“Above the line” and “below the line” are phrases you’ll hear in both accounting and marketing. The “line” acts as a way to separate different activities and their effects, whether it’s on the balance sheet or in an advertising campaign.
But what exactly is above the line, and what’s below it? And is it the same in accounting as it is in marketing?
This article will break down the definitions, characteristics, and applications of both above the line vs below the line strategies in both accounting and marketing. We’ll also touch on “through-the-line” (TTL) marketing, which mixes both approaches for a more complete strategy.
Above-the-Line (ATL) and Below-the-Line (BTL) in Accounting
The terms “above-the-line” and “below-the-line” are used in accounting to categorize different types of income and expenses. Understanding the distinction between these categories is key to understanding a company’s profitability and overall financial health.
Defining ATL in Accounting
Above-the-line (ATL) items in accounting relate to the regular, day-to-day operations of a business. These items are crucial for assessing how well the business is doing overall. Cost of Goods Sold (COGS) and Cost of Sales (COS) are common examples of ATL items.
ATL expenses directly affect a company’s gross profit. These expenses are typically more predictable and stable than BTL expenses. Common examples of ATL expenses are labor, raw materials, and utilities.
Defining BTL in Accounting
Below-the-line (BTL) items, on the other hand, are extraordinary or non-recurring income and expenses. They might not directly affect the core operations of the business, but they still affect the company’s net income. Examples of BTL items include taxes, interest income/expense, and some operational expenses.
BTL expenses are recognized at specific events and don’t directly affect gross profit. These expenses may not be fully deductible or are often itemized deductions. Legal fees, promotional campaigns, and interest are common examples of BTL expenses.
Key Differences and Similarities in Accounting
The main difference between ATL and BTL expenses is that ATL expenses directly impact gross profit, while BTL expenses affect net profit.
- Gross profit = Revenue – ATL Expenses
- Net Profit = Gross Profit – BTL Expenses
It’s essential to classify income and expenses accurately for accurate financial reporting and understanding a company’s financial health. Misclassifying expenses can lead to inaccurate profitability assessments and have tax implications.
Both ATL and BTL items are important in calculating profit margins (gross and net) and determining a company’s bottom line. Understanding both types of expenses is vital for financial planning and decision-making.
Above-the-Line (ATL) Marketing
Above-the-line marketing is all about getting your brand out there for as many people as possible to see. Think big, think broad, think mass marketing.
ATL marketing isn’t targeted; it’s about creating brand awareness and recognition with as many potential customers as possible. Because it’s not targeted, it can be tough to measure the return on investment (ROI). How do you know if your brand awareness campaign is really working?
Examples of ATL Marketing
Here are a few classic examples of above-the-line marketing:
- Television advertising. Commercials during prime-time TV shows are a perfect example of reaching a large audience.
- Print media advertising. Think full-page ads in national newspapers or glossy magazines.
- Radio advertising. Broadcasting your message over the airwaves to a wide range of listeners.
Advantages and Disadvantages of ATL Marketing
Like any marketing strategy, ATL has its pros and cons.
Advantages:
- Broad reach – you’re talking to a lot of people!
- Increased brand awareness – more people know who you are.
- Potential for long-term impact – building a strong brand reputation over time.
Disadvantages:
- High cost – reaching a mass audience isn’t cheap.
- Difficult to measure ROI – figuring out if your money is well-spent can be tricky.
- Less targeted – you’re talking to everyone, not necessarily the people who are most likely to buy.
Below-the-Line (BTL) Marketing
Below-the-line marketing takes a different approach. Instead of casting a wide net, BTL marketing focuses on reaching targeted individuals and achieving a specific return on investment (ROI). The goal is to deliver a direct message to a specific audience, emphasizing measurable results and accountability.
Because BTL campaigns are highly targeted and make use of tools like email analytics, they’re generally easier to measure than ATL campaigns. Marketing automation platforms like MailChimp and Constant Contact, for example, can provide detailed data on email open rates, click-through rates, and conversions.
Examples of BTL Marketing
- Direct mail marketing: Sending targeted mail pieces to specific addresses.
- Sponsorships: Partnering with events or organizations to reach a specific audience.
- Email marketing: Sending targeted emails to subscribers.
- In-store promotions: Using visual merchandising, pop-up stores, and sampling to entice shoppers.
Advantages and Disadvantages
BTL marketing offers some distinct advantages:
- Targeted reach: You can focus your efforts on the people most likely to be interested in your product or service.
- Measurable ROI: It’s easier to track the results of your campaigns and see what’s working.
- Cost-effective: BTL marketing can be a good option for small businesses with limited budgets.
However, there are also some potential drawbacks:
- Limited reach: You won’t reach as many people as you would with ATL marketing.
- Intrusive: Some people may find BTL marketing tactics, like direct mail or email marketing, to be intrusive.
- Careful planning: BTL marketing requires careful planning to ensure that you’re targeting the right people with the right message.
Through-the-Line (TTL) Marketing and the Blurring Lines
As marketing has evolved, a new concept has emerged: through-the-line (TTL) marketing.
What is TTL Marketing?
TTL marketing combines both above-the-line (ATL) and below-the-line (BTL) strategies to get wider reach and more targeted results. It’s about integrating mass marketing with personalized communication to create a smooth customer experience across a variety of channels.
Digital marketing is a big part of TTL marketing, and includes everything from online banner ads to social media posts and blog content. Social media is a great way to connect with customers and introduce them to new products.
The Blurring Lines
Because of modern marketing and technologies like social media, the line between ATL and BTL is becoming harder and harder to see. Digital channels let marketers reach a broad audience while also targeting specific groups.
Many campaigns now use elements of both ATL and BTL, including social media ads, influencer marketing, and content marketing.
The Bottom Line
Whether you’re talking about accounting or marketing, “above the line” and “below the line” refer to very different things. ATL marketing aims to create widespread awareness, while BTL marketing focuses on achieving measurable results. In accounting, ATL transactions relate to core business operations, while BTL transactions are tied to non-core activities.
The best approach depends on your goals, budget, target audience, and what your competitors are doing. Small businesses may benefit from targeted BTL digital marketing, while larger companies can use a “through the line” (TTL) strategy.
The lines between ATL and BTL are increasingly blurred. The most effective campaigns often integrate elements of both to maximize impact.