Marketing is no different from any other department. If the business or economic conditions change, tinting/spending will occur. Most startups and small businesses don’t have a large marketing budget, so the question is, can you reduce your marketing spending without severely impacting your business? Also, can you do effective marketing on a shoestring budget?
The good news is you can undoubtedly implement effective marketing on a tight budget, but there are some challenges (and opportunities).
This blog post will review the steps we usually take when restructuring a client’s budget. For example, if business conditions change or when there is an economic downturn (e.g., recession).
1. Review your current marketing spending
Before cutting marketing spending, you need to understand where your marketing dollars are spent. More specifically, which marketing channels are bringing you new business, and which are not. One of the biggest mistakes you can make is to look at your financials and try to cut the most significant marketing expense just because it will make the biggest impact on your bottom line.
Don’t cut your biggest marketing expense. Instead, cut your least effective marketing expense(s).
Let’s look at an example to illustrate this point better. If online advertising is your most considerable marketing expense, but it also brings the most leads to your business, then cutting your advertising budget in half will most likely cut your leads in half. Obviously, this is not the right approach.
Instead, we need to look for the least effective marketing channels you spend money and time on. For example, if your business is consistently posting on Twitter, but you haven’t acquired any leads, then this is a marketing channel that you need to look at closely. Even if it doesn’t cost you to post on Twitter, you are accruing costs in terms of labor hours.
Closely analyzing where you and your employees are spending time is especially important during recessions or when pushing to turn a profit.
When reviewing your current marketing spending, don’t just look for the biggest expense. Instead, look for the least effective marketing channels and campaigns.
Related: What Are Your Best and Worse Lead Generation (And Marketing) Tactics?
2. Prioritize your lead generation
At this point, you identified marketing channels (and campaigns) that bring you the most leads, some that bring you an occasional lead, and a few that bring you no leads.
On the surface, prioritizing marketing channels that perform (bring you leads) and deprioritizing underperforming channels seems simple, but it’s not always so straightforward. Especially when dealing with organic (non-paid) marketing channels that take a while to establish and attract leads.
For example, it may take years of content creation and search engine optimization (SEO) before you start consistently attracting leads via SEO. The same applies to posting videos on YouTube. It may alsotake a few years before you have enough content, views, and subscribers to reap the benefits.
When prioritizing your marketing channels, ask yourself these questions (per channel):
- Is this specific marketing channel bringing us awareness or leads?
- What is my “cost-per-lead” and “cost-per-customer”?
- What is the maturity level of this specific channel?
- How important is momentum to this channel? Or how easy or difficult is it to restart our efforts?
- What is the long-term potential of this marketing channel?
Let’s assume we created a YouTube channel six months ago and have uploaded videos consistently (one per week). So far, we have 600 subscribers, but none of our leads and customers can be attributed to YouTube.
If we were to summarize our YouTube marketing efforts, they would look like this:
- YouTube is only bringing us awareness.
- We cannot calculate “cost-per-lead” and “cost-per-customer” because we haven’t got any leads or customers yet.
- We only created a YouTube channel six months ago, so this marketing channel is still in its infancy.
- Momentum is very important because consistently uploading videos is a critical YouTube algorithm factor.
- Our core customer demographic is on YouTube. Also, we know that some of our main competitors are attracting leads from YouTube.
Should we stop, pause, or reduce our YouTube marketing spending? We will answer that question shortly, but let’s look at another example first.
The second example we will look at is Facebook Ads. We have been running Facebook Ads for five years now, and our Facebook advertising efforts can be summarized in this way:
- Facebook is bringing us leads.
- Cost-per-lead = $42 and Cost-per-customer = $240
- This marketing channel is mature since we have been running ads for five years.
- Momentum is not critical because we can pause and restart ads easily without concerns about the algorithm or losing momentum.
- Facebook ads have gotten more expensive, so our cost-per-customer is much higher today, but our ads are still profitable.
Now that we have two examples to compare let’s go over some essential factors you should consider. First, if we were struggling to keep the business afloat, cutting our YouTube budget makes perfect sense because our survival is at stake. Therefore, our marketing budget should primarily focus on channels that bring in leads today, not in 12 months or beyond.
However, prioritizing YouTube may make more sense if we are not in survival mode. For example, if our Facebook ads are less and less profitable every year, then it’s only a matter of time before we have to stop using those ads. In that case, creating a new source of leads becomes a priority, and executing a new lead generation channel (e.g., YouTube) is vital.
We highlighted these two examples to demonstrate that prioritizing marketing channels cannot be a one-size-fits-all recommendation. It depends on your business, industry, current marketing efforts, and financial situation.
In summary, when you prioritize your marketing channels, analyze their purpose, financial numbers, maturity level, momentum, and future potential.
3. Allocate Resources
After you prioritize your marketing channels, it’s time to allocate the appropriate resources (e.g., budget, tools, labor, etc.). Your financial situation will significantly affect how many different marketing channels you can support and how many resources you can assign.
If you are running a profitable business and trying to tighten your marketing spending, then shifting some (not all) resources from experimental to proven marketing channels is rational.
Typically, we advise our clients to spend up to 70% of their marketing budget on marketing channels that produce leads/customers and up to 30% on implementing new, unproven channels. If you followed this recommendation and wanted to trim your marketing budget, reallocating some resources from the “unproven” channels to “proven” is a sensible decision.
On the other hand, if your business is on life support, you probably need to take more drastic measures when distributing your marketing resources. For example, you may allocate all your resources to proven channels and cut all spending on unproven channels for the time being.
As a general rule, we recommend you allocate most of your resources to proven channels and some to unproven. However, even when economic or business conditions worsen, we hesitate to advise clients to stop all unproven marketing efforts because unproven marketing efforts often become primary lead drivers.
Allocating your marketing resources (budget, people, channels, etc.) is extremely important to your lead generation and sales success, so take your time and consult with experts if you can.
4. Capitalize On New Opportunities
Tough times always create new opportunities, as long as you look for them. When a business is easily acquiring new customers, or when the economy is booming, it’s easy to waste marketing resources. We often catch wasteful marketing campaigns, but while times are good, decision-makers (CEOs, Founders, Executives, Owners, Managers, etc.) don’t pay close attention to specific marketing channels and their performance. Also, convincing decision-makers to change direction in good times is much harder than during a downturn.
However, when the economy changes or profitability declines, this is usually when many businesses take a closer look at their marketing – this is your opportunity to reimagine your marketing strategy.
Also, if you are considering marketing cuts, there is a chance that your competitors are doing so as well. This is often an excellent opportunity to revisit unprofitable marketing campaigns. For example, suppose a cost-per-click (e.g., Google Ads) for a specific keyword was too expensive during thriving times. However, that cost may have been cut in half during a downturn or recession.
Marketing costs are often driven by supply and demand. Therefore, the fewer marketing dollars there are, the lower the cost.
If you are reducing your marketing spending, pay close attention to who else is reducing their spending?
In summary, during a downturn, revisit marketing channels or campaigns that may have been too expensive. You will be surprised how inexpensive some marketing can be when everyone is looking for an exit door. Furthermore, tough times often force you to think outside the box, and when you start thinking outside the box, you begin implementing marketing campaigns that are unique and typically more effective.
Implementing effective marketing campaigns on a tight budget is possible but requires a lot of thought. You have to review your existing marketing efforts, prioritize based on performance (not cost), allocate resources accordingly, and capitalize on opportunities you probably missed during rapid growth or a booming economy.
Reshuffling, reducing, or increasing a marketing budget is a normal part of doing business as long as it is conducted after a careful review and never rushed into. Also, avoid making month-to-month budgeting decisions. Instead, a marketing budget should be allocated quarterly or annually.
Related: Why Your Marketing Isn’t Working For You (And How To Fix It)