Why a cut in marketing budgets might not be a bad thing for marketers

Over the last few months there has been various studies released focusing on headcount and marketing budgets as we approach 2013. Research conducted by Lead Edge ‘Construction Market Barometer‘ recently showed that 28% of companies are expecting no change to their marketing budget, with 36% expecting growth. Whilst that is a good sign I personally also think that leaves more room for random acts of marketing (do more! do more of the less effective stuff!!).

Which means the remaining 36% of companies surveyed are looking at reducing marketing budgets. I can only assume that the companies which belong in this bucket are trying to assess which tactics, channels and strategies to cut or eliminate as we move closer to 2013.

“If we are going to reduce budget, what do we stop doing?”

As much as I agree that it might be quite difficult to show ROI in ££ for some in our industry, I think it’s very easy to show ROI in numbers (lead generation, sign up’s, downloads, registrations, speaking engagements, new relationships, loyalty etc) against every marketing activity/channel. It really comes down to defining what the R stands for in the ROI and having realistic objectives and timeframes. Is the return going to be a higher percentage of leads? Is the return going to be the number of subscribers or registrations? Is the return going to be the number of links? Is it going to be increase in traffic from doing SEO? Define it first.

Another metric to use for assessing budget is calculating the CPL (cost per lead). Problem with this is that marketers may not really go far enough in assessing the quality of each lead and gaining feedback from sales reps. For example, campaign A generated 100 leads at £1.00 for each lead, campaign B generated 5 leads at £20.00 but the 5 leads generated were ‘project ready’ leads, much more value. All leads are not created equal.

How do you split your leads? An example might be to have A type leads, B type leads and C type leads? – then the objective for the SEO spend and activity is to grow the C type leads by x%. Simple.

This is why cutting budgets is great….it allows for measuring against small objectives over shorter periods of time.

Why a cut in budget is a good thing (in my opinion)

It really comes down to two factors.

1) A cut in budget allows you to focus, really focus, one one or two objectives and do them well. Stops you conducting “random acts of marketing”.

2) Makes you a better marketer as you will question things you have never questioned before.

Do more with less. Heard that before? Course you have. I recently met with a marketer who showed me a 30+ page product brochure and said “we have to print these as customers lover them, I have a warehouse full of them”. I immediately thought “Do they REALLY love them?” and “Why is the warehouse full if they love them?” Maybe they just love them because they do a good job at propping up the wonky table.

After flicking through the brochure I noticed that there were about 16 or so pages of tear-out fax back forms at the back of the brochure, each form was the more or less the same, the only difference was that the name of the product at the top changed. Kill me now! What happens when the packing quantity changes or your R&D department have invested in streamlining the product resulting in dimension changes? Reprint the whole brochure? At what cost? What about the warehouse full of brochures??

Why couldn’t each product page within the brochure direct people to the exact page on the website (with unique URL’s for measurement purposes) so that they can submit their requirements online at any time of the day? Reduce print cost whilst investing in the time to create one web page. This is only questioned when the objective is to lower cost but maintain or increase performance.

This is one example of a simple cost cutting exercise and ties in with point #2 in my post ‘15 things marketers must stop doing now!

Get more agile with marketing budgets

From my own experience, marketing budgets were set at the end of the year for the next or at the beginning of the year (too late). Once set it was difficult to re-allocate throughout the year depending on how campaigns perform, industry changes, products change, behavioural change and the economy too.

A typical budget would be allocated to various categories such as print, exhibitions, email, website or hospitality and not tied to any outcomes of any kind. So before you have even started the year, your mentality is focused on outputs, rather than outcomes.

You are already at a disadvantage by being less flexible to adapt to changes and experiments throughout the year as budgets set in the final quarter of 2012 can’t anticipate the changes coming up in 2013. You may find out late that in the year that Architects have flocked to a new architectural social network and you have no more budget left for content development therefore have to sit back and watch your competition swoop in and sweep them all up in their basket.

You focus on the outcomes – not on the size of the budget.

Focus on outcomes like ‘increase leads by x%’ or ‘achieve 60,000 web visits with x% converting into registrations’ instead of budgeting on outputs like ‘3 exhibitions’ or ‘printing 20,000 brochures’ or ‘supplying POS to merchants’.

Take the ‘60,000 web visits with x% converting into registrations’ outcome as an example. The next question is “How are we going to achieve this and how long do we anticipate it to take us?”. Now you have a focused on an outcome, you can then budget accordingly for research, planning, content development, user testing, measurement and reporting.

So whilst having your budget cut maybe seen a bad thing by some marketers, I personally think it’s a good thing also.

Focus on outcomes, be agile, develop a plan that is focused on specific audiences, make sure it’s realistic and achievable based on your budget, whatever size it is. Don’t look at your budget and think “20,000 brochures is 60% of my budget”.

How do you manage budgets? Are you agile? Do you focus on outcomes or outputs? If you have focused on outcomes how has this helped you focus on the small tings that make the biggest difference? (Working title for the next blog post)

About Stuart Dinnie

Stuart has worked in the world of digital marketing for over 15 years. With his measured and planned approach, he has delivered robust digital strategies for construction companies to achieve real business growth. He now heads up the team at Pauley Creative as Managing Director and is leading his team & clients towards digital marketing excellence. He’s worked with over 100 construction clients; helping them on their digital transformation journey, providing sustainable strategies that return year on year incremental growth, delivering award-winning websites and adding value from board level to marketing assistant.

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