Cutting Marketing Spend: When It Works (and When it Doesn’t)

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.

Related: Key Financial Tips On How To Bring More Money Into Your Marketing Budget


When to Cut Spending

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.

Related: The 4 Main Lead Generation Goals: What Has Changed & How to Reach Them

#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.

Related: Marketing and Sales Alignment – Best Practices

#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

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.

Related: Why Companies are Spending Heavily on Lead Generation

#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.


The Takeaway

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.



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Key Financial Tips On How To Bring More Money Into Your Marketing Budget [GUEST POST]

Regardless of industry, effective management of marketing efforts is critical for every business. Ask any well-seasoned businessperson – it doesn’t matter how great a product you have or how much value you add with services you offer; you will never have any clients if your offerings aren’t marketed effectively. If people don’t know what you do or how well you do it, you will never have sales or accumulate market share. The fruit of your company will wither and rot on the vine if you can’t effectively bring it to market.

Related: Why Companies are Spending Heavily on Lead Generation

However, expanding your marketing efforts by making cuts to the quality of products or services are out of the question – it would be cutting off your nose to spite your face. Instead, what many companies need are ways to expand marketing efforts without sacrificing the financial viability of their company. What follows are a few ways to do just that – tried-and-true methods that companies can use to expand their own marketing budgets and efforts, without suffering in the process. One or more may work for your company, or open your thinking to other opportunities that might directly benefit your business.


Look for ways to streamline your operations.

One of the best ways to find new money to expand marketing or other efforts within your company is to identify and exploit new efficiencies in your current operations. Seek out inefficiencies such as double-handling of simple tasks or manual processes that could be eliminated for cost-savings. Realign your resources to accomplish current business tasks more efficiently, and deploy the savings for more robust marketing efforts. Simple, but effective.

Related: Benefits of Outsourcing and How to Stop Long Working Hours

Consider consolidating your business lines.

Many business leaders today espouse the 80-20 rule: 80% of a business’s revenue is produced by 20% of its activities. What this means is that, if 80% of your activities are only providing 20% of your revenue, then those areas represent substantial opportunities to make cuts for increased profitability. After all, even these less profitable areas of operations cost money to run. If you can eliminate some of these less-profitable areas, it can potentially cut sizeable expenses and the savings can be redirected to marketing for those areas of your business that generate most of your income.

Seek out and form critical strategic partnerships.

The biggest advantage to this concept is that it can help you to expand your marketing efforts without actually increasing your own budget. Instead, identify other companies that you might partner with on various marketing efforts. The right partnerships can help you to leverage the budget of other, larger or more established firms. In addition to getting a boost from their larger marketing budgets, if done correctly you can also benefit from their reputation or credibility in the marketplace. As your partner firms and their stakeholders become more aware of what you do and engaged with you as a company, they may even become valuable new clients.

Related: Improve your Lead Generation by Improving your Networks

Delay or curtail your own rewards.

Here we see demonstrated the bootstrapping mentality that is so valued among many young start-ups. If you, your co-founders and managers believe firmly in the long-term viability of expanded marketing efforts, consider asking all involved to put their money where their mouth is. With their approval, cut the compensation and benefits to these high-level stakeholders, or offer equity instead. Redirect the cash savings to grow your marketing budget. Hopefully, these efforts will help to grow sales and accumulate market share. If those efforts are successful, the rewards to your shareholders and executives will be far greater than their near-term sacrifice.

Get behind events or causes that have larger aggregate budgets.

In the worlds of philanthropy or civic engagement, business leaders can find many organizations that aggregate marketing budgets from many sponsors or supporters. Supporting such causes as a company, either directly with marketing dollars or through in-kind donation of goods or services, you can piggyback on their marketing efforts to increase awareness of your own business. What’s more, in many cases these causes are uniquely positioned for free media, further increasing the exposure gained by your involvement.

Consider working with professionals.

Many agencies and other firms are able to lend considerable value to your marketing efforts by maximizing the value of each dollar spent. Granted, you do not need to give a consultant free rein or engage them for additional services, but it can be helpful to enlist of the help of one or more specialized firms, rather than trying to do everything yourself. Yes, you will pay for their services in some form. However, if used correctly, their services will greatly magnify the impact of each marketing dollar, generating far greater returns on your marketing budget – regardless of its size.

Related: 4 Signs That You Badly Need a Lead Generation Team


Added marketing efforts can be a necessary first step toward success for many businesses. This often requires reassessing specific marketing efforts already being undertaken, measuring their various returns-on-investment and realigning resources to meet your specific goals. However, in many cases, this realignment is not completely sufficient to achieve objectives for your business’s marketing. Instead, success is reliant on finding ways to expand your marketing budget and redouble your efforts in order to gain market share and add new sales.

Related: 5 Important Decisions for Every Entrepreneur

If this is the case for you and your business, time and energy will be required to think critically about how and where to find the resources necessary to expand your budget. Further effort will be required to ensure that those additional resources are deployed with maximum impact and benefit to your bottom line. To start looking for ways to expand your marketing budget or deepen the impact of resources already being deployed, consider the tips above as starting points.

Aside from those points listed above, take time to think also of any ideas that arise as a result of this thinking, and carefully consider all opportunities and alternatives before executing on a chosen strategy. The marketing efforts that you make for your company will shape the way the public sees your company and your offerings. Your reputation and credibility are at stake, so be sure to undertake these efforts with due caution and experience.



Steven McMeechan

Steven McMeechanSteven McMeechan is a strategic marketing and communications specialist with over twenty years’ experience in senior marketing management roles across a range of industries including Information Technology and Financial Services. He works for Capstone Financial Planning and lives in Melbourne Australia.




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