Is ZBB (Zero-Based Budgeting) Mismanaged by Advertisers?

ZBB had a more innocent past when Peter Pyhrr a manager at Texas Instruments TI in Dallas developed the idea of preparing his 3970s budgets as if the previous year39s figures had not existed amp160According to The Economist quotevery assumption had to be rethought from scratch and then justified It was not acceptable to use last year39s expenditures as a benchmark for the current year39s budgeted costsquotZBB was less about budgeting and more about assumptiontesting and problem solving amp160ZBB required an ongoing evaluation of the causeandeffect factors that drove performance amp160If budgets were not delivering the required outcomes ZBB needed to figure out why amp160quotLet39s check all our assumptions and create new budgets from scratchquot amp160ZBB was an quotupstreamquot activity reexamining problems solutions and plans not just a quotdownstreamquot activity that adjusted budget lineitemsIn the marketing world advertisers have brands whose sales growth rates and profits need to be managed amp160Agencies are engaged to work on the brands media plans are established Scopes of Work are developed and spend levels agreed amp160The budgets that document media creative and production expenditures are based on assumptions about what combination of media messaging and content will drive brand performance amp160Budgets are at the bottom of the funnel amp160They are the outcomes of deliberations not the main actIf as is the current case brands are not growing and this is true for nearly every legacy advertiser then the agency media plan and Scope of Work assumptions need to be reevaluated amp160Ultimately there may be budgetary consequences although quotcutsquot are not the only possible outcome ZBB39s evaluation of quotwhat it takesquot to get brands moving again might conclude that greater spend levels are required amp160ZBB does not exclusively mean quotcut costsquot amp160The quotzeroquot in ZBB is not a benchmark or the only direction budgets should moveWe do not hear much from CMOs today about their vigorous plans to get brands moving again amp160All we hear about are their budget cuts and agency changes under the ZBB bannerTinkering with budgets and structure in the name of ZBB while ignoring the problems that the budgets are meant to solve may make performance problems worse amp160Brands that do not perform properly when expenditures are one billion dollars greater will not start to grow when less money is spent amp160Brands whose creative fortunes were managed by legacy ad agencies the Yankees Red Sox Dodgers and Astros of the agency world are not likely to do better under pickup teams that are paid even less amp160There will be no allstars on the AllStar teamAdvertisers seem to be looking for simple solutions or sound bites that suggest that they39re on top of things amp160Their performance problems though are complicated amp160Brand stagnation is the result of changing demographics Millennials replacing Baby Boomers ecommerce Amazon et al media fragmentation digital and social versus TV changing media consumption from TV to mobile and the strength of whitelabeled products in the tradeProperly done ZBB is an appropriate tool to examine what changes are required in plans operations and expenditures to address performance challenges amp160Marketing procurement and agencies should work together on the reexaminations amp160This is not how it is currently doneTinkering with budgets in the name of ZBB discredits the methodology and may make things worse amp160Under current ZBB practices agencies and brands are being enfeebled at an accelerated rateCartoon credit Gahan Wilson The New Yorker The Cartoon Bank amp160With permissionClick the social buttons above or below to share this story with your friends and colleaguesThe opinions and points of view expressed in this content are exclusively the views of the author andor subjects and do not necessarily represent the views of MediaVillagecomMyersBizNet Inc management or associated writers

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Is ZBB (Zero-Based Budgeting) Mismanaged by Advertisers?

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Michael Farmer

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Is ZBB (Zero-Based Budgeting) Mismanaged by Advertisers?

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