“Beware of little expenses; a small leak will sink a great ship”

Written by Beth Menear, Account Director.

I’ve been watching “Lucy Worsley Investigates: The American Revolution” because it’s bloody hot and I couldn’t be all that bothered to change the channel. It was good though, and the Benjamin Franklin phrase stolen for the title of this stream of consciousness seems actually quite apt as I’ve also been reading through ’Go Big or Go Home’, the latest IPA publication from Les Binet and Will Davis which hammers home how critical appropriate budgeting and investment is when it comes to marketing activities today. Small spending could mean big problems on the horizon. But think big, and you’re in with a chance.

Firstly, there’s a real efficiency vs. effectiveness issue. Insight from the IPA Databank shows that while advertising efficiency (ROI) has risen by 4%, effectiveness (total incremental profit) has dropped by 11%. This is because effectiveness relies on both efficiency AND budget. According to CMOs surveyed, budget was believed to account for around a third of a campaign’s effectiveness, with media and creative making up the rest.

Econometric analysis proved this latter assumption correct, confirming that both media approach and creative execution play a critical impact when it comes to effectiveness – big, consistent creative deployed through an appropriate balance of brand advertising and performance activity (you know that).

However, further analysis of effectiveness in the IPA Databank revealed ROI only accounted for 11% of variations in profit, with budget making up the remaining 89%. How much profit marketing delivers is ultimately determined by budget decisions more than any other variable.

We know that marketing teams are increasingly being asked to do more with less which can force their activity down a shady path of short-term activation and super-duper narrow targeting. In fact, IPA data suggests that almost 70% of firms are concentrating on short-term conversion. But this blinkered focus on ROI is a false economy where underfunded activity is less effective, leading to shrinking margins and potential further marketing budget slashes.

This doesn’t mean you need to spend millions to be successful – scale is relative to your brand’s position. If there’s one thing I remember from my recent re-read of How Brands Grow it’s that you must achieve Excess Share of Voice (ESOV) by ensuring your Share of Voice (SOV) is higher than your current Share of Market (SOM), and keep your Advertising-to-Sales (A/S) ratio above the category average. It’s as simple as that. 😉

During economic downturns, the impulse to heavily discount or cut budgets to preserve short-term margins is destructive. Maintaining brand investment preserves pricing power, protects long-term profit margins, and allows aggressive brands to capture market share as competitors retreat. I wrote essentially the exact same thing back in 2023. These fundamentals do not change.

When you take your appropriate budgets to the right place though, they can work even harder. Hark back to what I mentioned earlier in this ramble. It’s been proven that strong media and compelling creative positively impact effectiveness. The Extraordinarily brilliant ‘The Extraordinary Cost Of Dull’ details how investment needs to be even greater if your budget is being poured into bland and unimaginative ads. So, if you’re ready to invest in proper media, you need an agency with big enough creative ideas to fill the space, get you seen, and make your media spend work as hard as it possibly can. Ready for work that’s anything but dull? Hello! 🐾

You can check out some of our big thinking here.