Experimental budgets key for brands

11 June 2014
NEW YORK: Marketers seeking to prosper in the multichannel world could benefit from committing a set proportion of their budgets to experimentation, a new paper from Warc argues.

What we know about marketing budgets suggests the complexity of allocating the limited resources available to brands has grown dramatically with the rise of digital channels.

In response, Coca-Cola has established the "70/20/10" rule, whereby 70% of spend goes towards low-risk media and activities, while 20% supports proven innovation, and 10% is committed to experimentation.

The company's Fanta brand, for example, invested 70% of its marketing budget in TV ads, shopper marketing, and outdoor; a "mime spoof" received 20% of its outlay; and a "big-bounce" interactive experience took 10%.

"Within such a model major brand marketers have discovered that the 10% high-risk category also can represent high rewards," the study says.

The world's biggest retailer is pursuing an equivalent approach, according to Stephen Quinn, executive vice president and chief marketing officer of Walmart US.

"We put 70% of our headcount and resources against what's proven, and what's big, and what we know helps the business," he revealed.

"We've got 20% that's new … And then about 10% of our spending really needs to be against what's next, because otherwise we're just not going to master the things we need for the future."

Further illustrations cited by Warc's paper include fashion footwear brand Cole Haan aiming to achieve buzz rather than reach by dedicating a small budget to an innovative channel: after-hours storefront rolling gates.

Sports brand Mizuno enjoyed similar success targeting its reduced marketing funds at 600 influential runners across America, a strategy that helped it build an online community of 40,000 "running junkies".

Programmatic advertising offers the potential for cost savings and optimisation, a model used by Kimberly-Clark to target its expenditure for various campaigns, such as an effort for Kleenex in the UK.

Data sourced from Warc
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