3 budgeting tips to help marketers plan for 2021 amid uncertainty

Pendo O'Donohoe / October 2020

This is usually the time for businesses to be knee-deep into their planning season for next year. Yet given the economic uncertainty in the wake of the coronavirus pandemic, predicting how things will play out in 2021 is no mean feat.

The abrupt but significant changes in consumer behaviours, uncertainty around appropriate marketing channels for communications while maintaining the right tone of voice, and the general state of the economy make 2021 budget planning distinctly precarious.

Whatever the future holds, there are three key principles for marketers to keep front-of-mind when planning next year’s marketing spend during these challenging times.

1. Calculate your budget using new data, not historical projections

When annual planning, it is customary to base your budget on previous years, then adjust upward or downward. With many marketing budgets squeezed in 2020 due to the pandemic, some of you may have to take a cautious approach to 2021 as you might be facing further budget limitations.

Instead of immediately scaling back your marketing activity, take a moment to predict your baseline marketing budget needs with a bottom-up approach. Estimate future demand for your products, and the average costs of conversion to gain a clearer picture of the budget you need.

A good example of this comes from leading homeware and cosmetics brand Rituals. Ahead of last year’s busy holiday season, they scrutinised their strategy to ensure they were setting their budgets correctly. To do this, they looked into their current market share, cost-per-click fluctuations, and search query growth, alongside other data points to help build an in-house budget prediction tool. This allowed them to forecast an appropriate budget, before securing buy-in from senior stakeholders. As a result, they were able to capture rising demand within their category, and make the most of the gifting season.

To predict budgets more accurately in a dynamic market, we’ve built Performance Planner. This tool allows you to forecast key metrics up to 18 months ahead of time, and then regularly update them across all your accounts.

2. Show that marketing is an investment, not an expense

Marketing should be a profit-center for the business and, therefore, tied to identifiable business-wide goals, such as online or offline sales, leads, consumer engagement, and so on. During times of economic uncertainty this is perhaps even more important.

Whether your company is tightening its belt or expanding to meet new demand, it may be hard to justify spending money on advertising without a clear goal attached. Focus on how much new business your marketing efforts could potentially generate, rather than overloading senior stakeholders with marketing-specific metrics such as click-through rate and reach.

Where possible, try to simplify your reporting to stakeholders. You might want to measure your channels holistically. It is natural that lower-funnel activities have higher ROI but many advertising solutions such as video ads, search ads, and remarketing are built to work together. You can clearly demonstrate to your stakeholders that for each marketing dollar spent they get several in return.

Machine learning and analytics tools now allow advertisers to track conversions both online and offline. And, provided there is enough budget headroom, they can capture all available conversions within their desired target CPA (cost-per-acquisition) or ROAS (return on ad spend). One can also show that a race for lower CPAs and smaller marketing budgets is sometimes counterproductive to the business with a simple calculation like this one:

A table listing two options with setting target cost per acquisitions. Option 1: CPA $10, 10 conversions, marketing cost $100, margin at $100 per conversion $1000, profit $900. Option 2: CPA $20, 15 conversions, marketing cost $300, margin at $100 per con

That is exactly what Italian consumer electronics retailer MediaWorld did. When their network of offline stores closed during lockdown they invested in online sales and lowered their target ROAS to capture incremental growth in rising product categories such as laptops, video consoles, and small kitchen appliances. As a result, their e-commerce revenue tripled with ROAS of 22 to one. To estimate your ROAS and expected campaign performance, you can utilise simulators within your Google Ads account.

However, if your stakeholders are still hesitant, you might need to start with a smaller budget. Avoid spreading it thinly across all channels, pick the channels that have the highest ROAS, and fund them fully.

3. Fluctuating demand requires agility

If 2020 has shown marketers anything, it’s just how fast consumer behaviours can change. Make sure you build flexibility into your budget to respond to any new challenges or opportunities that may arise in 2021 as well.

In 2020 we saw a dramatic increase in online activity due to consumers’ accelerated digital adoption, alongside a shift in consumer expectations, and an improvement in return on investment for most advertisers. With that in mind, you may be able to make your marketing activities stretch further with fewer resources. Or, you may realise that you require a larger budget to make the most of the newly risen opportunities.

In France, Piscines Desjoyaux, a family-run business with 165 retail locations that designs and manufactures swimming pools, reacted quickly to develop a new product line of DIY at-home pools to help with this increased demand for home improvement projects. Desjoyaux and Agence 79 used automation, account optimisation, and combined audiences to digitally transform their business and to tap into this new market, while also benefiting from lower CPAs on generic keywords, which allowed them to increase their leads by +113% and sales by 20% year-on-year.

Most companies have a fixed annual marketing budget, which they reallocate monthly or quarterly. Given the dynamic times we live in, it is important to adapt these plans more frequently. For example, review your budget every seven days to ensure that your best-performing campaigns are not held back by outdated budget forecasts. In Google Ads you can reallocate budgets while maintaining control via Recommendations or with shared budgets, which automatically adjusts how a budget is allocated across different campaigns to help you improve your ROAS.

You can’t plan for uncertainty, but you can be ready for what’s next

Planning a marketing budget can be tricky at the best of times, let alone when there’s so much economic uncertainty to factor in. Nobody knows for certain what the future may hold, but you need to have a flexible mindset and an optimised budget plan to succeed. That way you can be ready to jump on any rises in demand, and new opportunities to drive growth for your business during the economic recovery.

How to unlock your brand’s online potential through strategic partnerships