Mark Beckman | Director | Beckman Marketing | mail me |
Beware of the marketing experts who warn you not to cut your marketing budget, with their perennial slogan, ‘cutting your budget would be an overreaction that could be costly to your company in the long run’.
It’s a Marketing tradition. Each time there is an economic downturn, creative ‘thought leaders’ write articles or host webinars to warn companies ‘why cutting your advertising or marketing budget when times are tough is a bad idea’. Each cautionary (or sales pitch) is usually accompanied by an incentive proclaiming that if every competitor cuts its marketing budget, that leaves a gap in the market for you.
In the last few weeks, many of us have seen customer demand fall, revenues decline, cash flow dry up and contracts nulled. So we will need to find every cent we can to keep our businesses afloat. And in looking at cutting operating costs across your organisation, you are very likely considering your supplier contracts, payroll expenses or admin overheads.
But you may not have given your marketing expenses the attention they deserve during these troubling times. This post is not about spending more on marketing. It is about pausing for a moment so that you can ‘reset’ your campaigns and budget – to make sure that they are contributing positive cash flow again – as most likely, they are not today.
Reboot your marketing budget
Typically, marketing will be your highest expense apart from human resources. In normal trading conditions you are probably spending around 7% to 25% of your revenues in sales and marketing related investments, which is all fine and well in a pre-pandemic market, as it was most likely contributing to a good bottom-line profit. But, if your revenues have just fallen 50%, your marketing investment just doubled to between 14% and 50% of revenues! In marketing-speak that is ‘some expensive bull****!’
So rebooting, or realigning, your marketing budget will correct the investment proportion. In the above case, you’d probably have to halve your marketing spend.
But, if the current pandemic phantasm is teaching us anything, it is that these are not normal times. It is a time that calls for serious introspection and scrutiny. It has also revealed the incredible creativity, adaptability and innovation that humans possess. So it’s time to get creative with your marketing campaigns and strategies, and ignore the ‘spend more’ cacophony.
Where to start with the reboot
If you have a good campaign tracking regime in place, you will know how many profitable leads each campaign or budget item is driving – even the so-called ‘brand building’ exercises. Sort your marketing activities in category order, from best performing to worst performing, and then start cutting or trimming all those campaigns that are at the bottom of the list.
Once your budget has been trimmed, you need to review the specific campaigns or activities that were running within those overall budget categories, as they are bound to behave very differently from pre-COVID-19 trading conditions.
Never assume that your historical marketing metrics will hold up going forward. You are going to have to scrutinise everything. That may result in you re-optimising each of your activities to account for learnings from the new market conditions. So, relook at every sub-campaign within a marketing channel and make sure it is still working its magic. If not, change the settings or messaging, or cancel it completely.
If you utilise the services of outside agencies as part of your marketing efforts, something worth considering, in line with your audit process, (especially if they want to protect their long-term relationship with you) is to ask them to work with you in coming up with a payment plan that will be beneficial to both parties going forward.
For example, this could relate to your contractual media spend, and their agency fees. Perhaps you could switch high-level fixed fees to variable fees that move up and down with your marketing or media spend. In cases where your campaigns stop entirely, keep your regular meetings with the agency or consultant and inform them of your strategy thinking, so that when the lockdown is finally over, they will be ready to go!
Investigate the possibility of renegotiating pre-arranged media bookings in line with your reduced budget. Many media outlets and magazines are pro-actively offering revised rates and contract fees, so shop around.
We are living in a crazy ‘covid-catatonia’ today. What made sense a few weeks ago, from a marketing perspective, most likely no longer makes sense today. You are very much relearning your business and publicity metrics from scratch. The sooner you audit your current marketing efforts from an investment perspective, and reset them, the less time you will be wasting your precious capital.
