What to Do When Your Marketing Budget Is Cut

The seemingly endless stream of bad economic news is making corporate leaders nervous. Worse yet, some companies including many e-tailers have seen their sales growth soften or even go into decline. Usually the first thing corporate management does when sales drop off is to cut expenses. And one of the first areas to cut is the marketing budget. It’s a favorite target because it tends to be sizable, can be throttled back quickly, and can be cut without stifling revenue immediately.

What should you do if your marketing budget is cut? While your management wants you to react immediately, you know that an ill-considered elimination of marketing support can quickly translate into a disastrous drop in sales. Rather than responding hastily and arbitrarily just to show activity, I recommend performing a quick analysis of your situation to get a better understanding of your best business alternatives. This will help you to redirect your marketing budget to maximize results.

Three Steps to Determine Your Current Business Situation

Before making any decisions about how to reallocate your scarce marketing dollars, it’s critical to understand your business performance to-date and marketing’s role in driving those results as well as how your consumers’ mindset has changed recently.

  • Analyze performance to date. Track marketing results to date against actual past performance indicators rather than budget. See how current trends may be changing relative to last year and recent months and weeks. Go beyond top line revenue and expense indicators to understand what’s driving your firm’s performance in terms of individual products, brands, and price points. Think about which product lines, products, or brands are moving. This can give you insight into how customers are changing their thinking.

    Monitor sales-related factors such as inventory, payments, and returns to gather additional information about how your business is changing.

    Check what you competitors are up to. During difficult times, it’s particularly important to consider a wide range of substitute products. (For specifics on competitive analysis, go here.

  • Determine true marketing spend so far this year. Don’t just rely on the spreadsheet that your department has been keeping since your actual commitments to date may have exceed that! Consult your finance department to ensure that your tracking and the company’s are in sync. Account for any outstanding bills for work done which have yet to hit your expenses. Also, check your media contracts and other commitments for marketing services scheduled later this year or future periods where you may be legally bound to pay. Lastly, check to see if services to support your marketing efforts that are provided by other areas of the business or third parties haven’t been cut back. If areas such as customer support, technology, and Web site operations have had their resources curtailed, adjust marketing plans to make do without these resources or to provide additional support where necessary.
  • Assess marketing efficiency in terms of which channels, media outlets, and campaigns are driving prospects and closing sales most cost effectively. Consider which type of sales require multiple impressions from different media. For example, while it may seem that most of your sales are attributable to search, are there other aspects of your marketing spend such as catalogs or display advertising driving people to search for you? Additionally, think about whether other resources are needed to maximize sales such as multiple distribution channels and non-marketing customer communications.

Put these different analyses together to get a more comprehensive picture of where your business is and how it has changed recently. Use these insights to guide your marketing decisions going forward. Remember that it’s important to track these factors on an on-going basis to enable you to continue to meet the dynamic needs of the marketplace.

Three Strategies to Redirect Remaining Marketing Spend

Based on the current state of your business, revise your marketing using the following three strategies:

  • Revise your promotional offers to be in sync with current trends. Develop new offers that help your communications break through the noise. This means assessing your product array including considering ways to change packaging to attract customers. Take into account how purchasing, pricing, and your products may be viewed as offering value in the current environment such as offering larger quantities or sets of products. When you do this, remember that this can have inventory implications. One place to look for inspiration is DRTV ads.

  • Change your messaging to maintain communications with customers and prospects. While price is certainly an important purchase driver in a weak market, keeping marketing messages focused only on pricing can hurt your margins. To breakthrough the clutter, use communications that talk about budget stretchers, time savers, affordable treats, and entertainment. (For more details, see “Four Communications Strategies for a Down Market.”) Consider how these messages can be used across various customer touch points and channels.
  • Reassess your marketing mix. Using your analysis, consider where you should place your marketing efforts. Take into consideration the impact of various marketing initiatives on each other. Assess the potential for more creative, cost effective forms of marketing, such as social communities and PR that require less advertising dollars but more employee-related resources. Also, make sure that other areas of the business, such as non-marketing customer messaging and your customer database, continue to support your marketing. Remind your colleagues that some level of marketing initiatives is necessary to drive revenues even in tough times.

So don’t panic if your marketing budget is cut. In hard times, it’s even more necessary to use your analytic tools and marketing creativity to get the most bang for your marketing dollar. With good information, you can effectively determine where to reduce your marketing spend to maximize results in terms of profitability.

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