The Brand Budget:
There has been a lot written recently acknowledging the budget challenges facing marketers who are being asked to “do a lot on a little.” If there was ever a challenge that warranted a reframe, it was this one. If you only have a little, then don’t try to do a lot. As the great Roger Martin (author of Playing to Win) says, “Confident companies do less”.
To help you operate successfully within this reframed challenge, we are going to give you a budgeting framework to guide you and show you how to bring focus to what you do, as well as point to a winning playbook that is applicable irrespective of budget size. That is not to understate the obstacles smaller brands face but more to offer hope that no matter where you are on your journey, there is a path to growth that is supported by evidence and advocated for by many of marketing’s thought leaders.
So, let’s kick off with a budget framework, which is intended to be a set of guidelines rather than a set of rules. Many of you will spot that the framework captures the contributions of some great people, including Mark Ritson, Grace Kite, Binet & Field and Byron Sharp as well as some of our shared experiences.
Brand Budget Framework: How to optimise your spend
Step 1: Take a ZBB approach
So often, the year 2 budget is submitted at the same level as the previous year with an additional request to cover inflation. The principle of zero-based budgeting is that you start from £0 every year. A necessity in a small business and a revelation in a big business because it forces an honest review of what worked and what didn’t.
Step 2: Apply 10% of sales revenue to advertising
In looking across the ARC database, Nielsen data and the work of Paul Dyson, Grace Kite found that spending between 5% and 10% of your net sales revenues on advertising will usually enable you to achieve a competitive excess share of voice and ensure the maximum return on investment. The Marketing Week article by Mark Ritson in October 2022 brings this guidance to life brilliantly.
The ‘Triple-Cooked Chips’ budgeting method: The full recipe
Step 3: Optimise your working spend and cap your non-working spend for your brand budget
Many companies, including the likes of Unilever and Heineken, make sure 80% of their total spend is allocated to what they call working spend, i.e. it is spend that reaches their audience. The non-working spend, for example fees and other costs, are capped at 20% of the total budget.
So this means your overall marketing budget will be higher than the 10% of net revenue.
Step 4: Apply the 60:40 guideline
Having established the amount of working spend you have, it is then time to consider the right split of that budget. I am sure you have all heard of the guidance offered by Binet & Field that suggests spending 60% of your budget on ‘brand building’ and 40% on ‘activation’. In the IPA paper ‘Effectiveness in Context,’ they provide a brilliant calculator that enables you to get to a number more applicable to your brand.
So now you know how much you have to spend and how it should be apportioned.
Step 5: Don’t spend it all at once
Byron Sharp urges brand leaders to take their budget and divide by 52. Focus on reach ahead of frequency every week of the year.
All too often, we see big brand launches that swallow the majority of the budget in one go. Everyone enjoys the initial spike in performance, but as consumers’ memories decay, the brand rate of sale starts to slide, the customer becomes restless, the sales teams start to question the potential of the new brand, and the supply chain wants to know when the volume that was forecast will leave the warehouse.
To avoid this scenario, the general guidance is to stretch what you can afford across the year so you are reaching as many buyers of the category as possible whilst staying fresh in the memory of these buyers.
This is how it would all come together in this fictitious example…
If you are in charge of a brand team…
Ensure you have some principles for investment, e.g. media share of voice ahead of your share of market.
Provide your brand leaders with a framework within which to operate.
Task them to propose and align on how the overall budget is allocated by brand. Include the Sales leaders on the promotional elements of the budgeting process.
Be ready to step in to facilitate final alignment.
Only at this point would I recommend cascading budgets to the wider brand teams.
Sometimes, it can feel like marketing theory is full of conflict, with headlines like “differentiation v distinctiveness” being an example of the type of energy-sapping headlines we can be confronted with. But the good news is that there is broad alignment that brands grow by building mental and physical availability.
If the long list of impressive sponsors of the Ehrenberg Bass Institute is an indicator, then some of the best brand builders in the world, including McDonald’s, Coca-Cola and Diageo, endorse this approach.
So, what is meant by Mental & Physical Availability?
“Be as easy to notice & buy as possible for as many buyers as possible, across as many buying situations as possible”
Byron Sharp
So, in the context of budgeting, we can tweak this language slightly:
“Be as easy to notice & buy as possible for as many buyers as you can afford to reach, across as many buying situations as possible.”
If Mental Availability is the likelihood of a brand being thought of in a buying situation, then the job of a marketer is to increase the chance of the brand being thought of in many buying situations.
To know how to do this, you need to understand the measures of Mental Availability.
Mental Market Share tells you what your share of all the links to category entry points is in the category your brand operates in. This is the same principle as your share of sales, but we are interested in share of mind, rather than share of market.
Mental Penetration tracks whether buyers of the category can link your brand to a category entry point.
Network Size tells you the average number of links a category buyer can make between your brand and a category entry point.
Share of Mind, which is most relevant for big brands, helps you understand if you are holding your position.
We go into much more detail in our blog 6 Stages of a Mental Availability Assessment, but for now, let’s concentrate on what good looks like and the journey to get there.
The left hand side of the above chart shows the highest scores from our database and the average scores of the leading brands within FMCG. For example, the brand that has Mental Penetration of 92% is Coca-Cola, and the brand with the highest Network Size score is Greggs.
PROMPTED AWARENESS: Sometimes, it’s just about getting the basics right. In our research of 8 different FMCG categories, a startling number of brands were not linked to the correct category.
The chart above shows how many brands have a prompted awareness of under 50% (amber), and many have less than 25% (yellow), meaning that ¾ of category buyers were unable to link the ‘yellow’ brands to the correct category despite being shown logos of the brand.
If you think you might be one of these brands, allocate as much budget as you can afford on increasing the number of category buyers who can link you to the correct category.
Lay this foundation, and you will be ready to move onto the next phase of strengthening your brand’s mental availability.
MENTAL PENETRATION: Just looking at your buyer data can sometimes paint an overly positive picture. Getting to grips with what your non-buyers are thinking is where the richness lies. This chart shows that the majority of non-buyers are unable to make a single link between a brand and a category entry point.
If your brand sits in the lower quartile, then just focus on Mental Penetration. You do this by ensuring that buyers of the category can link your brand to at least one category entry point.
NETWORK SIZE: To increase the chance of being recalled in more buying situations, a brand needs to be linked to more Category Entry Points. The bigger brands tend to have a Network Size of between 5 and 8, with the highest score in our database being 10. Often, it is the case that smaller brands have smaller Network Sizes because their messaging is too narrow.
If we look at the laundry category for a moment, the table shows that non-buyers of the ECOVER brand are able to make a similar number of links to CEPs as the non-buyers of the 4 big brands, demonstrating the potential of ECOVER to add value to customers if they make the brand available in their stores.
Brands like Smol and Method are doing a good job communicating their ‘green’ credentials in a way that is reaching non-buyers. What we know from our analysis of this category is that these brands need to widen their messaging to make more links to ‘effective cleaning’ category entry points. So that is where they should focus their budget.
Up to this point, we have been attempting to show you how you can use Mental Availability as your guide for focus and how to be confident in doing less.
To ensure we have landed this point, we want to reference two themes that come from Adam Morgan’s book Eat the Big Fish. Whilst it was written with challenger brands in mind, it is applicable to all brands in our view.
Sacrifice most of what you want to do. This idea of sacrifice is a path to growth. And it costs you less, not more.
There is a nice story in the book… It might be a made-up one about Picasso, but it is powerful nonetheless.
A visitor to his studio saw a huge block of stone sitting in the middle of the studio and asked the master what it was to be. A lion, came the reply. And how will you make a lion out of this unhewn stone block? It’s easy, said Picasso. I simply get a chisel and chip away anything that doesn’t look like a lion.
Sacrifice and Overcommit work together.
There is no point making sacrifices if you don’t know what you want to double down on.
We have shown that by concentrating on Mental Availability you will identify big clues as to where you should focus, whether that be making sure you are associated with the right category, through to building wider fresher networks in the minds of category buyers.
As the picture of the martial expert smashing through bricks conveys; if you don’t fully commit, it is going to hurt.
Being easy to think of is not enough
This article has deliberately focussed its attention on how you can apply the principles of mental availability to optimise the deployment of your budget, but of course you will need to allocate budget to ensure your brand is also easy to buy. If you run a big brand, then you will want category buyers to stay on ‘autopilot’. As Phil Barden explains in his book Decoded, when the purchase is routine/habitual, then the automatic and effortless processes of system 1 leads the purchasing behaviour. If you are a challenger brand, then you will want to trigger the reflective mental processes (‘Pilot’) to play more of a role in the purchase decision.
So, brands endeavouring to break through need to find ways to disrupt normal purchase behaviour. Tactics to support your distribution could be to allocate more space or impactful displays in key promotional periods. At some point, it will also need to include point-of-purchase materials, including retail media.
Our guidance is not to widen your distribution beyond the point at which you can afford to support its rate of sale. Success in a small number of stores is the way to demonstrate your brand’s potential as part of your customer rationale.
Conclusion:
There is a winning playbook that can be applied to the budget you have available.
The intent was not for us to dive deeply into the tactics but more to provide you with a framework and guidelines, reflective of the current thought leaders in the worlds of marketing and strategy.
There is a wonderful article by Roger Martin, ‘How Brands Grow AND Playing to Win’ published in July of this year, where he explains why he embraces the concepts of mental & physical availability and repeats a previous assertion that he sees marketing and strategy indistinguishable from each other.
https://rogermartin.medium.com/how-brands-grow-playing-to-win-e299cb2ac663
We can’t think of a better way to conclude than with this highlight from the article;
“Never forget to think about how to build and maintain physical and mental availability of your offering. Otherwise, the rest of your Playing to Win work will go to waste.”
Roger Martin July 23.
‘Don’t try to do more with less’ was co-authored by Martin Coyle and Mark Smith – Partners at SmilingCFO
Martin has led Sales & Marketing teams in multiple countries.
From £1bn + turnovers, with large commercial teams, to leading ‘emerging growth divisions’ alongside founders and entrepreneurs, he has a track record of building brands and developing people.
Link with Martin here on LinkedIn
Mark combines his brand positioning expertise with the latest in data-driven marketing strategies. He has an MBA in business and has completed both of Mark Ritson’s mMBA marketing programmes. As Founder of Brand Positioning, he has consulted on brands such as Whitbread, Yamaha, Budweiser Budvar, Pizza Hut, Boon Rawd International, Slimming World and Risk Capital Partners.
Link with Mark here on LinkedIn
If you are interested in how a Mental Availability Assessment can help your brand team and assist them to build a brand budget rooted in strategy then have a watch of our 10 x min video:
