Making Marketing Smarter Amidst the Cuts

It’s pretty much accepted during tough times like this: Budgets are going to get cut, and marketing’s usually first in line. Weighing the extent of the cuts is a challenge in weighing the tradeoffs between short-term revenue needs and long-term brand strength. Here are five tough questions to address that utilize existing intelligence in guiding how best to reduce and reallocate budgets.

1. Do you have a complete inventory of your growth investments and can you identify waste (or inefficient spend)? Divisional and functional silos in even the largest, most sophisticated companies often block a clear view of the marketing spending. You cannot manage what you cannot see. We’ve also found that periodically taking investment inventory will reveal wasteful spending of about 15% of the total almost every time, along with proven winners that must be supported despite budget reductions. A thorough inventory will identify obvious wastes and clear producers, as well as spending areas that pose bottom line opportunities for more efficient and effective spending.

2. Do your investments change your customers’ buying behavior? Share of market and revenue goals are too general to truly gauge effectiveness. It’s more important to know what behaviors you are trying to drive among customer groups. For one group, it may be an annual, versus bi-annual, service package upgrade. For another, methods to get them to buy 50 percent more each time they order. If you’ve identified growth-generating behaviors, you can judge your marketing investments by their ability to drive those behaviors – and become more focused in your marketing investments.

3. Are your investments focused on customers’ barriers to buying your brand? One client spent heavily on mass marketing in developed markets to build awareness; it looked efficient when the cost was divided by the number of prospects. But shifting away from advertising (given existing brand awareness) to spending on closing the sale actually doubled growth. Conversely, in low share markets, advertising’s cost had this client spending on closing the sale. But the need to push awareness and consideration to higher levels meant mass advertising worked best. Clearly, numerical efficiencies are less critical than understanding and responding to barriers to growth.

4. Do you have the right mix of marketing levers among your investments? All marketing investments do at least one of three things:

5. They change customer perceptions in a way that encourages them to buy more.

6. They provide temporary monetary incentives for customers to buy more.

7. They make the brand more available so customers can buy more.

Focusing too heavily on any one lever can hurt the others. For example, making the brand too available can drive down prices or increase the need for greater monetary incentives. Marketing effectiveness requires thinking through the right mix of investments to generate profitable growth.

8. Do you have a system to maintain “winners” and cut “losers”? As you assess your winning and losing investments, it’s critical to think about both the potential long-term and short-term impacts of those decisions. There are four considerations: effectiveness and efficiency; maintenance versus growth; proven versus experimental; and direct and indirect impact.

The bright side of this economy lies in the opportunity it presents for inserting greater rigor, better capabilities and smart metrics to make marketing investments more effective over time. Weighting these critical five questions will guide you down the path to greater marketing accountability through spending that better bridges the gaps between effectiveness and efficiency – whatever the economy is doing.