With a recession looming, should we cut our marketing budgets?

Marketing spend if often the first-place companies look when savings need to be made.  Its understandable ~ when cash flow is an issue and belts need tightening, it’s only natural to ask how we can justify spending huge sums on advertising and marketing. 

Sure, the marketing press warns us not to cut budgets in a downturn, but that often seems self serving… Its only if you really understand the value of your marketing activity that you can make informed investment decisions. 

Most companies will calculate a ROI for their AdEx spend, but most companies vastly underestimate the impact of their marketing.   Inhouse calculations usually start with a proportion of last year’s sales and calculate the short-term upside, but this misses huge parts of the picture. 

·         How much of your business is transactional? (i.e. driven by sales activation activity)

·         How much are your competitors spending? and how open are your customers to switching?  Marketplace erosion is real, and in many markets, saliency matters.

·         How much cushioning has your previous campaign provided?  Do you have sufficient accumulated weight (share of voice) to withstand a short hiatus?

·         Which elements within your marketing mix are the most impactful? 

·         If you are to cut spend, do you know where to cut?  Will cutting ATL brand building activity save you money now? Sure, but it could cost you in lost revenue for the next 5 years.   

Econometric modelling, sales attribution and share of voice analysis doesn’t have to be as complicated as it sounds, and the insight it delivers can be game changing.  Imagine finding out the campaign you thought delivered a negative ROI actually delivered a very healthy 3 or 4 because it played defence not offense.    

With that information, what would you do differently? 

Contact me to arrange a more detailed conversation….