Attributing costs in marketing is essential

A calculator, a cost sheet, and a hand and pen writing on it
From Flickr: Dave Dugdale

More than once, I’ve been accused of being too strict in how I attribute marketing costs to projects. I am very strict, but for good reasons:

Reason 1: Attributing costs allows for leadership and owners to understand and budget for costs

A couple of years ago, I began working on a project. The leadership for the organization I was working for looked at what was spent on the project in years past and gave us that amount to work with. The issue? It was less than 1/5 the actual cost of the project. Why so? Because people weren’t attributing the costs they incurred back to the project. Instead, they were absorbing them into their own budget.

This might seem like an OK thing to do, but it really isn’t. First, it “hid” the actual cost of the project so the organization’s leadership weren’t able to critically assess the project using actual cost numbers. At the cost they thought was correct, the project was a great deal. At the actual cost, the project became questionable. Second, it created a lot of difficulties for our committee because, since the other departments had their budgets cut and could no longer afford to absorb the costs of the project, we had to back to our leadership, ask for money, and justify why we needed it.

Reason 2: Critical business decisions are made based on costs and budgets

One department I worked with once said that their department was losing sales because of a reduction we’d made in their marketing budget. I decided to do an analysis to see if that was true by looking at a variety of variables and looking for correlations. I could not find a correlation between the drop in their sales and marketing expenditures no matter how I ran the numbers. But, I found that the particular division was down to making a profit of  $15,000 per year. The problem? Because their marketing budget was being charged back to my account, their profit and loss statement didn’t include their marketing costs ($25,000). With all their costs accounted for, the department was losing $10,000 per year. Critical business decisions about this department we being made based on incorrect numbers because not all costs were accounted for.

Reason 3: Shareholder/taxpayer accountability

Working for community colleges for the past nine years has made me very cognizant of being very transparent with all projects and their costs. The taxpayers should be able to ask and receive a correct answer about any project they so choose. So should shareholders. Assigning costs to the correct project is essential, and ethically necessary, for public and shareholder accountability.

So call me too strict if you will, but I think it’s absolutely critical to attribute costs correctly.

What do you think? How do you feel marketing dollars should be attributed

 

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