The following article is a guest post by Matt Krautstrunk from Resource Nation.
When faced with budgetary constraints, it seems there are two trains of thought in small business. The first one believes that cutting marketing budgets where ROI isn’t met poses no long term consequences. You may hear a business executive from this company saying, “why don’t we just invest in low-cost high ROI marketing initiatives like email marketing and social media?”. The second school of thought, is that when times get tough, use it as an opportunity to reinvest and capitalize where others are failing.
Both are sound options because, in reality, investing money in business segments that are losing money is highly risky. However, restricting a business segment’s breathing room can be equally detrimental to long term growth. I tend to think that keeping your marketing budget in tact is the best long term strategy, here are 5 reasons you should feel the same
1. Play Where Others Aren’t Playing
One of the most basic business lessons I learned in college is to succeed in business you must play where others aren’t playing. Long term success means differentiating your business from competition to create a virtual monopoly. A down economy gives you the opportunity to play where others aren’t playing. Chances are most companies within your industry have made budget cuts to their marketing. If you find out where they are leveraging success your business can jump on it.
Say for instance you find out your competition lets go of their sales in a certain category – they are no longer trying to grow in that vertical. Jump on it! This knowledge may be hard to come by, but keep tabs on your competition by talking with partners and checking sites like LinkedIn.
2. Don’t Cut The Hand That Feeds
Marketing is the hand that feeds the business. Customer service, sales, accounting and all other departments rely on marketing to bring on those customers. If you want to risk a portion your whole company’s health, by cutting out a portion of your marketing mix you could be making a huge mistake. Many business owners don’t realize how volatile their marketing initiatives are, and sometimes all it takes is a 15% decrease in budget to drag a company to a screeching halt.
3. Long Term Risks
There are many long term risks to cutting a marketing budget. Whether it is consumer facing activities like social media or traditional marketing initiatives like offline advertising, your business could struggle to get back on track after a budget cut. Say for instance your company stops allocating resources to social media claiming, “we have an employee dedicating 20 hours a week, and we don’t even see an ROI!”. Cutting resources there will cause a community that formed around your business to leave and find other places to engage.
4. There is More Opportunity in Down Economies
It’s true; a down economy actually can benefit your business. Besides for internal pressures, down economies will kill off low-end competition and give the opportunity to capture bigger market share. If you can make it a down economy, you will thrive a booming economy!
5. If You Cut Your Brand, It May Never Be The Same
Your brand is a living, breathing vessel. Since the advent of social, we are learning how brands can exhibit human like characters. Cutting off food to these human brands might tarnish its name. Let’s say your company is an online retailer, and your customers value your brand because it offers weekly deals that give them the ability to buy select items a fraction of the cost. If your budget cuts don’t see the value in this, you will not only lose customers but you may tarnish your brand forever.
We all are aware of how difficult the economy is. As business owners the decision is yours to either find new and creative ways to market your product or cut budgets where you aren’t seeing ROI. This is a fundamental decision for many, but if you take these tips into consideration you will find that cutting marketing budgets isn’t always the answer.