Why Cutting Marketing Budget Costs More Than You Save

Jennifer Mancusi 2 minute read

Like many companies out there, the state of the economy may have you facing revenue “lumpiness” and financial challenges that require careful budgeting decisions.  As such, many executive teams are looking for opportunities to operate more efficiently and reduce expenses.  If your marketing budget is on the chopping block, read on…

While it may be tempting to cut costs across the board, doing so can have serious consequences to both short-term revenue gains and long-term growth. Instead, companies must carefully consider when investments are likely to generate the greatest ROI during an economic downturn.

We’ve seen this time and time again…marketing and advertising budgets are often seen as the quickest and easiest way to reduce expenses. But there are multiple risks associated with cutting marketing budgets for businesses looking to grow. Here are a few:

Decreased Awareness

One of the main risks of cutting your marketing budget is reduced visibility. If a company is not actively promoting its products or services, it will become less visible to potential customers. While you may not feel the pain of this immediately, brand awareness is a long-game strategy and any decrease in activity will set you on your back foot, leading to a decline in sales, brand loyalty, and market share in the long term.

Decreased Demand Generation

Cutting your marketing budget has a direct impact on opportunities to connect with potential customers and promote your products and services.  Whether that means eliminating conference attendance where your customers are present or cutting digital advertising channels, you may miss out on critical opportunities to reach your target buyers, negatively impacting revenue generation.

Increased Competition

If you’re not investing in marketing, opportunities are created for competitors to gain market share and attract YOUR customers. This can lead to a decline in sales and a significant impact on long term revenue growth.

So what do we recommend instead? When others go quiet, consider it your opportunity to go loud.

Rather than reducing your marketing budget, now’s your opportunity to evaluate and ensure your spend is performing as efficiently as it can.  This means calculating your customer acquisition costs by channel and campaign to identify where your budget can go farther.  Investing in those areas that have a higher ROI will ensure you’re investing in the right areas that directly impact revenue growth.  And continuing to invest in your brand will help maintain awareness even when it seems like your customers aren’t spending, allowing you to leapfrog your competitors when the economy rebounds.

Looking for an example? During the 2008 financial crisis, Intel launched a marketing campaign promoting its new line of energy-efficient processors as a way for businesses to reduce their operating costs. Likewise, During the 2009 recession, Salesforce launched a marketing campaign promoting its cloud-based CRM software as a cost-effective solution for businesses looking to streamline their operations. Both campaigns were successful and helped to drive sales growth for these firms.

Ready to be bold and double down but need help understanding your attribution metrics to determine which marketing tactics are most effective for your business?  Check out Growgetter’s free Customer Acquisition Cost Evaluator and download our Step-by-Step Guide to Marketing Attribution.

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