5 Habits to Manage Your Digital Marketing Budget
Managing a budget can be a stress for some. I'm the geek who enjoys it. I enjoy balancing the performance metrics with costs and regularly checking on how my digital marketing plan is working out. I also love a good Excel spredsheet (or is it spreadsheet?). Over the years, I've developed a few habits to keep my digital marketing strategy aligned to my budget and still make friends with finance.
Habit #1: Establish an approach of No Surprises
The most important lesson I've learned about budgeting is to avoid surprises at all costs. This is really about establishing good communication with your team or the people who are spending against your budget. There's no way to avoid a mistake or an "I forgot to tell you" from a vendor—or stay clear of the occasional “this took me longer than I thought” or “I didn't set my daily limit low enough.” What I tell my team is that I expect them to make a mistake or forget something, because we are human. Create and maintain open lines of communication with your team on this. You want them to feel comfortable and know it’s okay to disclose a gotcha. I say, let me know if you overspend and we can address it. Chances are, I have another cost center that's flexible and I can use that budget to make up for an invoice I wasn't counting on. Which leads me to my next point...
Habit #2: Have a flexible cost center
You want a cost center or line item that's fairly flexible. This would be for a campaign, channel, tactic where it would be okay if you had to underspend in that area by say 20 percent to make up for something else being over. If your team is avoiding surprises and tells you they are over, then in an ideal world, you have time and a cost center to address it. A paid digital campaign that uses credit card (not insertion order) could be a good one for this.
Habit #3: Check on your budget regularly
I recommend making it a discipline to check your budget mid-month, month’s end, mid-quarter and quarter’s end, and of course year end. You'd be checking for things like: 1. if what you're spending money on is driving the results you expected, 2. if there's a program that's working well that you want to increase investment in (and conversely if there's a program that's not working well and you want to decrease investment in) 3. if a vendor, agency or contractor will use all the money you planned them to use that month or quarter or if you'll get through that IO as planned. It's a balancing act and one I recommend doing often. Plan on making little tweaks every two weeks. This does really require you to know what your team is doing and how well it's working because you need to justify every penny you're spending—for your company and yourself.
Habit #4: Work across three buckets: 1. budget, 2. plan, 2. forecast/actual
You may call these buckets different things, but what their purpose serves is surely similar to what I describe. 1. Budget tells you how much you can allocate toward a cost center or initiative. This doesn't change. It's set once you've completed your planning. Once I've set it up for the year, I don't change it. However, priorities change constantly and that's where the "plan" comes in. 2. Plan shows you what you're actually planning on spending. This may be more or less than what you originally budgeted, or thought you'd do. I also use this column for quarterly planning. 3. Forecast is what you think you'll actually spend and you're updating that mid month. Once the month is over, you change the bucket name to "actual" and it represents what you actually spent.
Habit #5: Know what your company expects
When taking over a budget, you need to know what your finance and your own management team expects. Here are some guidelines to ask about: 1. if you manage to the quarter or to the month, 2. how to move money from one quarter to the next, 3. how to pull money forward, and 4. if you should spend the full amount or even a little more and if more, by how much.
Last but not least, the golden rule in marketing is "don't underspend" — unless told to. If you don't think you need everything you planned, then check. Because in general, if you underspend you're communicating that you don't need it and you may be allocated less in future budget cycles. If you can accomplish what you need under budget, amazing. But remember this money is meant to accomplish your company's goals. Don't cheat the goals. Also, refer to my blog post on digital marketing testing strategies. If you've accomplished your goals and are under budget, you may consider allocating that extra amount to a test and learn something new—something potentially even more cost-effective. Now get those #spredsheets cranking.