part of the project management side of client communications. Where there is a need to match this against spend (and when is there not) then a system that enables this activity to be measured, costs compared and progress registered - has to be the best way forward.

 

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