How to Use the Budget Better

Deciding how much to budget for communications is an under-exploited field of expertise: but the rules are well known, even if rarely applied. How to divide up the budget once youve got it is the real key to operational success or failure.

The marketing budget is a substantial part of most companies operating costs, and much of it, traditionally, has gone on advertising (however defined).

The actual process of setting budgets has for many years remained, in most companies, an arcane form of guesswork, negotiation and the application of ancient rules of thumb. The various methods used are described at length in Simon Broadbents The Advertising Budget,1 and more tersely in an old, but still definitive, paper by Harry Henry.2

Both writers conclusions can be summed up, succinctly, as favouring a task-and-objective-based approach to setting budgets. This, supplemented where necessary by modelling, is the only method that really does justice to the problem. Nonetheless, history- based methods seem to prevail. As recently as 1991, a survey of large advertisers in North America and the UK showed only one-third of these presumably very sophisticated marketers using task-based methods, and many of these were doing so in conjunction with less sophisticated approaches.3