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After talking with a friend I pulled together a brief presentation for them which explained what Zero Based Budgeting (ZBB) practices at a client were likely to mean for an agency.
The key takeout for me are is one of attitude. ZBB isn’t about cost cutting but about spending the money in the most effective way, where it matters the most. ZBB has benefits that can applied outside marketing on complex projects.
And there in lies the problem with the way ZBB has been adapted by some consumer brands. Looking from the outside in at 3G Capital and its work at Kraft and Heinz brands, it seems that ZBB is being used for short term cost cutting, rather than resource allocation.
Whilst this might be justified in terms of Jack Welsh-style shareholder value. The reality is short term pay-offs robbing long term potential. This is what happens when you let finance focused MBA graduates a la Scrooge McDuck attempt to do a brand marketers job. What looks good on their spreadsheet looks retarded when viewed through the lens of marketing science.
For agencies, ZBB means that the client is making an active effort to keep marketing thinking fresh. It means a pragmatic approach to innovation based on benefit rather than running around screaming innovation.
It also means knowing when you’re not the right agency for the job and having partners that you can work with. Which is why we’ve seen ad agencies like Mullen Lowe bulk up on digital and earned media chops. Finally if you see that your client is using ZBB just to cut, cut, cut. Plan for another client because at least one of two things are happening:
- You aren’t coming up with ideas that meet the needs of the business, so ZBB dictates that investment will be moved away from your programmes
- The client has a short-termist mindset in using ZBB. You might not be in danger of losing your business, but they might be in danger of losing theirs to the competition