Gartner says that marketing budgets have started to plateau in 2017, after years of steady growth. That’s one of the main things they found in their 2017 CMO survey, which also reported that only two-thirds of CMOs expect a significant increase in their 2018 budget while a third believe their budgets will be cut.
There’s obviously a lot of reasons why companies slash marketing budgets (including tough economic times, shifting priorities, cost-cutting measures, and scaling down operations). Most of these factors are simply beyond any marketing decision-maker’s control. But marketers still influence how much business impact their marketing activities can have. And that’s through carefully planning how (and how not) to spend their budget. That’s what we’ll talk about in today’s blog post.
When to Cut Spending
During economic downturns, businesses typically pull the plug on marketing spend first. It’s only natural for companies to do this since most of them kick into survival mode when the economy tanks. Outside of a recession, however, there’s only a handful of situations where cutting marketing spend is a viable option.
#1 The end goals aren’t clear.
Marketing exists to grow revenue, but revenue isn’t the only goal that marketing needs to achieve. In fact, setting increased revenues as a goal doesn’t tell you much about how marketing accomplishes it.
More specific Goals and objectives (like increased subscribers by X signups each week, grow monthly organic traffic by Y%, or exceed landing page conversion rate of Z %) all move the revenue needle. If a marketing activity or your overall program doesn’t clearly show this, then it’s a prime candidate for the chopping block.
#2 Marketing isn’t aligned with sales.
There are all sorts of things that can go wrong when marketing and sales are out of whack. Communication is next to impossible; there’s plenty of finger-pointing; the sales process lengthens; prospects don’t become customers.
That’s why there’s no point in paying for a marketing tactic or project that doesn’t align with sales’ priorities. The allocated budget, and eventually the amount spent, produces underwhelming or even damaging results.
#3 You can afford losing out to the competition.
You know what happened to those companies that were quick to cut marketing budgets in past recessions? Most of them survived, of course. But they were all outperformed by competitors that maintained or even increased their marketing budgets during the downturn.
That’s because a commitment to a well-oiled marketing machine (with clearly-defined goals and sales alignment) is a commitment to revenues. Going the other way only leaves market share for your competitors to snatch from you. But, if you can afford to lose out to the competition, then, by all means, reduce your marketing spend.
When Not to Cut Spending
There’s one core reason why marketing budgets are the first to go when business goals aren’t met. Most decision-makers see marketing spend as an expense and not as an investment. That’s why companies try to minimize marketing spend as much as they can. While this is true in some situations, this isn’t always the case. You shouldn’t cut marketing spend when:
#1 Decreased marketing spend brings only hard cost savings.
Cost-cutting measures result in two kinds of cost savings. Hard cost savings are reductions in expenditures reported as line items in the P&L statement or budget. Soft cost savings are cost decreases that indirectly affect the bottom-line and include things like better efficiency, shorter lead times, and higher productivity.
While hard cost savings are the easiest to measure and track, they only form a narrow band of the cost-saving spectrum. If reducing marketing spend only results in hard cost savings, then you’re better off finding ways to maximize the budget you have instead of slashing your expenditures altogether.
#2 Cutting back results in cutting corners.
Sometimes, reducing marketing spend severely drags down marketing performance. This is one of the situations where cutting marketing spend isn’t worth it. Take, for instance, the fact that, for a large number of marketers, it’s the lack of budget that’s holding them back from fully leveraging marketing automation.
When cutting marketing spend means scaling down activities to the point where they no longer drive results, you have to wonder if you can really afford cutting corners just to cut costs.
#3 Cutting back is done to fix a misspent budget.
It’s not a good idea to slash this year’s marketing spend because last year’s budget didn’t produce the desired results. If your marketing initiatives in 2017 didn’t generate the desired ROI, there’s a good chance the problem lies in not being able to accurately attribute results.
When marketing fails to hit goals, the problem won’t be fixed with budget cuts. The solution is to find new and better ways of using what you already have.
If there’s one lesson to pick up from this post, it’s that there’s more to cutting marketing spend than cost savings alone. That’s why it’s always a better idea to make the most out of your budget. Strategies like outsourcing part or all of your marketing program is one way to make this happen.