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Scissors Won’t Fix Your Budget Problem

If you work in marketing for any length of time, one fact becomes obvious before almost any other. When times get tough, whether at one specific company or because of a recession like the one we’ve been struggling with for the last few years, the first thing companies tend to want to do is take out their scissors, usually targeting the marketing budget first. Some companies will also want to make cuts to the sales staff or the customer service staff. Maybe the IT department can shrink a bit. If the company is a manufacturer, reducing production shifts may also be on the table.

If you work in business long enough, another fact slowly becomes obvious. Scissors are not the solution to a budget problem, at least not initially. Strategy must come first. Thinking about strategy or the potential downsides of making what might seem like obvious cuts can seem torturous when the pressure is on to right the ship. However, the potential exists to create more problems further down the road if cuts are made impulsively or irresponsibly.

The Chain Reaction

In a business, everything ultimately is related. It’s impossible to cut one facet of your company while protecting everyone else from the effects. Consider the following examples:

Cutting Marketing – If marketing efforts are cut back significantly, two problems can arise. First, you are losing part of your sales force. Yes, ads, PR, social media efforts and other tactics can be seen as part of your sales force. They can go out into the world and tell your story. These materials don’t need travel accounts. They don’t need food. They just need your initial investment and away they go. Additionally, if there is a recession as we have experienced recently, cutting back on marketing can send a signal to the industry you’re in that you’re no longer able to afford your marketing efforts. Perhaps some might even assume you succumbed to the tough times. Neither of these are good messages to send, and both can be hard to combat once they’re planted in peoples’ heads.

Cutting Sales – Cutting sales people prematurely can have a devastating effect if the economy starts to recover quicker than expected. Who will handle the increased number of leads? Bringing in sales people who do not have the depth of knowledge of those who were laid off will not necessarily plug the dyke quickly enough. Yes, keeping a full sales force is costly with expense accounts, travel, etc. as part of the equation but a knee jerk reaction to a bad month or a bad quarter can further deepen the problem even though it may show a short term improvement.

Cutting Customer Service – If your company cuts back on customer service, you may find that your customer retention begins to fall off. That means that the money you saved through your cuts may be offset by the loss of customers you had always relied on. Companies today do not expect the level of service they receive to disintegrate, no matter what your own circumstances. There are plenty of other companies out there waiting to treat them right.

In other words, cutting costs is a short-term solution that could actually work against your chances of improving things in the future. Your company as it exists now has a foundation on which growth can occur. If you start tearing apart that foundation, the whole house can fall.

Money is Money

All of that being said, the fact remains that sometimes difficult decisions must be made. Sometimes cuts do need to happen. The temptation is sometimes to make rash decisions out of desperation. Cut the most expensive marketing tactic. Cut the part of the sales force that seems most expensive. Paradoxically these are not always the best choices. Sometimes cutting several smaller marketing tactics is a better choice than cutting one big one. Sometimes incentivizing rather than cutting the sales force will have better results. Sometimes offering more training to your customer service team is the wiser solution.

The only way to know these things for sure is to sit down and strategize before grabbing the scissors. While the tick-tocking of your company’s clock might  sound loud in your ears, the future depends on you acting the most cautiously and the least impulsively during times like these. It is often beneficial at these times to talk to a marketing partner or a consultant who can review the big picture from an external perspective. They might advise a radical haircut. They might advise a new style. There will many options to weigh, and yes, it will take time.

In the building trades, there is an old adage. “Measure twice, cut once.” The same holds true for running your business, whether in good times or in bad. Measure the ramifications of your actions twice (or more). Cut once. You may not be able to take those cuts back once they are made.

Image Credit: http://www.flickr.com/photos/azriadnan/1818312422/ via Creative Commons

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6 comments on “Scissors Won’t Fix Your Budget Problem

  1. I had a client say to me last week: “We’re a little slow now so we need to ramp up our marketing.” I almost fell off my seat; this obvious wisdom is not common.

    • Wow, that’s really great! It’s a very tough lesson to grasp, and then when you get it you can’t believe you never had gotten it before. Unfortunately, the learning curve can be very tough for a company to endure.

  2. One thing I have tried to evangelize is that leaving your marketing budget intact when your competitors are cutting their own budgets provides a kind of multiplier effect for your marketing dollars. It also keeps you in front of potential customers, so that when they are ready to buy again yours is the name they will remember.

    • Great point. It’s important to be aware of what else is going on in your industry. Often the temptation is to say, “Our competitors cut back so we should too.” That is not always the best path, however!

  3. While I have not seen the ax fall as much on marketing in my career path, I certainly have experienced it in public relations. It usually stems from the finance department and their lack of understanding of public relations.

    PR, in some instances, does not even receive its own line item in the budget but is rolled into the overall marketing budget. I have heard the statement ‘PR is an expense, never a revenue generator, therefore first out.

    Thanks
    Anneliz

    • I’m sure almost every department has a complaint like that. Everyone probably feels like they are in the most precarious postion. That is a great weapon against integrated marketing and social business. Fear creates a lot of silos and competition.

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