COVID-19’s impact on the economy spread through dozens of industries around the world, and those impacts continue to spread to suppliers, vendors, and services companies throughout the supply chain. Few have been unaffected. For many, the sudden loss of reliable sources of revenue triggered a wave of preemptive budget-slashing and furloughing employees just to stay afloat. While some businesses struggled to maintain clients, others were forced to close their doors completely. Even companies that weren’t immediately impacted sought ways to cut costs and decrease overhead to prepare for uncertain times. For many, the most obvious area they identified for expense cuts was the marketing budget.
Depending on your industry, marketing can take up anywhere from 4%-24% of your total budget. And while cutting your marketing spend can temporarily help with your cash flow, 38.4% of companies depend heavily on marketing as a major driver of revenue growth.
Cutting all of your marketing spend will reduce your overhead but it will also make it harder to attract new clients to replace those you lost, weakens your brand presence, and puts you in a bad recovery position to bounce back after the economy starts to recover. According to the Harvard Business Review, building and maintaining a strong brand presence for your company is a key strategy to reduce risk in an economic downturn. In fact, increasing marketing spend during a recession has shown to help boost financial performance the following year.
When we asked about her take on the topic, Kristen Ortwerth, CMO and marketing advisor, said the following:
“Marketing is about creating momentum. Efficient marketing spend requires consistency. Essentially, when you take your foot off the gas, the car starts to slow down, and eventually stops. It takes a lot more energy & fuel to get it started again than it would if you’d only slowed a little.”
She added, “While it’s tempting to look at your marketing budget as an easy place to cut spend to improve your immediate cashflow situation, ultimately you’re going to see a significant slowdown in your sales pipeline down the road. Depending on your business model, that could be either immediate or it could be several months away. Starting your demand gen engine all over again is painful and time consuming. If cashflow is an issue, try to find cost savings across your entire organization.”
3 Major Risks of Cutting Marketing Spend
1. Decrease in Sales Opportunities
This risk is the most obvious; without consistent marketing efforts, you’ll be less likely to attract new clients and may miss out on entire sales cycles with potential new prospects at a time when you absolutely need them most.
Most companies require a steady flow of both inbound and outbound activity to build a healthy revenue engine. Marketing initiatives not only create initial brand awareness, they also nurture your prospects and drive them towards a conversation with your sales team. From email marketing to regular blogging, consistent marketing builds trust and rapport with prospects.
Don’t dismiss the importance of trust. According to this survey, 68% of adults in the U.S. say that trust in a brand has a lot of influence on their decision when making a big purchase. Even with brand recognition, companies who aren’t nurturing a relationship with prospects will lose out to their competitors.
2. Your Competitors Outpace You & You Lose Market Share
Let’s say you cut your marketing budget, but your competition doesn’t. Prospects who are comparing offerings are likely to opt for the company that can establish the most trust and familiarity.
“While your product is critical to sustainable business success, poor branding in a digital era of social credibility and brand recognition can make your product irrelevant.” Said entrepreneur Jia Wertz. CEO Jaiden Vu takes this theme one step further : “It’s not the best product that wins but the best-known one that wins.”
By forgoing your marketing efforts, you forgo your ability to compete in the market. This kind of setback can be irreversible if one of your competitors manages to gain enough market share. Your ideal customers will begin to automatically assume that their larger presence means they have a superior solution.
3. Your Existing Customers Might Start to Wonder if You’re Still a Viable Partner
As explained above, cutting your marketing limits your ability to reach potential prospects and attract new clients, but it can also impact your relationship with existing customers. Decreasing your marketing spend acts as a red flag to your customer base. Marketing is your mouthpiece of communication; it’s how you stay connected to the outside world. But if your blog & social media accounts go quiet, your clients may start to worry. In uncertain times, your clients and prospects need consistency more than ever. The moment they stop feeling connected to you, it’s going to have a negative impact on your brand reputation and the trust you worked so hard to build with your clients.
In short, the risk of decreased marketing often outweighs the dollars saved.
Instead of Cutting Marketing Altogether, Make the Most of What You’re Able to Spend
As they say, when times are good, you should sell and market; and when times are bad, you must sell and market. But if you’re losing revenue, you’ll have to cut costs somewhere.
In this situation, it’s best to enter with a pocket knife rather than a machete. Review your marketing expenses with a fine tooth comb to identify opportunities with the highest ROI and only cut initiatives with minimal impact.
For instance, you may already be allocating sufficient funds to your lead generation efforts. From buying prospect lists to promoting LinkedIn ads, you’re doing what you can to prospect for your sales team. However, this might not be the best use of those dollars. Fearless Competitor found that outsourcing lead generation generates 43% better results than in-house lead generation. Rather than taking a DIY approach, working with a lead generation partner can free up time and resources for your team, while also creating more ROI.
All the while, don’t forget the impact of free marketing. Whether you choose to attend networking events (via Zoom) or you diligently approach your LinkedIn as a thought leader, there are strategies you can implement to beef up your brand presence with a minimal budget. Don’t dismiss this approach. There are over 80 million small businesses using Facebook’s free business tools and over 1.6 billion people around the world connected to a small business on Facebook; with regular engagement and valuable content, your presence can make an impact.
Finally, marketing can be used to retain the customers you currently have. With tactics like holding customer round tables, you can ask clients to share insight on how they’re getting through hard times. Even creating a regular podcast with your clients can be a great way to foster relationships and add value to your existing customer base. These retention strategies are inexpensive and help you to build trust, dependability, and loyalty.
Losing clients is hard on businesses and frankly, hard on morale. But it doesn’t need to be a permanent set back for your company. Effective marketing can help to reestablish client relationships, attain new business, and reposition your company in a time of crisis. Cutting your marketing budget can have a longer lasting impact than losing clients. Marketing helps to both maintain your portfolio while also growing your business. To learn more about adapting your business to financial setbacks, click here.