Most CFO’s cut costs to obtain profitability for the company. In a recession, that is often the best course of action. The question is: what kind of knife do you use? A meat cleaver or a scalpel?
Should You Cut Marketing Expense in a Recession?
Marketing costs are a prime target for the CFO’s slashing of expenses. The logic is: If fewer people are buying then why spend more marketing dollars to prospects who aren’t going to buy anyway? Makes sense!
But there is another way to look at marketing dollars. Even in the lowest point of a recession there are sales, albeit, at a lower level. Let’s assume that your company wants to hold sales flat good times or bad.
During the good times sales come relatively easy. There is plenty of demand and it doesn’t take much effort for the phone to ring. If you wanted to hold sales flat then you would reduce your marketing dollars in the good times. Right?
Conversely, when bad economic times are upon us it takes considerably more effort to generate the same sales volume. So if you increase your marketing efforts in a recession you should be able to hold your sales flat.
The problem with this argument is that most companies don’t have the free cash flow to fund increased expenses in a down market. So what is the solution?
I suggest that you take a scalpel versus a meat cleaver to your marketing expenses. Analyze the productivity of your marketing dollars. What marketing programs have produced the most results? Is it public relations? Direct mail? web site?
You should start tracking how your sales inquiries hear about you. We had one client who was spending $250,000 per year on yellow pages ads. We set up a program to track the source of each sale. The client discovered that less than 10% of their new sales cam from the ads. The majority of their new sales cam from the inside sales force. Consequently, we reduced the yellow page budget to $50,000 per year and hired two more inside salesmen.
So before you start slashing and burning your marketing budget go back to the tried and true marketing efforts that produce results.
When in a recession, your CEO needs extra advising or guidance to make it through. Furthermore, they need a trusted advisor or wingman. Learn how you can be the best wingman with our free How to be a Wingman guide!
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