Managing Marketing In Budget Cuts

Managing Marketing In Budget Cuts

Advertising means any paid form of communication from an identified sponsor or source that draws attention to ideas, goods, services or the sponsor itself. Most advertising is directed toward groups rather than individuals, and advertising is usually delivered through media like television, radio, newspaper and, increasingly, the Internet.

Tough Waters

Navigating budget cuts can be challenging, especially for marketing teams tasked with delivering results despite reduced resources. As budgets tighten, marketing departments must find innovative ways to maintain growth and optimize their strategies.

Many companies are struggling to maintain their sales pipeline. Finance leaders often misinterpret the value of marketing investments, leading to budget cuts that can severely impact a company’s growth trajectory. This disconnect between finance and marketing departments makes it difficult to justify expenditures that are crucial for long-term success.

Challenges of Budget Cuts

Marketing teams often encounter numerous challenges when budgets are slashed. Reduced resources can lead to difficulties in maintaining the sales pipeline, optimizing campaigns, and justifying marketing investments. Finance leaders may not fully grasp the importance of sustained brand-building activities, crucial for feeding the sales pipeline.

Budget and people cuts have become the norm

• Big tech companies have conducted mass layoffs to navigate tougher market waters. Over 150,000 tech workers were laid off in 2024 alone.
• Marketing budgets dropped by an average of 15% in 2024 compared to 2023, and minus 26% compared to 2019.
• Higher interest rates make it harder to raise money, unless you are an AI startup, which means that it is harder to grow as aggressively with advertising.

The days of frivolous spending are ended. Additionally, even when some of your company’s assets have increased significantly, you still need to develop resilience, just like an investor who diversifies their portfolio.

Reducing Your Ad-diction

As long as your lifetime value exceeds your client acquisition cost and net retention is positive, you may either increase your ad spend or just use up all of your available funds. It is often both.

However, you really want to be in a situation where you can swiftly reduce your advertising budget by 20-30% while still seeing growth. True resilience is like that.

Additionally, a McKinsey report shows that resilient organizations generate 150% higher growth. McKinsey found that: During times of economic uncertainty, marketing is more important than ever. Instead of trimming, companies can empower their CMOs to adopt an investor mindset.

Channel Diversification

Examining the channel mix of websites in the biggest industries, it was discovered that whereas D2C companies mostly rely on sponsored traffic, B2B enterprise and SaaS organizations receive far more direct and referral traffic, but less from social marketplaces, which have the highest percentage of organic traffic.

Remedy

Diversifying advertisement enable investment in organic channels such as SEO, content marketing, organic social, organic YouTube, etc.

As organic channels require only fixed instead of marginal costs, such as an advertising budget. So your investment becomes more efficient as returns can scale even without investing more money.

Additionally, even in situations where budget cuts are not necessary, organic channels can increase the effectiveness of commercial channels (like Search). Compared to commercial channels, organic channels are slower to develop and have less clear attribution. Earned, owned, and paid is the ideal foundation for striking a balance between paid and organic channels.

First, find out where your audience is by looking at high-affinity websites in SparkToro, survey your existing customers, or analyze which channels/platforms send you referral traffic in your web analytics tool of choice. Find out the audience size per channel. For instance, if you have a highly engaged audience on Reddit but the most relevant subreddit has only 1,000 members, it might be smarter to go after SEO if your relevant keywords have a promising search volume.

Prioritizing product referrals, investing in SEO and email, organic YouTube, and then looking at other channels is a fairly popular channel sequence that I found to be effective.

In order to investigate the next channel, it is crucial to create very specific criteria for when a channel is developed based on its influence on the bottom line.

Trimming

The most effective approach for cutting advertising budgets is to start with branded terms and paid search. Many companies are spending millions of dollars to bid on their own brand, but not always necessary.

Incrementality testing, the practice of measuring the true incremental impact of a specific campaign or strategy by comparing a test group (exposed) against a statistically similar control group (unexposed), marketer can calculate incremental lift, demonstrating true cause and effect rather than relying on correlation attribution. Incrementality helps determine how many conversions, leads, or dollars would not have occurred without a specific marketing activity.

Effective trimming also takes your audience’s location into account. In SaaS, social media is typically prioritized over sponsored search, however, in business, it might be the opposite. But cutting off brand advertising completely is the biggest error businesses make. In order to support SEO and performance channels, brand awareness is still necessary.

Higher paid spend doesn’t always translate into more or better traffic. Two examples that were found are Salesforce and Shopify. Both companies have a diversified channel mix. They just show that advertising returns can fluctuate, and having optionality is critical to survive the winters so you can enjoy the summers