When it’s time to tighten the belt on the budget, what’s the first thing that goes? Other than employee perks like free coffee, that is. It’s marketing.
Why? Because it’s easy.
It’s hard to cut operating costs, research investments, or sales expenses. But it’s easy to cut advertising and PR campaigns, social media, email marketing and even content marketing. Those are simple nos.
To the CFO, marketing looks like a line item. It doesn’t show direct revenue – it just shows an expense, making this category an easy target to draw a line through. But it’s getting harder to do that now because there are marketing communications tools that can show ROI for a range of activities.
Don’t Cut Marketing Expenses First.
The economic market is always changing. We’ve had bull and bear markets. And now – after enjoying a long bull market – the forecast is that we’re headed into a down market. It’s anybody’s guess at this point. But once the bad news begins, your CFO will take a harder look at expenses and the first thing he may want to cut is marketing.
Just because it is an expense doesn’t mean that it isn’t an important expense. The way we look at it at Brandwidth Solutions is that it’s a critical investment in your future.
Remember the classic studies done on companies that invested in heavier advertising, radio program sponsorship and creative pricing tactics during the Great Depression? Those companies ultimately became the market leaders in their respective industries: Kellogg, Procter & Gamble, MGM Studios, and Yuengling among them.
The companies that cut marketing? They disappeared.
During a depression, money is tight – much tighter than in a bear market. But guess what? Human behavior remains the same and therefore this dynamic hasn’t changed. So if you’re thinking that you can eliminate your marketing budget with impunity, you may want to think again.
4 Reasons Why Cutting Marketing Spend Puts Future Revenue at Risk
There are solid reasons why you really don’t want to cut investments in marketing. Marketing activities make an impact nine to 12 months ahead of sales. If you cut marketing now, you will lose your momentum nine to 12 months later.
- The Challenge with Long Sales Cycles
For most of our clients, long sales cycles are the norm. If your sales cycle is 12 to 18 months long, it can be really hard to match the marketing expense you made 12 to 18 months ago to the actual sale of your product or service today. Calculating your ROI in this case is difficult.
Sometimes you can easily understand marketing ROI if your CRM is used properly or if you’ve submitted a quote. But sometimes, even when you are presented an opportunity or a request for proposal, you don’t know how or from where it came. You won’t always have a handle on exactly what marketing event generated enough interest to ask for a quote.
If you have a sales force that’s well-trained, they’ll know to always ask, “How did you hear about us?”
But let’s face it, usually the sales person is so excited about the opportunity that they’re not thinking about how a simple question like this can drive future sales. Instead, they’re thinking, “How do I get this sale? What are the things I need to do to get this sale?”
For long sales cycles, the marketing ROI is usually in the form of lead generation. If you cut marketing, you’ll cut your lead generation activities – ultimately, cutting your sales.
- Lasting Brand Awareness Takes Time
Your customer isn’t going to remember you just because they saw your product once. It takes time to build awareness of your brand. It takes time to build your product’s reputation. It takes time for your potential customers to understand your expertise. It takes even more time for them to make a buying decision.
It used to be that it took 5-7 “touches” (meaning exposures to your brand) before a prospect remembered your brand. Today, that number is even higher. This means that building your visibility and thought leadership is an ongoing process.
If you cut your marketing budget, you won’t be able to capitalize on the marketing investments you’ve made and like those companies in the Great Depression who cut their budgets, you’ll also disappear from the conversation in your industry.
- It Takes Money to Make Money
There’s a reason why this adage exists. When sales aren’t fully funding operating expenses, or when the economy looks bleak, the tendency is to try to cut costs and save your pennies to ensure your survival.
Let’s look at it another way. If no one knows about you, you don’t exist. Or, if you’ve disappeared from view (say, all of the advertising or articles you used to publish are discontinued), the assumption is you went out of business.
Not a good feeling, is it?
If you are not participating in your industry’s conversation in some fashion, you won’t be able to generate any leads. If you can’t generate leads that convert to sales, you really will cease to exist. You’ve got to continue to market your product or service even in lean times to ensure that you stay top of mind for prospects that need your product.
- Stand Out: Do What Everyone Else Isn’t Doing
Let’s go back to the successful companies in the Great Depression, or we can look at examples of some of the greatest investors like Warren Buffett, Jim Rogers, or John Templeton. In both cases, the choice was made to do the opposite of what everyone else was doing. That choice ensured visibility and created immense success.
If your product is “best in class” but your industry is experiencing a pull back, get out there and keep marketing. When you stay visible during downturns, your customers will see you and confidence in your company will increase. When they are ready to buy, they’ll remember you.
What Can You Do To Reduce Marketing Costs without Harming Your Business
All is not lost if you absolutely must make changes in your marketing budget. You can look at that line item and say, “Okay, we need to reduce spend.”
There are certainly elements that will keep you visible and in the decision-making mix. Your customer audience is shifting and getting younger. They search for products and services in the B2B space like they do in their personal life. These are the behaviors you’ll want to take into account when you seek to reduce your marketing spend.
What do you cut and what do you keep?
When you think about your customer profiles, you’ll want to keep social media and advertising. Maybe you decide to not do any print and you chose more digital advertising. Perhaps you use Google display ads instead of Google AdWords to cut your spend.
You should never cut down on your content because your content is your thought leadership. You can reuse it over and over. And certainly, you need to stay in the press and you’ve got to keep attending trade shows.
To make marketing a line item expense and then just put a line through it and say, “I’m not going to do this anymore,” puts you in the position of losing out on your future sales.
Don’t steal tomorrow’s revenues by cutting your marketing efforts today.
Brandwidth Solutions serves the healthcare, life sciences, energy and contract pharma industries. We work with companies that want to make the most of their marketing – who want their marketing empowered to help drive leads – and ultimately sales. If you want to move your product or service forward in a smart way, we want to work with you. Call us at 215.997.8575.
