If you have been following the news in the advertising (or marketing analytics) world, you might have noticed that the largest advertising agencies had one of the worst years (2017) on record (see [1] below). Pundits and the agencies themselves have attributed this decline to how clients have begun reevaluating their marketing budgets. The reevaluation has ultimately focused on the effectiveness of marketing spends and the growth of zero-based budgeting techniques (see [2] and [3] below). Articles [4]-[7] also highlight the drastic budget cuts that the largest ad clients began undertaking over the next few years. The articles focus mainly on AB-InBev, Unilever, and P&G; however, Nike, Coca-Cola, Pepsico, and several other large advertisers have also publicly expressed their frustrations around the uncertainty present in the ad budgeting process. Some of them have also embarked on investigating whether zero-based budgeting is right for them. Given that a majority of these cuts are driven by zero-based budgeting, I would like you to explore this topic in more detail. Specifically,

 

• No budgeting process is perfect. What in your opinion are the pros and cons of the zero-based budgeting model? Should it complement or substitute for other budgeting processes we discussed in class?
• What sort of data might be necessary to ensure that your zero-based budgeting approach yields sensible recommendations?
• We also discussed several attribution methods in class. How dependent do you think the success of zero-based budgeting would be on the types of attribution models used? How might you increase the odds of success in this budgeting approach?
• Advertising, as we discussed at the end of class, is inherently dynamic in its effectiveness. Not accounting for this dynamics can have major impacts on the marketing budgets. Can you think of the possible consequences of using a static model vs. a dynamic one when setting advertising budgets?
• Due to the dynamic nature of your advertising, what are some of the risks of reducing your advertising today?