How Can You Benefit from Zero-Based Budget
Being able to forecast with a high degree of accuracy and make accurate predictions is what makes a great marketer. Marketing specialists do have to be creative and come up with new solutions, but they also have to be at least somehow good with numbers.
There is this technique that you might have heard of before called zero-budgeting. And to be able to use it one really has to be good with math, as it is more of a data-driven approach.
It is very common that marketers do planning for sales and expenses for the future year using figures from the previous one. And yeah, then they would add just a random percentage to make it look more realistic.
But is it really realistic? It’s almost impossible that the numbers in the next year will be just like they were in the last year. The competitors can get more active and build a stronger online presence. Consumers might fall in love with another business. It’s hard to tell, but it will hardly be the repetition of the previous year.
Zero-based budgeting is what can allow you to plan more precisely and accurately. By using this method, you can make sure that your budget is realistic and that it reflects possible hardships and goals for the future year.
ZBB is when we start calculating from zero. So we do all the calculations from zero base, we do not use the numbers from the past. When you start at zero you have to estimate every expense carefully and think about what the company really needs.
One of the brands that are applying ZBB and seeing great results is Unilever. They are saying that it helped to invest more productively into their marketing. They also saw a decreased cost of the ad production. By implementing ZBB, they are able to minimize waste and reduce overheads. You can find out about their results in more detail here.
ZBB can successfully help you reduce waste by reducing ‘what’ and strategically adjusting ‘how’. Our aim is to decrease costs without having to sacrifice growth. Look at this piece of visual content from Bain:
What is zero-based budgeting and how can it help you?
As you can see, there are a lot of tips that have something to do with rationalization and elimination of all unnecessary expenses and services. That’s what ZBB is all about.
Let’s say, you are working on brand development. And your TA is people who are between 22 and 30. And in the last year, just like many years before you spent a large part of the budget on a traditional channel like TV. But your investments hardly pay-off. Should you repeat your last year when you see that TikTok is growing its audience and there are some much more relevant platforms for your audience that could bring much more conversion?
Zero-based marketing can help you to save up for 25% of your spending in some categories. And these resources could be used in a much smarter way that will pay-off.
How to apply ZBB
By relying on a zero-based budget, we focus more on the existing opportunities and challenges of the market. ZBB is able to affect the business activity during the campaign. Look at these examples:
- the team might discover that the segment is oversaturated locally, but there is demand in other countries, so they start planning a launch in the world market and reassign spending;
- the team finds an opportunity to launch a new product, so they quickly reallocate resources to support this launch;
- the current ad campaign opens a need for a new product or services from your audience, so the budget gets reallocated to source collaboration;
So, from these examples, ZBB is all about being agile and adaptive. It is s when we take into the consideration surroundings, the environment, and the current state of the market. ZBB is unimaginable without a team that is ready to collaborate and adapt.
This method can be applied to internet marketing just like any other industry. And if you feel like there are better ways to spend that 20% of saving, maybe it’s time for you to try it.