Brand Budgets: Getting a Piece of the Pie
As an industry consultant, I am often asked, where is the money at a CPG, and how can my company get a piece of it? While the question is simple, the answer is not.
Companies who want to work with CPGs can’t understand why a brand with a $50 million budget has no money to spare to test a new offering, ad unit or partnership. Whether a brand has a budget of $10,000 or $10 million, the answer is often the same: “My budget is already set. It’s unlikely that I can afford this, but tell me your idea and I’ll see.”
First, be aware that many of the final decisions about budget are out of the control of the people you may be pitching/speaking to. Getting to the right people is another story.
Let’s assume you do, though. Every year, a brand is given a budget based on the sales it is anticipating for the upcoming year. Usually this planning begins 18 months in advance. The first thing a brand determines is what upfront costs it needs to deduct from its budget. This can include corporate commitments (dollars brands must put aside for joint or mandated corporate programs), trade programs (usually the same or more from the prior year) or coupons that may be included in corporate events. At some companies, this money is taken off the top, and the brands don’t see the dollars; at other companies, brands see the dollars but can’t touch them. Often these costs can take more than 50 percent away from the given budget.
The next thing a brand will do is lay out its priorities for the year. Is there a new product introduction? How many different products in its line need some type of support? Is there a sponsorship that it needs to ensure it has dollars for? Will it put a percentage in reserve for any unexpected issues? Will there be new initiatives later in the year? (Often, there is a product in test, and the decision to roll out isn’t reached until after the budgets are finalized.) Once the budget is set, there is little room for adjustments.
In each case, a brand has to decide how to slice up the budget. If it wants to try something new, what should it sacrifice? Brands don’t get dollars added to their budgets; they just slice up the pie differently. There’s been a lot of press about brands putting more money into digital or social. Brands are not getting additional funds to do this; they are sacrificing elsewhere.
Some brands may have test budgets; others may even have an innovation group with a small budget for testing. But unless these new programs are scalable, they aren’t going to truly affect a brand’s sales in the long run. The best approach is to incorporate the new technology into a program that is already in the plan; make it another spoke in its wheel, as opposed to the centerpiece. In this way, the program’s success or failure is not dependent solely on the innovation.
Brand people are inundated with unsolicited ideas. Often they ask their agencies to vet the ideas for them. If your product is specific to an area, such as shopper marketing, it’s best to pitch the idea to the shopper marketing agency for a particular brand. If the agency likes your idea, then it will become your internal champion. Brands rely on their agencies to show them cutting-edge technologies and innovations. For digital agencies, it’s harder; most brands have a roster of agencies they are asked to stick to. Brands are impressed with agencies that deliver break-though thinking. Sometimes a new agency will get included in a project so the brand can personally see the interaction.
Nothing is as important as networking. During my tenure as a brand marketer, I met with many companies because of a request from an internal colleague. It didn’t always lead to work, but it did usually lead to a view of the proposal, and maybe even a test.
Stephanie Kovner-Bryant is a marketing executive with 20 years experience at brands including Procter & Gamble, Kraft Foods, BMG and Unilever. She is currently a consultant and can be reached at firstname.lastname@example.org
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