3 Strategies for Annual Planning and Budget Segmentation

Read Time: 7-9 minutes

Bottom Line Up Front (BLUF): This article breaks down three key strategies for annual marketing budget segmentation: the Sprinkle Strategy (spread small bets), the Tentpole Strategy (concentrate efforts), and the Four Burners Strategy (balance large and small initiatives).

Author: Alex Stonehouse, Marketing Director at Forj

Near the end of every year, most marketing leaders go through the exercise of creating an annual plan and budget for the following twelve months. Deciding how to allocate your budget requires strategic thinking and often involves tough decisions around what to prioritize.

The decision of whether to spread your resources across multiple small initiatives or concentrate your budget and your energy on a few large bets can significantly impact your overall success.

There are three marketing budget segmentation strategies that illustrate the considerations and trade-offs we must grapple with as startup marketers: the Sprinkle Strategy, the Tentpole Strategy, and the Four Burners Strategy.

Understanding Budget Segmentation

Budget segmentation refers to the practice of dividing your marketing budget into specific segments, each dedicated to different strategies, channels, or campaigns. The way you choose to segment your budget can have a profound effect on your marketing outcomes. While a well-segmented budget can help you achieve your goals efficiently and effectively, poor segmentation can lead to wasted resources and missed opportunities.

So what strategies can startup marketers apply to annual planning and budget segmentation?

The Sprinkle Strategy: Spreading Small Bets

The Sprinkle Strategy is characterized by dividing your budget into many smaller bets. For example, if you have a $1M budget, you might allocate $100K to ten different campaigns. This approach is akin to spreading seeds across a wide field in the hopes that some will sprout and yield a healthy crop.

Advantages of the Sprinkle Strategy:

Diversification: By spreading your budget across multiple initiatives, you reduce the risk of putting all your eggs in one basket. If one campaign fails, others may still succeed.
Flexibility: With smaller investments in each campaign, you have the flexibility to experiment with different channels, messages, or target audiences.
Test & Learn Quickly: If your company is still looking to find your footing in the market while establishing product market fit, it can be hard to commit to larger investments without applying the test and scale approach to start.
Risk Management: The smaller size of each investment means that any single failure is less likely to have a significant impact on your overall budget.

Challenges of the Sprinkle Strategy:

Diluted Impact: With smaller budgets for each campaign, it can be challenging to achieve a significant impact in any one area. The risk of spreading yourself too thin is real. The upside of this strategy is limited. Low risk often means low reward.
Complexity: Managing multiple campaigns simultaneously can be resource-intensive and complex, requiring careful coordination and oversight.

The Tentpole Strategy: Concentrating Your Efforts

The Tentpole Strategy involves allocating your budget to fewer, but larger, campaigns. Using the same $1M budget example, you might allocate $250K to four campaigns, typically one per quarter, that you can build the rest of your go-to-market and demand generation strategy around. This approach is like planting fewer, but stronger, trees that can provide shelter and sustenance over time.

Advantages of the Tentpole Strategy:

Significant Impact: Larger budgets for each campaign allow you to create a more substantial and memorable presence in the market.
Focused Effort: With fewer campaigns to manage, you can concentrate your resources and attention, leading to higher-quality execution.
Brand Building: This strategy is often used for brand-building initiatives that require a more considerable investment to achieve long-term recognition and loyalty.

Challenges of the Tentpole Strategy:

Higher Stakes: With more resources allocated to each campaign, the risk associated with failure is higher. If a campaign doesn’t perform well, the impact on your budget can be significant.
Limited Flexibility: Focusing on fewer initiatives means you have less room for experimentation or responding to market changes.

The Four Burners Strategy: Going All In

The Four Burners Strategy represents an attempt to capture the best features and outcomes from the Sprinkle and Tentpole strategies while focusing the majority of your energy on a single priority area. Here, you might allocate a large portion of your $1M budget to one major campaign, say $750K, while spreading the remaining funds across smaller initiatives ranging from $50K to $150K. This approach allows you to make a significant bet on one key initiative while keeping some flexibility and room for experimentation with smaller investments.

Advantages of the Four Burners Strategy:

Strategic Focus & Commitment: The large investment in one major campaign ensures that you’re taking a bold approach and planting your stake in the ground. It forces everyone to row in the same direction while coalescing around a core message and overall strategy.
Impact & Disruption: Increased focus, attention, and investment in a single strategy enhance the chances of creating a major splash that disrupts your industry and captures attention.
Consistency: Imagine applying the $750K investment to a single strategy that you commit to for six months or a year. It’s your primary focus, and you are consistent. Every day. Every week. Every month. Your results will compound, engagement will increase, and demand for your product will grow.
Harmony, Not Balance: This strategy balances the need for a significant impact with the desire for diversification. You’re not putting every dollar into one campaign, but you still have the potential for a big win on the primary investment.
Flexibility Isn’t Sacrificed: Unlike the Tentpole strategy keeping some of your budget in smaller segments, you retain the ability to test new ideas or pivot quickly if needed with a portion of your budget.

Challenges of the Four Burners Strategy:

Pressure on the Major Investment: The success of your overall strategy may hinge on the performance of the primary campaign, which can create significant pressure.
Complexity: Managing different-sized initiatives with varying levels of importance and risk can be challenging, requiring careful planning and execution.
Cross-Team Buy-In: You will have to be confident in your strategy, and be comfortable articulating it to your team, the broader GTM function, and leadership. This approach can raise some questions and make people nervous, but when executed right the payoff substantial.

Choosing the Right Approach

Deciding how to segment your marketing budgets forces you to confront an unfortunate truth: despite wanting to have it all, there are significant constraints on your time, bandwidth, and available spend. So how can you make a final decision on what to invest in and what to cut from the plan?

Ultimately, the answer depends on several factors, including:

Company Goals: Are you looking to build brand awareness and trust? To generate leads and drive conversions? Are you focused on growing a pipeline? Do you have a sales-led, product-led, or community-led approach to growth? Your overall company goals will be a significant factor in determining how you should allocate your budget.
Market Conditions: In a rapidly changing market, you might prioritize flexibility and experimentation, favoring a Sprinkle Strategy, so that you can learn quickly and easily get in and out of investments as needed. In a more stable environment, a Tentpole strategy can provide a consistent drumbeat to build quarterly initiatives around. The Four Burners Strategy requires conviction, confidence, and strong product market fit, along with a good feel for where your customers spend their time and attention.
Competition: Consider where your competitors are investing heavily. If it’s in one particular area, that may indicate they have found an essential segment of your market, meaning you’ll need to match their efforts with a similar approach. But it could also mean that channel is crowded and over-leveraged, making it expensive and inefficient, and you would be far better off finding blue ocean with far less competition. This is where you can combine your expertise and intuition with hard data to help you make informed decisions.
Resources: Consider not only your financial resources but also your team’s capacity to manage multiple campaigns and strategic programs. When you understand their strengths you can lean into the areas where your team excels and set them up to get the most out of your budget.
Leadership Buy-In: The founder or CEO and the finance team are not your enemies here. They may have some opinions about the best way to budget, and it can sometimes feel like you are clawing for each dollar, but what they are really asking you to do is provide a vision for how you want to spend the money. From that vision, you can back into the resources you need to achieve it. At the end of the day, you all have the same goals. You want to grow the business. So work with them, not against them.
Company Maturity: It’s helpful to remember that you are not tied to any strategy forever. You can change your strategy to suit your needs, and the needs of your customers, as you scale and mature as an organization.

I encourage you to think critically about your team’s marketing priorities and the trade-offs you are willing to make. Ultimately, the right strategy will depend on your unique situation, but understanding the pros and cons of each approach will help you make strong decisions, whether you choose to sprinkle or blast one of the four burners.