Don’t slash marketing budgets!

When the world goes to hell in a handcart, there’s two basic ways you can react. You can either run through the streets in a shrieking panic yelling ‘doom’ at everyone you meet or grit your teeth, buckle-up and get ready to meet the challenge head on – whichever you prefer.

The economic gloom has deepened over the past 18 months and the marketing sector has done its best to hold the line. While other industries were talking the planet into recession, we did our best to accentuate the positives, and perhaps if others had followed that example we might at least have slowed the cycle of decline.

Now that the time for blind optimism is well and truly over, the industry has to get real about the recession. There’s a lot of marketers out there still preaching that budgets aren’t going to be slashed and that everything’s fine and I’m sorry to say it, but they’re just plain wrong.

The accelerating downturn is already having an impact on nearly every company out there and if they don’t want it to worsen, people are going to have to pull their heads out of the sand.

Rather than hide under our desks and hope that it goes away, we’ve got to come out fighting. We’ve got to come up with solutions for clients bitten by the crunch and prove to them – in pounds, shillings and pence – that the money they spend on our services is earning them a fantastic rate of return. At the end of the day, no businessperson worth their salt is going to abandon a relationship that makes them money.

Cutting a marketing budget during a recession is rarely considered a smart move and can be one of the biggest mistakes a business will ever make. As money becomes tighter, the need to hold on to customers and find new ones is greater than ever before. We need to be making the argument that spending the same budget more wisely is the way ahead.

Look at the numbers from the US, where there were three recessions between 1973 and 1991. During those periods, the companies who increased their marketing budget were equally as profitable as ones who cut back. The difference was that after the recession the return on capital employed (ROCE) increased to 4.3 per cent against -0.8 per cent for those who cut their budgets. Two years after recovery, the ones who invested in marketing were experiencing ROCE rates on average three times higher than those who didn’t.

So, cutting your marketing budget might make the balance sheet look better in the short term, but in the long run it could be killing the business.

In the online sector, of course, we have even more powerful arguments to take to the market. Given the benefits offered by digital marketing in terms of proof of ROI and ability to measure performance, in times of trouble it makes sense to focus your budget on campaigns that you can be confident are delivering real value for money.

If you’re doing it right, marketing is an investment rather than an expense – that’s the essential point we’ve got to make here. While companies can prosper during a recession, it’s also easy to make decisions (like indiscriminately slashing budgets) that could seriously damage their prospects in the long term.

That, I reckon, is the challenge facing marketers today. If you can prove to your clients’ satisfaction that for every pound they spend you’ll deliver several in return then frankly you don’t have a problem. If you can’t? Well, maybe you’d be better shoving your head back in that sand…

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