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Updated 25 Feb 2020

What should you cut first when times are tough?

Times are tough, sales are down, is marketing the best way to spend scarce cash?

Ed Hatton, Entrepreneur, 24 October 2016  Share  0 comments  Print

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The economy is limping along and lower sales means having to save costs. The marketing budget is a tempting target for cuts. Developing the company and product brands is a long-term investment, and it’s difficult to show returns on expenditure.

Even lead generating marketing has a time lag between spending marketing funds and bringing in cash from sales. Cost cutting is usually driven by accountants who may have little understanding of customer needs or branding.

Should you cut marketing expenditure? Only as a last resort to ensure survival and then for a defined time, otherwise emphatically no. There are better ways to cut costs. See the July 2016 My Mentor column in Entrepreneur ‘Cutting Costs.’

There is plenty of evidence to suggest that cutting marketing spend in a recession is a seriously bad idea.

A Wall Street Journal study of the last recession showed that companies that cut back on marketing lost sales and market share, while those that held their marketing increased profits compared to those that reduced marketing.

Repeated studies going as far back as the Great Depression have shown the same results. Savings you make from reduced marketing may be more than wiped out by lower sales. You need every sale and every customer you can get in these times.

Related: Are you in control of your business or does your business control you?

Some studies have shown that it even pays to increase marketing in bad times. Recessions can be a great time to go on the offensive, to grab customers and market share from competitors.

Efficient marketing

This is the time to get the best effect from every Rand you spend on marketing. Focus on issues that will help your customers to save money, like low maintenance costs, productivity gains, product longevity, and low cost of ownership. Fortunately we live in an age where many marketing options are cheap, easy to use and have measurable outcomes.

Do a multi-pronged approach, with all marketing reinforcing the same messages. Choose your media wisely so you will be seen by key decision-makers in your target markets.

You do not need to change all your marketing campaigns, but do review them and replace ineffective campaigns with more efficient ones. One example of an inexpensive marketing promotion includes a modern website that people see and linger on. This an inexpensive necessity. Check how many people visit your site and how long they stay, then improve those results.

Use Internet banner advertising to add to your database of people who have shown interest and then market to them by making offers directing them to special purpose landing pages. Use email or telesales.

Build your brand with low cost sponsorships or by hosting events with reputable guest speakers. Write thought-provoking articles for the press, a blog or social media to establish credibility. Employ an intern to do the administration for all these ideas and gather information.

The power of repeat sales

Do not ignore your customers. They are potentially your best market for additional business and must be pampered and communicated with to prevent them moving to competitors. Make sure they know all the products and services you offer, and how they can use your products to boost their own sales.

Related: Starting a business without funding

Special campaigns for customers only can be communicated via closed user groups on the Internet, readable and useful newsletters or personal contact and telephone. Announce special offers and bundled prices exclusively for customers. Increase customer service and support levels.

Your goal should be to hold or increase turnover, or to lose less sales than competitors by marketing intensively but smarter.

Doing this should see you emerge from the recession in a powerful position to use the good times that will inevitably follow the bad. The sales made by this strategy are statistically likely to outweigh any savings you may have made by sales-destroying cuts to marketing. 

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About the author

Ed Hatton, Entrepreneur

Ed Hatton is the owner of The Marketing Director and has consulted to and mentored SMBs in strategy, marketing and sales for almost 20 years. He co-authored an entrepreneurship textbook and is passionate about helping entrepreneurs to succeed.

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