The year 2010 is coming to an end and the 2011 marketing plans are being drawn out by CMOs.I have often wondered how are budgets allocated year after year by CMOs and marketing managers. In fact, most CMOs use archiac methods of planning marketing spends? 

1. How much did I spend last year?
2. How much is the category or competitive brands spending during the same period?

Is there a better  method to plan and allocate marketing spends? I am sure time has come for us to look at this kind of an analytical framework.

I came across an interesting article on how this can be done and I found it very interesting. Here are some of the higlights of the approach:

Step #1: The first question the author says is for the CMO to determine or test their spend leverage.

Step # 2: Most often, the author comments, marketing departments are not in alignment with the overal organizational strategy - on margin improvement, new geography penetration, production innovation or redesign, alternative channel testing etc.. It sounded very familiar to me and it is an important item which CMOs & marketing teams need to revalidate as they build their marketing spend plans.

Step #3: To determine which marketing spends to "defund" based on impact to business over the last year.

Step #4: Then basis the above 3 steps build a strategic prioritization plan.Strategic prioritization means CMOs need to decide which geographies, which segments, which innovations, which programs need more or less monies.

Step #5:  The other interesting point made is that marketers should also look at risk issues around the environment as normally only GDP growth rates are looked at. The issues include terrosim issues, weather etc. which do pose a risk to marketing planning and spending.

I believe this is a great framework for a start to look at defining and planning marketing spends in a new year.