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Why Cutting Your Marketing Budget In Times of Crisis Is Unwise

June 18, 2021


When confronted with an economic fallout, businesses across the globe will find themselves facing a familiar dilemma: to make marketing budget cuts or not to make marketing budget cuts?

This age-old debate gets right to the core of how businesses should balance the books in a recession. Should they put a pause on marketing? Should they double down on their campaign strategy? Or should they invest in new initiatives that better reflect the times?

We’ll be answering those questions and more as we break down the ins and outs of how to approach marketing budget cuts in times of turmoil and beyond. 

Why do businesses cut marketing budgets first? 

When a business needs to make cuts to weather an economic storm, marketing budgets are almost always first on the list. 

After all, spending big on marketing can seem counterintuitive when customers are spending less and revenues are down. That’s when, on the surface, big marketing budgets can become difficult to justify – even for the biggest of businesses. 

Take 2020, for example. Marketing spend plummeted to the lowest levels in over a decade, just as around 255 million full-time jobs were lost across the globe. 

Against that backdrop, it’s not hard to see why spending money on encouraging customers to open their wallets became less of a priority. If even Google had to cut their marketing budget in half, how could other businesses afford not to do the same?

But no matter how logical it might seem, is it always right to make marketing budget cuts?

In two words: not always.

Why cutting your marketing budget isn’t a good idea 

Chances are if your revenue took a hit this year, your recovery plan includes marketing budget cuts. But consider this: studies have consistently shown that businesses who market themselves during rough patches are the ones most likely to survive a recession. 

Why? Because above all else, there’s less competition. 

As some businesses cut their marketing budgets, others can jump in and make a name for themselves, without having to break the bank. This creates a unique opportunity to optimize your marketing strategy and pull new customers away from your competitors. 

What’s more, cutting marketing spend is usually counterproductive. 

While a low period will certainly require you to switch up your strategy, it doesn’t always have to mean a reduction in your marketing budget. It just means that you need to make smarter decisions.

You could channel your funds into campaigns that send a positive message. This increases sales by building brand value and connecting with customers in a different, more authentic way – just like Ford and Ikea did in 2020. Fail to do that, and your reduced marketing budget could actually do more harm than good.

Ultimately, this is about re-allocating your marketing budget to channels and content that are right for the moment, without necessarily dialing things down.

There’s also the fact that while some markets might not justify big marketing spend, others – with different economic and cultural makeup – might. China, for example, became the go-to for brands in 2020 when its economy actually continued to grow during COVID-19

Take Beyond Meat, for example. They took full advantage of China’s growing plant-based sector and future-proofed themselves by launching a Chinese website to help them survive the impact of COVID-19 on the global economy.

In the end, thriving during a rough patch is less about making marketing budget cuts, and more about making savvier marketing decisions that make the most of new opportunities. 

Reasons teams opt to cut marketing budgets 

Although it isn’t always the right decision, there are a number of reasons why businesses might make marketing budget cuts. 

The first of which is that, sometimes, it’s simply the only way to balance the books. In the long-term, cutting your marketing budget rarely makes sense – but if it’s the only way you can survive the short-term, then it might be all you can do. 

That said, marketing budget cuts aren’t just about economics. They’re also about optics. No business wants to offend or get on the wrong side of their customers, especially during a pandemic or recession when emotions are high and customer perception is so important. 

How do you ask your customers to dig into their pockets when their pockets are the emptiest they’ve been since the global financial crisis in 2009? 

You don’t, or at least, that’s the stance most businesses take. 

Interestingly, only 8% of customers thought brands should stop advertising during the pandemic, which suggests that putting marketing on pause for the benefit of customer perception simply isn’t worth it – even during an economic downturn. 

That’s why it’s so important to make smart marketing decisions, instead of just cutting your marketing budget in panic mode. 

6 areas to consider when planning to cut marketing costs 

If you’ve got no other choice but to make marketing budget cuts, you’ll need to make the right kind of cuts that won’t backfire in the future. Here are six ways you can cut corners, without taking too much of a risk.

1. Ending contracts with external marketing agencies or subcontractors 

Outsourcing your marketing strategy can be a great way to put your marketing campaigns on autopilot. But when money is tight, you might want to consider reviewing, and potentially even ending, external relationships if they’re not delivering a strong ROI. 

It’s all well and good working with do-it-for-you agencies that save you time and (usually) money, but during a crisis, can your business still justify the cost? Might it be cheaper to do things in-house? Do you have the resources to make that happen?

Only you will know the answers to those questions, and you’ll need the numbers to back them up, but in some cases, you might find that your marketing budget stretches further if you take full control of your strategy. 

That said, you’ll need to be careful and selective about which relationships you put on pause and which you continue. Keep in mind that certain initiatives like those that work on brand building and organic growth can pay off in the long-term, which your calculations might not reflect.

In fact, according to The CMO survey, around 30% of businesses have prioritized brand building in 2020. You don’t want to get lost in the competition by making marketing budget cuts that leave your brand forgotten and left behind.

It may seem like reducing costs related to SEO and content marketing is the easiest option when cutting back your marketing budget, but you should think carefully before doing so. These are the initiatives that require a long-term vision and could strengthen your brand in the future.

2. Getting rid of unnecessary marketing software and tools

Over the past few years, SaaS companies have offered new, innovative solutions to make marketing easier for businesses across the globe. They cut costs, streamline workflows and optimize results – all of which is great, but only if you actually need and use them. 

Unfortunately, bloated tech stacks are becoming more and more common, as businesses are drawn in by big claims that don’t always add up. 

The result? Spiralling subscription costs and low ROI that goes undetected. That’s why when you’re cutting your marketing budget, it’s important to assess your SaaS stack to work out if there’s any room to slim it down.  

Using tools like G2 Track, you’ll be able to:

  • Identify unused and underused apps 
  • Consolidate apps with overlapping functions 
  • Review licenses with usage insights 
  • Make data-backed decisions about your tech stack 

Ultimately, while some SaaS tools are worth the price, others aren’t – and knowing that difference could save you from having to eat into your campaign budgets for software you simply don’t need.

Again, selectivity will be important here. You don’t want to cut ties with tools that play a vital role in your strategy, and nor do you want to cancel any agreements that you might want to return to in the future. Instead, check if your provider has a pause option that’ll let you pick up where you left off, without having to input new data again. 

3. Spending more time on underutilized marketing channels 

Instead of just cutting your marketing costs, how about redistributing them from overutilized and low ROI channels to underutilized, high-potential ones?

A crisis is a great time to reassess your marketing strategy and work out not only how you can cut costs, but also which platforms and channels your business is yet to make its mark on – and what that might mean for your bottomline.

You might find, for example, that while a legacy channel underperforms for you during a recession, a new platform might have a better, more relevant user-base that could help you reach your customers for a fraction of the cost. 

In China, international businesses like Starbucks, Dyson, and Marriott have seen huge success by pivoting and growing audiences on e-commerce channels that they had neglected for far too long. 

The lesson? 

Sometimes shaking up your budget and allocating funds for new channels (in previously untapped markets, like China) can be a great way to optimize your budget and increase ROI, without having to necessarily shrink it. 

That said, you should only cut your budget on a channel if you’ve noticed a downturn. Getting started on new channels during a recession can be tricky, and you don’t want to disrupt what’s already working for you without good reason. 

Review your analytics and check out what other options are available to you. If you think there’s room to switch things up, jump at the opportunity. Your marketing budget could deliver a higher ROI if you get it right.

Source: Blog

4. Scaling back on internal marketing functions and teams 

As well as cutting external marketing costs, you should also look a little closer to home and consider whether your internal marketing budget is being put to good use. 

Your in-house marketing team will play a huge role in your business, even if you do lean on external partners to tie everything together. That said, it can sometimes be difficult to judge the ROI of internal staff members when a lot of the day-to-day management is outsourced. 

You might also find that what your internal team is focusing on isn’t necessarily delivering tangible results or is no longer a real priority. Again, you need to be careful here about acting too quickly and not considering the long-term benefit of things like social media and SEO.

But an area like internal employee marketing, for example, might not be something you can afford to prioritize when you need to make marketing budget cuts. That’s why it’s worth doing some sums and really digging into the value that your internal team brings. 

If you find that your in-house team isn’t worth the cost, it’s totally acceptable (and wise) to scale it down – especially if they don’t have the resources or skills to replace external partners. 

Let’s be clear about that, though: if your team does have those skills, it’s better to tap into them during a recession, than to outsource, even if it means increasing their pay. But if they don’t, you should certainly consider reviewing your in-house marketing budget. 

Instead of making permanent cuts, though, it would, first, be sensible to offer reduced hours to your marketing staff before ending your relationship with them. That way, when things pick up again, you’ll still have an experienced marketing team on tap that you can scale back up with ease. 

5. Ceasing recruitment and hiring new candidates 

Talking about scaling down your existing teams, it should go without saying that you might also want to put a pause on hiring new candidates as part of your marketing budget cuts. 

In 2020, 59% of CEOs implemented hiring freezes, so it’s certainly one of the most popular ways to make cuts without taking money directly from your campaign budgets. 

At the same time, however, you might decide that recruiting and investing in new staff members is an effective way to boost your internal marketing team and cut costs elsewhere – perhaps by reviewing those external relationships again.

Your approach to recruitment in a recession will be dependent on your marketing strategy and whether you most rely on external or internal support. You might find that hiring new staff could actually stretch your budget further than if you continued to outsource. 

If you have the resources to hire, it’s especially worth investing in roles that focus on building new relationships in new markets. Ones that could play an important part in how your business manages the recession. 

Do some sums, look at your analytics, and come to a decision whether it would be sensible to put a pause on recruitment or not. If it is, you could cut thousands of dollars and better optimize your existing set-up, instead of unnecessarily expanding it. 

6. Freezing new product launches and updates

Putting a stop to your in-person marketing events could help you to stretch your marketing budget further, thanks to digital alternatives. 

If you have the resources to launch a new product, for example, you could invest in virtual events and social media campaigns that are not only more cost-effective than traditional marketing tactics, but also guarantee a wider reach. 

It’s likely that your marketing budget – especially after making cuts – will actually be better suited to digital events.

That’s why it’s worth freezing any new product launches you have planned and building a new strategy that’s more affordable, and more digitally focused. That way, you can still make marketing budget cuts but be cushioned by a repositioned strategy. 

When you do get back to launching new campaigns, it’s also important to consider your messaging. Customers have less money than they’ve had in over a decade, so you need to carefully consider the optics of any campaigns you launch. Empathetic messaging will be a key part of that, as will tapping into the community spirit triggered by the events in 2020. 

Need to make marketing budget cuts? 

Consider the points we’ve raised today, and assess whether any of them are the right steps to take for your business. They might well be, but they might not – and you need to make sure you’re not cutting core parts of your budget that could backfire later down the line. 

Whether you choose to reduce your budget or keep it stable, the real secret to success in a recession is to find ways to optimize and make the most of the funds you have. 

Invest in new initiatives, build new strategies, think outside of the box, and don’t be afraid of putting money into new ideas that could provide the lifeline your business needs.

In short: be savvy, and don’t make cuts on a whim. That’s how you can manage marketing budget cuts now and in the future, without taking any undue risks. 

Artboard 1 copy 18@2x Not sure how to budget well during a crisis?

Using budgeting and forecasting software can help you make more informed decisions rather than cutting vital business organs, like marketing, on a whim.

Artboard 1 copy 18@2x Not sure how to budget well during a crisis?

Using budgeting and forecasting software can help you make more informed decisions rather than cutting vital business organs, like marketing, on a whim.

Why Cutting Your Marketing Budget In Times of Crisis Is Unwise Cutting your marketing budget might seem like your first instinct during an economic crunch - but being tactful at it can help your business immensely. Learn how you can make the most of your budget and where you could cut corners.
Seema Nayak Seema Nayak is a Digital Marketing Specialist at with a decade of experience in helping businesses grow. She loves mountains, slow travel, and animals.

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