Unilever budgeting: hard times or smarter marketing?

Despite posting year-end revenue of $5.34bn, Unilever CEO Paul Polman announced in a presentation to analysts and investors that this year the company will adopt zero-based budgeting. Managers will have to build marketing budgets from scratch every year and justify marketing spend.

Though Unilever’s yearly sales rose 4.1%, net profits slipped by 5%. Polman has been quoted as saying the company is reviewing its overheads as well as brands and marketing efficiencies. He has predicted a year in which market conditions will be more challenging and volatile than they were in 2015, with little economic growth. Jumpy stock markets, volatile currencies and the impact of climate change will increase and geopolitical tension is on the rise, he says. 

The move to a zero-based budgeting approach is intended to reveal inefficiencies which could have been covered up in previous budgets and to save on marketing spend.

The marketing media were quick to comment on the move, some seeing it as evidence of “belt tightening” and cost cutting by Unilever. Others ask why a brand the size of Unilever didn’t take such a sensible step sooner.

Marketing consultant Mike Anthony says that instead of basing the budget on what worked last year, with no better reason than “this is what we’ve always done”, zero-based marketing breaks habits and challenges marketers to consider whether an activity is still effective and relevant to brand strategy.

On marketingweek.com, Mark Ritson argues that the approach is not about cost cutting but is a better, more strategic way in which to plan marketing. It encourages marketers to do their research, ask for a certain amount of investment and then commit themselves to providing the required financial return at the end of the year or, as Ritson says, “your ass will be delivered on a tray”. It’s an approach that fosters accountability, a more strategic direction and an improved team of marketing professionals. He also maintains that senior managers are more likely to bet on “better marketers, with better plans and better opportunities, and reduce investment in crappy ones with crappy plans”.

The big take-out: Unilever’s announcement that it is to implement a zero-based budgeting approach seems to be evidence of a tough financial year ahead. However, to some critical thinkers in the industry, it is a fresh strategic move that fosters better marketers and better marketing.