a. Schultz’s (2005) article provides a description of the typical budgeting process. Explain the process in your own words. What change is the author recommending to this process? Would you recommend introducing the change to your company? Why or why not?
For traditional financial institutions, the usual marketing budgeting cycle (wherein success can easily be measured by monetary standards) is easy. For the marketing and communications sectors however, there is a debate as to what should be used as a measure of success: should it be a matter of assessing the short term returns, or the long term impact? The traditional method of budgeting involves a pretty straightforward process: management determines how much to spend in accordance to projected income, and then they make the necessary adjustments.
However, the lack of a concrete measure of success for marketing and communications means that manages could not really know how much to spend or invest. The author suggests that one useful approach to this dilemma is to measure first at the beginning of the process, then budget later. The author proposes that success be measured using financial returns, specifically, how marketing and communications influence customer behavior in terms of dollars.
I would definitely recommend this process to my company, especially if my company does not have a specific system of success measurement in its marketing and communications areas. I believe that budget accountability is of the utmost importance to any company, and without a way of gauging how the money you put in impacts the success of the company, it’s almost like throwing money away.
b. Batarla’s (2005) article describes zero-based and performance-based budgeting. Explain the processes and how they differ.
With “zero-based” budgeting or zero-based processing, data from previous years are not taken into account—budgeting is done in a way that the expenses needed are detailed first without regard for other factors or past circumstances. This process allows for a fresh take on things and a greater perspective on what the program really needs to cost. With “performance-based” budgeting on the other hand, accomplishing outcomes (performance) is given more importance than accomplishing programs.