The objective and task method of budgeting is a popular and systematic strategy for developing marketing budgets. The method can also be applied to other areas of operations. Using the objective and task method, budget-makers set quantifiable marketing objectives, then create a list of tasks necessary to achieve each objective, adding up the costs of the various tasks to develop a comprehensive budgets. Other methods for developing marketing budgets include the percentage of sales method and the competitive parity method.
Objectives are necessary to give budget-makers an idea of the types of tasks that need to be performed. Without clear, quantifiable and time-bound objectives, marketing activities can lose their cohesiveness and focus, causing a company to miss valuable marketing opportunities by presenting a weaker campaign and uncoordinated strategies. Examples of clear marketing objectives include, “to increase market share by 10 percent this year,” or “to increase the number of positive customer-feedback responses by 15 percent each quarter.”
After you have defined your objectives, the next step is to map out a list of activities, or tasks, that can bring the company to where it needs to be. Tasks can be internal activities, such as creating a database of customer purchases, or externally focused activities like a public-relations event. For each objective, have your team think through the smaller components required to achieve the larger goal.
To meet the market-share objective mentioned above, for example, a budgeting team may determine that the company needs to hire new salespeople, develop and execute a new advertising campaign, increase warehouse capacity and revamp the company's order-processing system.
The final step requires less creative thinking than the previous two, but more in-depth research and attention to detail. In this step, budget-makers analyze all costs incurred by each task required to meet objectives. Some tasks can be budgeted precisely based on previous experience and accounting records, while other tasks may include a range of uncontrollable variables that can influence costs.
Continuing the above example, hiring new salespeople will likely incur costs for placing job ads, running background checks and setting up new desks and equipment. The advertising campaign may include costs for development and media placement. Implementing a new order-processing system could include development fees, software-license fees, training fees, installation costs, maintenance costs and the cost of temporarily lost productivity.
Balancing the Budget
One weakness of the objective and task method of budgeting is that managers do not use a pre-determined monetary value as a starting point. Thus, it is possible to end up with a budget that creates an imbalance between costs and income. If your costs come in too high compared to your cash reserves, credit lines and expected income, go back and rethink your objectives. If a company cannot afford the tasks required to increase market share by 10 percent, for example, it may be able to handle a goal of 5 percent growth, moving the goal up to 10 percent in a future budget period.
- PhotoObjects.net/PhotoObjects.net/Getty Images