Zero-Based Budgeting: Build the Budget You Can Defend

Zero-based budgeting is a method of building a budget from scratch each cycle, requiring every line of spend to be justified on its own merits rather than inherited from the previous year. Nothing carries forward automatically. Every pound or dollar has to earn its place.

For marketing teams, that distinction matters more than it might first appear. Most budgets are not built, they are grown. Last year’s number becomes this year’s baseline, adjusted up or down based on mood, politics, or whatever the CFO will tolerate. Zero-based budgeting forces a different conversation entirely, one that starts with outcomes rather than history.

I have run budgeting cycles in agencies and on the client side across more than twenty years. The version most teams operate is not really budgeting at all. It is negotiation with last year’s spreadsheet as the opening bid. Zero-based budgeting is uncomfortable precisely because it removes that anchor. And that discomfort is where most of the value lives.

What Does Zero-Based Budgeting Actually Mean in a Marketing Context?

The term gets used loosely. Some teams call it ZBB when they trim 10% off last year’s budget and ask department heads to absorb the difference. That is not zero-based budgeting. That is a cost reduction exercise with better branding.

True zero-based budgeting means starting with a blank page. You begin with your business objectives for the coming period, identify the activities that could plausibly contribute to those objectives, cost each one from scratch, and then rank them against each other to decide what gets funded. The prior year’s budget is reference material at best. It is not the starting point.

In a marketing context, this plays out across several dimensions. Channel spend, agency fees, technology subscriptions, headcount costs attributed to marketing, events, research, creative production. Each of those categories has to justify itself against the same question: what does this contribute to the outcomes we are trying to achieve, and is that contribution worth the cost relative to the alternatives?

That sounds straightforward. In practice, it surfaces a set of conversations most marketing teams have been quietly avoiding. Why are we still running that retainer? What is the actual return on that sponsorship? Has anyone looked at whether this tool is still being used? Zero-based budgeting does not create those problems. It just makes them visible.

If you are thinking about how ZBB fits into your broader marketing operations function, the Marketing Operations hub covers the wider set of disciplines that sit alongside budgeting, from planning frameworks to team structure and performance measurement.

Why Do Most Marketing Budgets Default to Incrementalism?

Incremental budgeting persists because it is faster, less confrontational, and easier to defend in the short term. If you spent £500,000 on paid media last year and the business grew, the implicit logic is that the £500,000 was part of why. Adding 5% feels like a reasonable bet. Cutting 15% feels like a risk. Neither position requires you to actually understand what drove the growth.

I saw this pattern repeatedly when I was running agency relationships with large clients. The media plan would land on my desk in October, and it would look almost identical to the previous year’s plan with a few new channels bolted on. When I asked why certain spend levels had been maintained, the honest answer was usually that no one had questioned them in years. The data existed to interrogate the decisions. No one had been asked to interrogate them.

There is also a political dimension that does not get discussed enough. Budget lines represent teams, relationships, and sometimes careers. If your agency has been running a particular programme for three years, cutting it is not just a financial decision. It is a relationship decision. Zero-based budgeting forces those conversations into the open, which is partly why finance teams tend to like it and marketing teams tend to resist it.

The Forrester perspective on transforming marketing planning from reactive to strategic is relevant here. The shift from incremental to zero-based budgeting is fundamentally a shift in how planning is framed. It moves from “what did we spend last year” to “what are we trying to achieve and what will it take.” That reframe changes the quality of the conversation, even when the final numbers end up being similar.

How Do You Actually Build a Zero-Based Marketing Budget?

The process has a logic to it, but the logic only works if you follow it in sequence. Most teams that try ZBB and abandon it skip the first step, which makes every subsequent step harder.

Start with objectives, not channels

Before any number appears in a spreadsheet, you need a clear statement of what the business is trying to achieve in the period you are budgeting for. Not marketing objectives. Business objectives. Revenue targets, customer acquisition goals, retention rates, market share ambitions. Marketing’s job is to contribute to those outcomes. The budget should reflect that hierarchy.

This sounds obvious. It is not how most marketing budgets are built. Most start with “how much do we have” and work backward to what that buys. ZBB inverts the sequence. You start with what needs to happen, identify the activities that could plausibly drive it, and then figure out what that costs. The budget is an output of the strategy, not an input to it.

Build decision packages for each activity

In formal ZBB methodology, each activity or programme is documented as a decision package. This is a short document that describes what the activity is, what it costs, what outcome it is expected to drive, how that outcome will be measured, and what happens if it is not funded. You also typically include a minimum viable version of the activity and a scaled-up version, giving decision makers a range to work with.

In practice, most marketing teams do not need to implement the full academic version of this. But the principle is sound. Every spend item should be able to answer three questions: what is it for, how will we know if it worked, and what is the cost of not doing it? If a budget line cannot answer those questions, that is useful information in itself.

Rank activities against each other

Once you have a set of decision packages, you rank them. This is where ZBB gets uncomfortable, because ranking forces explicit prioritisation. You cannot fund everything. When you have to choose between two programmes with similar costs but different expected returns, you have to make a judgment. That judgment should be documented, because it will be revisited when the results come in.

The ranking process also surfaces dependencies that incrementalism hides. You might find that three separate budget lines are all contributing to the same outcome, and that consolidating them would free up resource for something higher priority. Or you might find that a programme everyone assumed was self-funding is actually drawing on shared resource in ways that were not visible in the previous year’s budget.

Fund to the line, not to the history

When you have ranked your activities and applied your available budget, you fund everything above the line and do not fund anything below it. This sounds simple. The difficult part is holding that position when someone with seniority argues that a programme below the line should be funded anyway because it has always been funded. That argument is precisely what ZBB is designed to challenge.

I ran a version of this process at an agency I was leading through a period of significant cost pressure. We had a long list of internal initiatives that had been running for years, each with a small budget that had been renewed automatically. When we applied a zero-based lens, we found that roughly a third of those initiatives had no clear owner, no defined outcome, and no one who could explain what they were actually for. We cut them without ceremony and redirected the resource. No one noticed they were gone.

What Are the Genuine Advantages of Zero-Based Budgeting for Marketing Teams?

The case for ZBB in marketing is not primarily about cost reduction, though that is often how it gets sold internally. The stronger case is about clarity and commercial discipline.

When every spend item has to justify itself, marketing teams are forced to articulate the commercial logic of their work in terms that the rest of the business can evaluate. That is a discipline most marketing functions benefit from, regardless of whether they are over- or under-resourced. The inability to explain why a programme exists in business terms is a weakness. ZBB surfaces that weakness in a structured way.

There is also a resource allocation benefit that goes beyond cutting waste. Incremental budgeting tends to lock resource into established channels and programmes because they have history. Zero-based budgeting creates space to redirect resource toward newer, higher-potential activities that would otherwise struggle to get funded because they lack a prior year baseline. When I was scaling a performance marketing operation from a standing start, one of the consistent challenges was getting budget for channels that had no track record in the business. ZBB, or a version of it, was the mechanism that made those conversations possible. You could put a new channel on the same footing as an established one and argue the case on expected return rather than precedent.

The process also tends to improve the quality of marketing measurement. When you have committed to a specific expected outcome as the justification for a budget line, you have an obligation to measure against it. That creates a feedback loop that incremental budgeting does not. If you funded a programme because you expected it to generate a certain volume of qualified leads, you now have a benchmark. That benchmark shapes how you evaluate the programme and whether you fund it next cycle.

Thinking about how your team is structured to support this kind of rigorous planning? The Optimizely overview of brand marketing team structures is a useful reference for how different organisations assign ownership of planning and budgeting decisions.

What Are the Real Risks and Limitations of Zero-Based Budgeting?

ZBB has genuine limitations, and the marketing industry has a habit of either ignoring them entirely or using them as an excuse to avoid the process altogether. Neither response is particularly useful.

It penalises brand investment

The most significant structural problem with ZBB in a marketing context is that it creates a systematic bias against brand-building activity. Brand investment is long-cycle, hard to attribute, and genuinely difficult to justify in a single budget period. Performance marketing, by contrast, has clear short-term metrics and is easy to defend in a ZBB process. The result, if you are not careful, is a budget that drifts toward immediate response activity and away from the brand work that creates the conditions for that response activity to function.

I have seen this happen. A business applies ZBB, cuts brand spend because it cannot be directly attributed, and watches its paid search performance deteriorate over the following twelve to eighteen months as brand awareness declines and cost per acquisition rises. The connection is real but lagged, which makes it easy to miss in a cycle-by-cycle budgeting process.

The mitigation is to build explicit protection for brand investment into the ZBB framework. Treat it as a category with its own justification logic, separate from the direct response stack. The question for brand spend is not “what did this generate last quarter” but “what is the cost of not maintaining brand presence in this market over a two to three year horizon.” That is a harder question to answer, but it is the right question.

It is time-intensive

A full zero-based budgeting process takes significantly more time than incremental budgeting. Building decision packages, ranking activities, and running the prioritisation process properly is a substantial piece of work. For large marketing functions with dozens of programmes and multiple agencies, it can consume weeks of senior time that might otherwise go into execution.

The practical response is to not apply ZBB uniformly across every budget line every year. Many organisations use a modified approach where the full ZBB process is applied to a subset of spend, typically the largest or least-scrutinised programmes, while smaller or more stable budget lines are reviewed on a lighter-touch basis. This captures most of the benefit without the full administrative overhead.

It can cut learning before it compounds

Some programmes take time to mature. A content strategy, a CRM programme, a new channel test. If ZBB cuts these before they have had time to demonstrate return, the business loses the compounding benefit of sustained investment. There is a tension between the ZBB principle of justifying every pound in the current cycle and the reality that some marketing investment takes multiple cycles to pay back.

The answer is not to exempt long-cycle programmes from scrutiny, but to evaluate them against an appropriate timeline. If you funded a programme on a two-year return horizon, evaluate it against that horizon, not against what it produced in month six.

How Does Zero-Based Budgeting Interact With Marketing Measurement?

ZBB and measurement are closely linked, and not always in the way teams expect. The process surfaces a fundamental question that most marketing functions have not fully resolved: what counts as evidence that a programme is working?

In a ZBB process, you have to commit to that answer before you spend the money. You are not just allocating budget. You are defining the terms on which each programme will be evaluated. That is a more demanding standard than most marketing teams are used to, and it tends to expose gaps in measurement infrastructure that incrementalism allows teams to paper over.

I judged the Effie Awards for a period, and one of the things that struck me about the entries that did not make the cut was not that the work was bad. Often it was not. The problem was that the teams could not demonstrate a clear link between what they had done and what the business had achieved. They had outputs, not outcomes. ZBB is partly a forcing function for closing that gap. If you have to justify a programme before you fund it, you have to be specific about what success looks like. That specificity is what makes evaluation possible.

The relationship between budgeting and measurement also runs in the other direction. If your measurement infrastructure is weak, ZBB will be harder to implement well, because the decision packages will lack the data needed to rank activities with any confidence. Before applying ZBB properly, it is worth auditing what you can actually measure and being honest about where you are relying on proxies or assumptions.

Hotjar’s overview of how marketing teams work touches on the measurement and attribution challenges that sit underneath this kind of budgeting work. The structural issues they describe, around how teams track performance across channels, are directly relevant to how credibly you can defend a zero-based budget.

How Should Marketing and Finance Align on Zero-Based Budgeting?

The relationship between marketing and finance in a ZBB process is where a lot of implementations go wrong. The most common failure mode is that finance runs the process and marketing participates in it, rather than both functions designing it together. When that happens, the criteria for “justified” tend to reflect a finance perspective rather than a marketing one, which systematically disadvantages the activity that is hardest to attribute.

The conversation that needs to happen before the process starts is about what counts as justification. For a direct response campaign, that might be cost per acquisition against a target. For a brand programme, it might be share of voice, brand tracking metrics, or a contribution to a longer-term revenue model. For a technology investment, it might be efficiency gains measured in time or headcount. Each of those is a legitimate form of justification. They are not directly comparable, which is why the ranking process requires judgment, not just arithmetic.

Marketing’s job in that conversation is to educate finance on how marketing value is created and over what timeframe. Finance’s job is to ensure that the criteria are specific enough to be evaluated and honest enough to be challenged. Neither side should be able to veto the other’s input. The process only works when both functions have genuine ownership of it.

Forrester’s work on designing global and regional marketing operations is useful context here. The structural questions about who owns what in a marketing organisation are directly relevant to how ZBB gets implemented. If accountability for budget decisions is unclear, the process will be gamed rather than followed.

When Does Zero-Based Budgeting Make Sense, and When Does It Not?

ZBB is not always the right tool. There are conditions under which it adds clear value and conditions under which the overhead outweighs the benefit.

It tends to work well when a business is entering a new strategic period, when priorities have shifted significantly from the prior year, when there is a genuine belief that budget has accumulated in areas that are no longer delivering, or when the marketing function is scaling and needs to establish discipline before spend gets harder to control. It also works well as a periodic reset, applied every three to five years even if incremental budgeting is used in the intervening cycles.

It is less well suited to situations where the business environment is highly volatile and planning horizons are short, where the marketing function is very small and the overhead of a full ZBB process is disproportionate, or where the measurement infrastructure is not mature enough to support the level of accountability the process requires. Applying ZBB in those conditions tends to produce a budget that looks rigorous but is actually built on assumptions that cannot be tested.

There is also a cultural dimension. ZBB requires a level of candour about what is and is not working that some organisations are not ready for. If the culture punishes people for admitting that a programme has underperformed, ZBB will produce gaming rather than honesty. The decision packages will be written to pass the process rather than to reflect reality. That is worse than incremental budgeting, because it creates a false sense of rigour without the substance.

Early in my career, I asked for budget to build a new website and was told no. Rather than accept that, I taught myself to code and built it. That experience shaped how I think about resource constraints. The absence of budget is not always the problem. Sometimes the problem is that no one has made the case clearly enough, or that the case is being made to the wrong person in the wrong terms. ZBB, at its best, is a mechanism for making that case properly. It forces the question of what the money is actually for, and it demands an answer that the business can evaluate.

What Does a Zero-Based Marketing Budget Look Like in Practice?

The mechanics vary by organisation size and complexity, but the structure tends to follow a consistent pattern. You start with a master list of everything the marketing function currently does or wants to do. You document each item as a decision package with a cost, an expected outcome, and a measurement approach. You rank the packages. You apply available budget from the top of the ranking down. You document what falls below the line and why.

In a mid-sized marketing function, this might produce a ranked list of thirty to fifty decision packages covering everything from paid search to events to agency retainers to SaaS subscriptions. The process of building that list is often itself revealing. Teams frequently discover programmes that no one has a clear owner for, tools that are being paid for but not used, and agency relationships that have drifted from their original scope without anyone formally reviewing the value.

The output is not just a budget. It is a documented statement of what the marketing function is committing to deliver, and on what terms. That document is valuable beyond the budgeting cycle. It becomes the basis for mid-year reviews, for conversations with the CFO about marketing’s contribution, and for the next budgeting cycle, where you can evaluate what actually happened against what was promised.

When I was at a point in my agency career where we were managing significant paid media budgets across multiple clients, one of the disciplines I tried to instil was the habit of treating every budget renewal as a zero-based decision. Not because we expected to cut everything, but because the discipline of justifying the spend from first principles produced better plans. The clients who engaged with that process seriously got better results. The ones who just wanted to renew last year’s plan rarely improved on it.

If you are thinking about how zero-based budgeting fits alongside other marketing operations disciplines, the Marketing Operations hub covers the full range, from planning and governance to team structure and performance frameworks. Budgeting does not exist in isolation. It is one part of a broader operating system for how a marketing function runs.

How Do You Maintain Momentum After the Budget Is Set?

One of the underappreciated aspects of ZBB is what happens after the budget is approved. The process creates a set of commitments. Maintaining accountability to those commitments through the year is where most of the operational value is realised.

This means building a review cadence that checks actual spend and performance against the decision packages. Quarterly is usually the right frequency for most programmes, with monthly check-ins for higher-spend or higher-risk items. The review should not just ask whether the programme is on budget. It should ask whether it is on track to deliver the outcome that justified the budget in the first place.

When a programme is underperforming against its committed outcome, the ZBB framework gives you a clear basis for the conversation. You funded this programme on the expectation of a specific return. It is not delivering that return. What changes, and by when? That is a more productive conversation than the one that typically happens in incrementally budgeted organisations, where underperformance tends to be absorbed into the general noise rather than addressed directly.

The review process also creates the data for the next ZBB cycle. If you have a year of documented commitments and outcomes, the next round of decision packages can be built on evidence rather than projection. Over time, this compounds. The quality of the budgeting process improves because the quality of the underlying data improves, and the quality of the data improves because the budgeting process demands it.

For teams managing data and privacy obligations alongside their budget processes, it is worth noting that the way you collect and use performance data has compliance dimensions. The Mailchimp guide on SMS and email privacy covers some of the practical considerations for teams managing customer data as part of their marketing measurement infrastructure.

Is Zero-Based Budgeting Worth the Effort?

For most marketing functions, yes, at least periodically. The full process is demanding, and applying it to every budget line every year is probably not the right approach for most organisations. But the underlying discipline, of requiring every spend item to justify itself against current objectives rather than prior year precedent, is sound regardless of how formally you implement it.

The teams that get the most from ZBB are the ones that treat it as a planning discipline rather than a cost-cutting exercise. They use it to have better conversations about what marketing is for, what success looks like, and how they will know if they have achieved it. Those conversations are valuable whether or not the final budget numbers change significantly.

The teams that get the least from it are the ones that apply the methodology without the mindset. They build the decision packages because the process requires it, rank the activities because that is what you do, and then fund roughly the same things they funded last year because no one is willing to make the hard calls. The form is there. The substance is not.

Zero-based budgeting is not a silver bullet for marketing effectiveness. No process is. But it is a useful forcing function for the kind of commercial clarity that marketing functions often struggle to maintain when they are under pressure to produce activity rather than outcomes. Used well, it does not just change how you allocate money. It changes how you think about what the money is for.

About the Author

Keith Lacy is a marketing strategist and former agency CEO with 20+ years of experience across agency leadership, performance marketing, and commercial strategy. He writes The Marketing Juice to cut through the noise and share what works.

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