It's That Time of the Year Again!
Yes.. the holiday season is approaching, but more importantly it's spend it or lose it time (otherwise known as Q4) for some marketers and agencies.
In Rockefeller Center, the tree is going up and the rink is packed, but the spend it or lose it mentality is what brings real cheer to the eyes of many properties. These gifts, however, aren't always 'no strings attached.'
In case you're not familiar, 'spend it or lose it' is the propensity of some marketers and agencies to spend what's in the budget in Q4 so that next year's budget won't be adjusted downward to reflect spending patterns in the previous year.
Some say that this mentality isn't prevalent in today's spending environment. However, it seems, there is another factor that could drive it even more. The uncertainty of the first three quarters has meant more cautious spending, and perhaps an even greater amount of pent up kinetic ad dollars for Q4. This 'wait and see' approach may mean more sponsors are looking for "just in time" opportunities in the last two months of this year, as Viacom described last week.
“I have X dollars I need to spend by year’s end. What do you have?” Music to your ears, right? Of course, no one is going to complain if increased sponsorship dollars land in the fourth quarter. Properties get new partners, sponsors spend around the busy shopping season and agencies can clear and replenish budgets for the new year.
One problem with this "clearance" mindset is that it creates a situation of moral hazard. Spend the money, without risk, because it needs to be spent. We saw what happened on Wall Street when i-banks partook in the potential benefit of unlimited upside, while largely insulated from risk on the downside. Marketing may need a similar dose of reality. Is it a good thing when marketers shift spending to accommodate artificial (at least in business terms) deadlines? And if you're a property, it's always nice to get an extra end of year check, but don't forget that an investment that your sponsor does not fully activate or seem entirely interested in this year, can come back to haunt you next year. Especially in an environment of heightened scrutiny. Your ability to deliver this year, may reflect on how other sponsors view your opportunity next year.
With the right mentality, however, end of year spending can be efficiently allocated (by sponsors) to test the waters and learn how to better use 2010 investments without the pressure to spend a budget to the bottom of the barrel.
I'm not trying to play Scrooge, but it seems that spending could be better allocated without the artificial deadlines that we seem to, in some instances, place on ourselves.
If you set an expense budget for a trip, you're not expecting it will get extinguished at the airport gift shop on the way back. Similarly, shouldn't CFO's, CMO's and agencies find a way to rollover marketing budgets in a smarter way?
It's the season of giving, sure, but maybe agencies and sponsors need to explore extending that season into the new year for more thoughtful, well-planned and better executed investments.
photo credit: flickr via caruba