Can you cut marketing budgets whilst maintaining performance?

Published 27/09/2022
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Businesses have had a rough ride of it over the last three years. The pandemic, followed by soaring inflation and oncoming recessions have created long-lasting economic headwinds that have challenged the resolve of even the most established firms.
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The natural inclination during turbulent business environments is to build resilience by reducing expenditure where possible, and one of the largest areas of somewhat-discretionary spending for most organisations is in marketing and advertising. 

But there is a balancing act to play here. Pulling all marketing spend will see sales reduced at a time when maintaining and even growing revenue is critical for resilience. But ring fencing your marketing budgets could mean having to make savings in other areas of the business, including laying off employees. 

I believe there is a middle ground, and a way in which cautious firms can look to make efficiency savings in their marketing and advertising activities, all whilst maintaining (as best possible) levels of performance. 

Here’s a look at how it can be done. 

Analyse your returns from all marketing channels

The first step is to really understand your different channel marketing efforts. How much are you investing in each, and what measurable return are they delivering? 

Some channels are easier to analyse than others. Paid search and social directly tell you a ROAS each month, whilst investments into email marketing or CRM-based nurture campaigns can also generate a ROI figure. 

Harder to calculate will be avenues such as SEO, or PR and organic social - especially if these are relatively new channels of focus. Look at growth, as well as any directly-attributable sales, and offset that versus the capital commitment to continue pushing these channels, including any directly-related expenditure (influencer campaigns, PR agencies) and the salary costs of employees carrying out this work. 

From here, you should have a broad but detailed picture of all your marketing activities in a rankable way. Which channels are delivering great returns month after month? Ring fence these channels. And which channels are becoming a black hole for cash without seeing any progress towards a profitable return? These are the areas that you can look to focus on making any savings. 

Don’t abandon your primary target audiences 

In a similar way that we don’t want to be cutting the budgets of our top-performing campaign channels, we also want to maintain the investments we’re putting into the best-performing audiences. 

A great example of this in practice is with an AdWords campaign. If you need to make a 20% saving on your monthly AdWords spend, then it’s easy to think ‘we’ll just spend 20% less each month’. But this broad stroke approach will see returns fall in line with the scaling back of investment. 

This can be avoided by instead analysing your different target audiences, or demographics. Which age groups, or interest-groups, and even remarketing and lookalike audiences, are driving the most profitable returns?

Instead of cutting spend across all audiences, focus instead of those that are delivering the poorest returns. This approach will enable you to cut spend, but in a way in which your ROAS and ROI could actually improve. 

Focus on ‘free’ marketing channels 

If you gave me the choice between 1,000 Adwords clicks or 1,000 email subscribers, I’d take the subscribers every day of the week. 

‘Free’ marketing channels, such as SEO or organic social, email and content marketing, are all fantastic ways to drive brand awareness and directly-attributable sales, without having to spend a penny on a per-click basis. 

I say free in inverted commas for a reason - these channels need management and some investment still - but businesses who have invested in these areas over time will be the most resilient from a marketing standpoint if budgets need to be severely cut, even if for a short period of time. 

Why? Because they’ve already built up audiences they can market to, without having to spend to reach them. 

There is a catch. SEO, or building a big email marketing list, takes time to develop. Cutting 25% of your paid spend and investing 5% of that into SEO efforts or a new Mailchimp account with no contacts in it are not going to help mitigate the loss of revenue growth you could have otherwise seen. 

But now would be a good time to look at these channels, and consider the question of ‘where’s my traffic and leads coming from if we had to pull all spending tomorrow?’. 

Assess how your marketing efforts are managed

There’s been a long-standing and ongoing debate as to the merits of in-housing versus outsourcing marketing activities. 

There are of course benefits and pitfalls to both. Building your own team means you can usually get work done more quickly, centralise all thinking and do more too. But outsourcing means you can tap into a wider pool of talent and expertise under one roof, usually for the same price of less than you’d pay one or two individuals internally. 

Different business leaders will have a view on both, with some seeking a blended approach with generalised marketing managers and directors in-house, who then manage agency relationships to carry out specialist areas (such as paid search, or SEO and PR). 

Whether you’re looking to boost performance, or cut costs, the trick is knowing when it’s the right time to hire a marketing agency. If your in-house resource is struggling to keep up with the amount of work expected of them, or just doesn't have certain specialist skills, then that’s a good sign that additional help would be beneficial. The other is that returns are stagnating or costs are increasing whilst revenues remain flat. Again, a good sign that fresh ideas and new minds working on your firm’s marketing output could be advantageous. 

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About The Author

Arthur Wilson is a marketing consultant and writer across digital, business strategy and HR. He is a regular contributor to The Entrepreneur and small business advisor for Enterprise Nation.

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