Point/Counterpoint: Who should set the marketing budget – the client or the agency?

Nader Ashway marketingthingy blog post image - who sets the marketing budget

Okay, so I’m borrowing from Saturday Night Live’s classic sub-skit featuring Jane Curtin and Dan Aykroyd.  But it’s the only way I think we can easily platform this complex topic for debate.  For you legal eagles out there, copyrights appear at the end of this post.

Who should set the marketing budget – the agency or the marketer?  This seems to be the question that plagues marketing relationships – especially between small and midsize marketers and smaller agencies.  On the broader scale, it’s pretty easy…larger marketers (and/or public companies) tend to stipulate their budgets way out front, and use previous years’ spend as a barometer, which can be tracked on resources like Adviews, a subscription-based tool from Nielsen. Generally, most of that spend is earmarked for media anyway.

But with smaller/midsize companies and smaller/midsize agencies, it seems that the budget dance is a tricky little two-step, and no one seems to know who should lead.  Let’s explore both scenarios and see which one makes the most sense for you.  Your opinions are invited!

Jane:  The agency should set the budget.
Buying marketing services is similar to buying any other services from any other vendor.  That being the case, you want to get the most bang for the buck.  So you invite a couple of agencies in, set up the goals for the upcoming year (or the project or initiative) and ask them to come back with a proposal that sets out a budget, a timeline, and what they expect they’ll achieve.

The agencies come back with proposals about what they think the marketer should be doing (building a microsite, running an outdoor campaign, running a sweepstakes, maybe,) and what they want to charge you for that. So the benefit is that you – the marketer –  do get to see a variety of thoughtful approaches to your marketing, as each agency will make different types of suggestions and usually prepare very fancy presentation materials!

As far as costs, an agency will typically include management fees, creative fees and expenses for out-of-pocket costs, like media, some third party add-ons, printing, postage, web development, etc.

This is the best way to do it.  I’m not telling what the agency to spend – they can tell me what they want, and I’ll choose from there. Agencies know what things cost, they know what they need to make to be profitable, and they know what I want.  Why should I tell them I have $100,000 to spend this quarter if they can deliver it at $75,000?  I have to be responsible with my budget.

Dan:  The marketer should set the budget.
Jane, you ignorant slut.  Everyone knows that if you ask an agency to set the budget, they’ll come back with a number you can’t afford, that includes every possible marketing incarnation from social to mobile to telepathic or whatever.

Or worse, they’ll suggest an over-inflated, over-reaching grandiose plan that includes tons of media that they can commission at double digits, and tons of dopey ideas like flash mobs and street teams and who knows what else.  [Not that these are bad ideas, but when there are no boundaries, some agencies like to frolic in the fields on your dime.]

If marketers want to get an equal assessment of how an agency can perform, the best way to do that is to quantify specific parameters:

using X dollars, and in Y time frame, what do you suggest to help us meet objective Z? 

Using this simple formula, or expanding it to a more detailed RFP, you will get presentations from agencies that are focused, that demonstrate their core capabilities and that usually have an ROI component attached.  But without stipulating dollars, you’ll never quite be comparing the presentations on an equal footing.

Marketers, YOU know what your goals are.
Not the agency.
You know what your operational expenses are to sell a product or service.
Not the agency.
You know what your board of directors or shareholders want to accomplish.
Not the agency.
You know what you have to spend to get there.
So why ask the agency to tell you?

So.  What do YOU think?  Should the agency tell you what to spend, or should you ask an agency what they’ll do with your budget? 

“Point/Counterpoint” is intellectual property:  a sub-skit of “Weekend Update.” “Weekend Update” is part of a comedy program called “Saturday Night Live,” created by Lorne Michaels; originally written by Chevy Chase and Herb Sargent. © 1975 Broadway Video/SNL Studios.

Relax. With marketing, price is NOT the issue.

If you’re looking for an advertising agency or a marketing communications firm or a web developer or a direct marketing partner, there’s good news.  You won’t be shopping on price.

This is kind of weird for most market consumers – virtually everything we buy has a price attached to it, and generally, the choice we make on any given purchase tends to include price as a determining factor.

But with marketing, it’s different.  With marketing services, YOU set the price.  You say “I want this and this and that and that, and I’m willing to spend $X.”  Pretty cool position to be in, eh?  Imagine if you could walk into your favorite restaurant, and say “I want the Sea Scallops appetizer and the John Dory Entrée and I think I’ll have the Green Tea Ice Cream dessert… and I want to only pay $42 for everything.  Oh, and throw in a glass of Riesling with the entrée!”

That’s pretty much how it goes with marketing.  Let’s say you’re about to embark on an advertising campaign.  You would never solicit five proposals and then select the most inexpensive agency.  [For one thing, you couldn’t really solicit a proposal without stipulating a budget.]  And secondly, these kinds of services aren’t shopped on price.  You’re searching for ingenuity.  Or practicality.  Or intense creativity.  Or humor.  Or whatever you think might move the needle.

Buying marketing services is NOT like buying tires, where you go from shop to shop, looking for the best deal.

Unfortunately, many would-be marketers like to play the “I’m not telling you my budget” game.  They think that by withholding that parameter, they’ll get more affordable services.  Unfortunately, it doesn’t work that way.  Every ad agency, every web development company, every marketing consultant thinks they have a feasible answer to your quandary.  But we all think you should be spending a minimum of $10 million.

Here’s another rub.  The supplier (agency, developer, or restaurant owner) can simply say “no.”  [Sadly, not many of them do.  But it’s really necessary sometimes.]  Some suppliers can’t do what you’re asking for $42.  Or WON’T do what you’re asking for $42.  And those answers will help you make important decisions later on.

So, next time you’re shopping for marketing/advertising/web services, do yourself and the professional on the other side of the table a favor:  set a budget.  It’s the best way to get a straight answer, the only way to compare apples to apples when you’re reviewing your proposals, and probably one of the very few times in your professional life when YOU get to determine what something will cost.