This document discusses zero-based budgeting and its implications. Zero-based budgeting requires all expenses to be justified each period, starting from zero, rather than using previous budgets as a baseline. Clients are adopting it for strategic budgeting due to economic uncertainties. It means marketing teams must thoroughly research and justify budgets based on key performance indicators. The process impacts agencies, holding groups, and the creative process by requiring tighter briefs, shorter timelines, and focus on measurable ROI.

1. What does zero-based
budgeting mean for agencies?
Ged Carroll
renaissancechambara.jp

2. In this presentation
• What is zero-based budgeting
(ZBB)?
• Why are clients looking
implementing ZBB?
• ZBB is not cost-cutting
• What does it mean for
marketing?
• How does it impact marketing
holding groups?
• How does it impact at the
agency level?
• How does it impact the
creative process
• ZBB versus the philosophy
behind performance
marketing

3. What is Zero Based Budgeting (ZBB)?

4. What is Zero Based Budgeting (ZBB)?
ZBB isn’t a new management concept, the first mention I found of
it was in Public Utilities Fortnightly in 1929. Peter Pyrr of Texas
Instruments adoption of it in the 1970s drove its current
popularity. President Jimmy Carter’s use of it, gave it wider public
attention.
A method of budgeting in which all expenses must be justified for
each new period. Zero-based budgeting starts from a "zero base"
and every function within an organization is analyzed for its
needs and costs. - Investopedia

5. Why are clients moving to ZBB?

6. Low economic growth, mixed retail
outlook
-2
-1
0
1
2
3
4
5
6
7
8
9
2012 2013 2014 2015 2016 2017
GDP Forecast (World Bank)
Global
China
U.S .
Eurozone
Developing World excluding BRICs
-3
-2
-1
0
1
2
3
4
5
6
2012 2013 2014 2015 2016 2017
Retail sales (various sources)
Global U.K. U.S. Eurozone

7. Cross-sector: growth is volatile, hard to
sustain
-5
-4
-3
-2
-1
0
1
2
2010 2011 2012 2013 2014
CPG % growth (Euromonitor data)
Packaged Foods Home Care Personal Care | Beauty
-20
0
20
40
60
80
100
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Consumer Technology % growth
(Various)
Smartphones Tablets Smart TVs

8. Tougher competition

9. You can’t cut your way to growth. You need to
spend where the customer values it, to drive
growth. That spend can come from savings
made in lower value processes.

10. ZBB already has many adoptees

11. Brands have 6 approaches to grow
Product ChannelCustomer
Revamp offering Get closer to the customer Pick your channels
Protect core
Innovate the business model
Inorganic innovation
Model via Accenture

12. ZBB is not cost cutting

13. … or penny pinching
The zero base approach is not a cost cutting method or belt-
tightening approach. It’s just a better, more strategic way to plan
your marketing.. – Mark Ritson, Marketing Week

14. What your clients are actually doing
1. Last year’s spend goes away in terms of planning– ‘zero’
2. The marketing team do their research (and probably task
some of it out their agencies – the media buying agency is the
likely candidate)
3. They craft their marketing plan and conclude it with a budget
in which they ask for a certain amount of investment and
promise a specific ROI
4. Senior management vet the plan with two outcomes: approval
granted or pushback and ask for changes

15. What does it mean for marketing teams?

16. What does it mean for marketing teams?
• Category owners are involved earlier and in a more
collaborative process of setting budgets
• Senior management double down on marketers that they trust
• Marketers become accountable
• Transparency
• Visibility
• Responsibility
• No sacred cows

17. Likely effect on the marketing spend
Strategy /Area Advertising Brand creative DM / eDM Social media
marketing
PR
Revamp
offering
✔ ✔ ✔
Get closer to
your customers
✔ ✔
Pick your
channels
•
Protect core • ✔ ✔ •
Innovate the
business
model
• ✔ ✔ • ✔
Inorganic
innovation
✔ ✔ ✔
✔ Likely increase in spend • Likely steady spend, no likely increase Blank box: likely budget reconsideration

18. What impact does it have on marketing holding
groups?

19. How does it impact marketing holding
groups?
• Depends on the balance of
their portfolio
• For instance Publicis’
weakness in shopper marketing
could leave it exposed on a
channel strategy
• Acquisitions and sales to
focus on plugging gaps
• Possiblity that social
marketing is less critical in
comparison
• Increased focus on
accountability likely to hone
ad tech offerings further
• Major account revenue less
predictable as it no longer
based on incremental
increase planning

20. How does it impact at an agency level?
• Planning
• Longer, more complex planning
process
• Justification is more important,
particularly around ROI
• Fresh thinking becomes more
important
• Shorter time to execute a
given campaign
• Campaign rather than
ongoing activity orientation
• Clients being held more
accountable will hold
agencies the same way
• Increased transparency to
ensure corrective action
sooner

21. How does it impact the creative process?
• Greater degree of upfront
research time
• Tighter brief
• Focus, less but better – ROI /
effectiveness
• Shorter time to execute
• No guarantee of campaign
continuity impacts storytelling
0
10
20
30
40
50
60
70
80
1 channel 2 channels 3 channels 4 channels 5 channels
Average effectiveness success rate
(IPA 2012)
Average effectiveness success rate

22. ZBB versus the philosophy behind
performance marketing
Zero Based Budgeting Performance marketing
ROI across business Optimising cost per
sale
Long term sales benefit Short term sales
benefit
Channel agnostic Cross-channel
Campaign-led Campaign-led
Often focuses on
customer loyalty
Immediate customer
satisfaction
• Whilst both are about
delivering ROI, there are
differences
• ZBB reducing customer churn
is an ROI oriented goal in
itself
• Performance marketing is
more about acquisition
• ZBB doesn’t favour channels,
its about the right one for the
job

23. Creative commons attributions
• What is Zero Based
Budgeting image – Kokorowa
Shinjin - flic.kr/p/4wqCvL
• ZBB is not cost cutting image
– Jenny Downing -
flic.kr/p/9r3AWQ
• What impact does it have on
marketing holding groups
image – Yahoo! -
flic.kr/p/8CCeeJ
Images not listed come from
my own collection.

24. About me
Amazon author page: amzn.to/1SeO5Il
LinkedIn page: linkedin.com/in/gedcarroll
About: renaissancechambara.jp/about
Blog: renaissancechambara.jp
Email address found here: scr.im/renaissance
Twitter account: @r_c
Sina Weibo: renaissancechambara
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