Friday, February 5, 2010

Budget Allocation Modeling

One of the principle reasons I decided to enter the world of Hispanic advertising was to bring a more rigorous and data-driven analytical approach to what I viewed as the unsophisticated and heuristic nature of some of the most important decisions made in our industry. While our industry has come a long way, including the omnipresence of account planning and the growing and rich field of Hispanic direct response, there is still one very important process that has not managed to move forward -- the allocation of Hispanic marketing budgets.
As anyone who has ever worked at an agency or media / publisher will tell you, overall marketing budgets typically come down from the "heavens" (i.e., the C suite) with little input from outside marketing professionals. However, how those overall marketing budgets are allocated across markets, products / services and marketing mix elements is typically a joint exercise between the client and its agencies, with some occasional input from select third parties such as consultants, media and publisher partners.

Yet, more often than not, the decision as to how much to invest in Hispanic advertising is made heuristically or worse yet, simply handed down as the "scraps" of what is left after general market and other lead agencies lay their claims. As the Association of Hispanic Advertising Agencies (AHAA) Right Spend report has been chronicling for years, advertisers have failed to allocate the minimum recommendation of 8% (based on Hispanic population and buying power alone) of their advertising budgets to the Hispanic market. While each industry and company will ultimately invest varying allocations based on their particular situation, the aggregate 8% AHAA benchmark indicates that, on average, companies are under-investing in the Hispanic market.

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