Planning marketing budget on a diet: the chance to become stronger
When a crisis comes many companies are tempted to cut their marketing expenses.
Is it an act of pure common sense and prudent management? Or a shortsighted decision that is endangering the company’s future? The debate is often posed in those terms.
As always, the reality is more complex than suggested by this polarizing question. The leader’s role is to refuse to be boxed in that dilemma and set aims while planning the marketing budget.
Table of contents
Before administering treatment, one must make a diagnosis
The first is obviously to analyze what is the nature of the challenges that the company meets:
- An eroding topline, in which case, what is the reason for it: Is the market down? Have we lost a key customer? Is our product / service offer off-sync vs the consumers’ expectations? Do we lose volume or price? and so on.
- Rising costs, like typically raw material, which in turn is hurting profitability?
- Long-lasting profit issue, threatening the long-term survival of the company?
- A brutal and unpredictable external event: economic crisis, geopolitical turbulence, pandemia?
Obviously, depending on the nature and gravity of the crisis, the decision to plan a marketing budget will be different. That is why it is paramount to be very thorough in understanding the situation. In most cases, there is everything in-house to understand the issue at hand: data, brainpower, experience. What gets in the way of reaching the bottom of the issue is twofold:
- difficulty to truly analyze all the data and diagnose the issues, i.e. looking at the symptoms but not understanding the root causes.
- cognitive biases and a difficulty to question what has always been done.
Focus, focus, focus
The second step is to determine what is THE critical objective that the company is setting for itself. The golden rule is simple: when resources are scarce, there is no other way than to narrow down the organization’s goals to the bare minimum, as there is only the possibility to support a limited number of initiatives.
For many years, I worked for a global group in the FMCG business. Back in the early 2000s, the Greek subsidiary had to face a very severe economic crisis that resulted in a slump of the various markets they operated in. Their sales were severely hurt, and in order to deliver the profit expected by the Corporation, they could have reduced spending across the whole product portfolio, by a similar percentage of sales for example.
Instead of that, they decided that over the long haul, some categories were more important than others and in that respect, they turned that crisis into a real opportunity. In this highly competitive market, the question they asked themselves was simple but powerful: in which situation do we want to come out once markets will rebound?
They decided that the most important objective was to gain market share in one of the categories, oral care, where they already had a strong position but where they could establish real dominance for their brand. They identified that, in the future, this product category was the most promising driver of profitable growth for the company. Hence, in contrast with their competitors, they launched new products, they maintained social media marketing costs, they promoted heavily in order to gain trial for the new variants. As a result, during the crisis, the Greek brand grew from slightly over 30% market share to nearly 40%. Consequently, when consumption rebounded, it was perfectly positioned to leverage it and to deliver compounded growth: a much higher market share on a fast-growing market is an arithmetic wonder!
All of the other categories, which had been deprioritized, saw their marketing expenses lowered. But the Greek subsidiary, through intense in-store activity and digital marketing budget allocation, managed to maintain or erode only slightly their position in their respective markets.
Hence, if the total amount of marketing monies spent by the Greek company was actually significantly lowered, they came out from those challenging times as a stronger competitor than before. This rewarded the quality of their strategic thrust and the courage they had to focus company resources on a clear and shared objective.
Digital marketing budget: a good opportunity to innovate
When resources are scarce, the challenge becomes of course to do more with less: less advertising, less promotion, less PR, less event marketing, less sponsoring, etc. Suddenly you have a lack of advertising budget and the TV campaign that used to be run almost automatically, year in, year out, is no longer an option; the costly sampling is questioned; printing new glossy sales brochures for the commercial team is no longer seen as necessary.
Well, this is an opportunity! Without the constraints of the crisis, how many companies would have willingly revisited the way they do business? Shortage of resources is a mighty incentive to look for innovative ways to market one’s products or services.
A clear example of that is the need to accelerate digitalization and include social media marketing costs as a way to support the activities in a more cost-efficient manner than the traditional media.
If your salespeople can only re-use the brochures of last year or cheap Powerpoint printouts, isn’t it the right moment to equip them with tablets?
Frank Gehry, the famous architect, once said:
“The best source of creativity is timing and a budget.”
“The best source of creativity is timing and a budget.”
It is no different for marketing, especially when it comes to a marketing budget for small businesses: challenging times force organizations to revisit their traditional actions and processes to get more leverage with every $ invested.
Those periods tend to be very fertile. And they durably change the way that planning marketing budget runs, for the better; to the point where, very often, people can’t help saying “but why didn’t we do all this before?”.
There is no “one size fits all” for the debate on how to handle scarce marketing resources. But the above simple approach of digital marketing budget expansion is certainly effective to optimize a company’s performance under severe budget limitations:
- an in-depth analysis of the situation has to be quickly performed
- then, there has to be a total company commitment behind a limited number of priorities
- finally, energy has to be put behind the search for new solutions to the marketing challenges that the company is facing
This A.F.I triptych (Analyze, Focus, Innovate) requires strong leadership and persistence. But it pays off and is the secret of resilient companies.
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