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The Budget Myth

by

Moneyontreessmall
I have both the benefit and the curse of too many years putting programs together that help companies influence the behavior of their target audiences.  I say benefit because I have seen a lot over the years.  I say a curse because sometimes when you have so much information it takes a long while before new information that contradicts the old outweighs the past and new ideas form.  I work very hard to assess new information and attempt to increase its weight when necessary in order to not be stuck in old frames/paradigms.  This became apparent the other day.

I had a conversation with someone about the budget relating to an incentive application and sometime during the discussion it was brought up that a program budget should allocated 75% for awards, 15% for communicating the promotion and 10% for ongoing administration of the data. 

I nodded because that was what we did historically.  It was an industry "rule of thumb."

OldallocationThen
it hit me.  That was old information based on assumptions, processes
and constraints that were in effect 20 years ago – before computers sat
on desktops, before the world-wide web, before object oriented
programming – heck before indoor plumbing!  In those days we printed
everything relating to communicating the promotion, clients sent us
files that were uploaded to a mainframe and we ran reports on green-bar
paper.  None of that applies today.

Today, the web site acts as a data input device feeding real-time
databases that connect to OLAP reporting tools allowing our clients to
see data in a variety of dimensions.   Awards are ordered online from
the participant’s web-based account and travel registration takes place
through the browser.  Not one of the requirements that drove the
75/15/10 rule apply -  yet we’re still thinking that way.

Long story to get to a simple point – budget allocation doesn’t
follow any rules any more.  Budget is a function of the sophistication
of the client’s data gathering, the pervasiveness of internet
connectivity within the target audience (and that’s becoming less of an
issue now that 80% connect to the internet and of those 50% have
broadband) and the complexity of the behavior we’re trying to
influence. 

Newallocation
If pressed by a client to "allocate" budget I’d probably say
something like – 90% for awards, 10% for everything else.  And that
would be a guess as well. 

The real key is…. how much are you willing to spend to fix the
problem?  After that it is somewhat irrelevant how it is allocated as
long as the result is achieved.

Originally posted on on Incentive Intelligence