Monday, September 19, 2011

No one knows how to create a non-profit marketing and communications budget

The truth about budgeting for non-profit marketing and communications is that no one knows how to do it. There are plenty of people who say they do. There are also those who claim to have a method. Some of them even say they base their method on some kind of benchmark. Take my advice and take everything those people say and use it as kitty litter. It's worth that much.

I've been looking for a method, approach, benchmark, system or religious experience that would define non-profit marketing and communications budgeting for more than three years and I haven't found one that makes any sense. And, considering the subject, that isn't surprising.

The problem is that no two non-profits are the same. Many do similar work and have similar marketing requirements (such as fundraising support). But there are always key differences. Non-profit local markets are notoriously different from each other. Many organizations are structured very differently. There’s also a wide variety of input and output levels – some charities can raise more money with fewer donors. And finally, the sector is in fact made up of a host of very tiny sub-sectors.

That's not the case in retail, where marketing budgets are virtually a science. Most big chain retailers know exactly what their competitors spend on marketing because that information is available through research companies. Compare that to non-profits. In our sector, there are no organizations that are tracking what we spend and how we spend it on marketing and communications.

And even if such an organization existed, what would they tell us? Likely, they would show that marketing and communications spending across the sector is a dog's breakfast. The 2008 study by the American Marketing Association and Lipman Hearne found that budgets were all over the place. The average they came up with (2-3% of operating budgets) was so crude it was almost useless. Tracking what other non-profits spend in hopes of finding a benchmark will only tell you that you don't want to benchmark against them.

One of the reasons why marketing and communications spending is weaving all over the road like a drunk driver is that many non-profits have been chopping their budgets. Marketing and communications has always been the first thing to go when times get tough and that has created feast or famine approach that means many non-profits have money to spend on things like a new website one year and the next they have nothing.

This is also a problem for another reason -- many non-profit budgets are based on precedence. That is, the budget is formulated based on the budget from the year before. While this does wonders for consistency, it simply locks in the ups and downs in previous budgets. Bad budgets become even worse as time goes on.

There are other problems that cloud the issue even further. Too often, budgets are based on tools, not strategies. An ad costs this, a website costs that, and so on. To be most effective, a marketing and communications budget has to be tied very closely with a strategic framework, and for many non-profits that's missing. So, that's the reason why many budgets look like a grocery list.

And it also explains why the sector has such a hard time trying to achieve the zenith of budgeting -- predicting outcomes instead of just costs. The place where a non-profit really should go is not costing out to the Euro, Loonie or Greenback how much they will spend in stationery this year. No, what they should be figuring out what kind of outcomes their budget will be buying this year. The budget should say how much value your non-profit is going to get from your marketing and communications. This is somewhat common in retail and manufacturing where businesses link marketing directly to the value chain that starts with product creation and ends with the sale. Our sector can't use the same kind of formula because we don't make widgets. We sell ideas that people can believe in or services that give hope. Typical value chain economics don't work. But the idea is still sound. Our budgets do need to predict what their impact will be.

This brings up perhaps the biggest political problem in marketing and communications budgeting -- making the case for funding to the non-profit leadership. The long and the short of it is that too many leaders think that marketing and communications is not a line function. They see it as something secondary. Part of this surely has to come from the budgeting process. If, as I suspect, most budgets don't show the value marketing and communications creates then this situation will never change and these functions will always be one heartbeat away from the chopping block.

A final challenge is change. We’re in the midst of the greatest revolution in marketing and communications in history, but you would never know it by looking at non-profit budgets and plans. In the next decade, we will see massive amounts of change that will make much of our current non-profit marketing and communications offerings redundant. Print materials will fade away. Websites will need to be much more functional and powerful. Everything and everyone will be online. Most donors and supporters will be mobile. There will be more choice than ever and more competition. More than ever, there will be a need to build a marketing and communications system that reaches stakeholders effectively and easily. These changes need to be planned for now and, in some ways, they even need to be budgeted for now. You can’t buy the future, but you can invest in the things that will get you there. And that is what is missing in most non-profit marketing and communications budgets.

So, where do you go from here? Join me next week when I unveil my approach to non-profit marketing and communications budgeting.

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