Striking a Balance in Marketing Budget

Studies show that brands that maintain or increase marketing expenditure in a recession tend to do better than their rivals in the long run. Due to strong NPD and heavy marketing support, the company’s sales rose 20% between 30 March and 30 June.

However, to escape hatchet-wielding finance directors, marketers must take steps to make their spending more efficient in ways that do not harm demand. Marketing asked a panel of experts for their tips.

Streamline your processes:

Our research shows that most companies can make 10%-20% efficiency gains or more, without harming demand, by overhauling inefficient systems and processes. You can cut up to 50% from production costs by eliminating costly reworking, additional print-runs, and bureaucracy that involve one piece of collateral being reviewed by 100 people.

Manage agencies more tightly:

Clients should push media agencies to justify their choice of media in financial terms. It is amazing how many brands still target difficult to reach markets through ad spots in Coronation Street. A senior fellow in marketing at London Business School, cites market research as one area to cut back on. A lot of this is done in a ritualistic attempt to ‘keep in the touch with the customer’, but doesn’t affect what the company does.

Most companies have a portfolio of brands, and if they know how big they are, their profit margins and so on, they can quickly get a rough idea of which ones are worth supporting and which aren’t. If more marketers did those sums, they would realise how much of what they do is uneconomic.

Optimise promotional balance:

Karl Weaver, a director at Data2Decisions, a marketing consultancy that helps clients manage budgets, advises companies to wean themselves off price promotions. Advertising can help reduce responsiveness to price. So advertising and price promotions can cancel each other out, particularly if the advertising is run after a promotion.

Power of emotion:

The financial payback from emotionally led ads is greater than that from more rational ones. People are motivated by how they feel, rather than what you tell them, which is another reason to resist brand-eroding tactical activity such as price promotions. Positive word of mouth can increase the efficiency of marketing budgets by about 40%.
Research shows that creative execution is the second-biggest determinant of an ad’s profitability, after market size. Its importance is in a downturn. If your current execution is not as effective as the last one, ditch it and bring back the old one.

Power of integration:

Integrated campaigns can increase efficiency by up to 100% because of interaction between different channels. Similarly, using one-stop shops for all communications will presumably result in significant cost-savings.

Don’t cut marketing staff only to re-employ people on inflated salaries as ‘consultants’. By creating more clarity about what people do and relating it to clearer marketing goals, you will need fewer people.

The finance director runs a business, so being able to engage with them is vital. You do that by talking in terms of investment, rather than spend. Marketing spend is discretionary and easy to cut. British Gas spends about £40m annually on marketing, and you think, ‘If we spent £20m, would our world fall in?’

Evaluate everything in business terms:

Evaluate everything in business terms to identify what works. Who claims that Dell has increased its marketing efficiency in the US by 50% in the past two years by testing everything it does. If you want to learn and improve, you have to recognize and admit to failure, rather than brushing mistakes under the carpet.