What Happens When You Cut Your Marketing & Advertising Budget?

Oct 20

When the economy is shaky and consumer confidence starts to dip, it’s natural for organizations to take notice and make adjustments. Many businesses pivot or shift when markets get rocky.

But in times of change, it’s important to remember not to make impulsive or knee-jerk reactions — especially when it comes to your marketing and advertising.

Approaching a slowing economy by cutting your marketing teams, organic communication efforts, volume of content, event and community participation, and advertising budgets may seem like a quick way to save, but it can have lasting and costly repercussions for your brand, revenue, and reputation.

Let’s consider what may happen when you turn down — or turn off — your marketing and advertising.

What Happens When You Cut Your Marketing and Advertising Budget?

Marketing and advertising are how a business communicates with customers, generates leads and revenue, and builds lasting brand affinity and authority. If you are thinking about cutting your marketing budget or advertising spend, here are a few ways your business could be affected.

Short-term savings

Yes, cutting a budget line like marketing and advertising will create initial savings. Many companies cut marketing and ad budgets during poor economic conditions. In the 2008 recession, ad spending in the U.S. dropped by 13%.

Long-term loss of leads and sales

Short-term savings are great, but they can lead to long-term losses. Marketing isn’t a faucet pouring out leads and sales that you can turn on and off. Successful marketing is fueled by momentum, and you lose forward progress when you stop or scale back too much. Leads and sales may come in shortly after turning off marketing and advertising, but as momentum wears off you’re likely to see a drop in leads and sales as your past marketing efforts wear off.

Decreased brand awareness and recognition

Cutting budgets affects each part of the marketing funnel. Most noticeably, it reduces leads and revenue coming in at the bottom of the funnel, but it will also slowly chip away at the top of the funnel. Without marketing or advertising, brands will struggle with building the brand awareness needed to attract new audiences and build relationships with new or already interested customers.

Diminished brand trust and loyalty

Halting marketing communication can even impact the way existing customers think about your brand. When an organization goes silent, it can signal to customers that something is wrong. Customers may begin to lose trust and turn to competitors as silent brands slowly drift from the top of their minds.

Longer runway to ROI

Marketing takes time to pay off. When marketing and advertising efforts are turned down or turned off, it will take time to ramp back up. Marketing tactics such as SEO, content marketing, and lead nurturing take time to drive sales. Expect a slow start when you begin reinvesting in marketing and advertising as you will need time to attract new leads and move them through the sales funnel as you get to know a new buyer journey.

Larger investment to restart

New marketing efforts take more time and more investment to build momentum. As one example, paid ads are the most expensive at their initial launch. They improve their ROI over time as algorithms learn to deliver the highest-performing ads. Expect a longer timeline and a larger investment when restarting ads and marketing campaigns.

Open doors for competitors to pass you

When you stop marketing and advertising, you create a gap for another brand to fill. As you lose share-of-mind with customers and share-of-voice in the marketplace, a competitor has room to step in and replace you. Your lack of visibility creates opportunities for competitors to boost their own positioning in the market.

Missed opportunities to gain visibility

When one brand scales back, it creates opportunities for other brands to step in. If you continue with your marketing while others stop, it gives your brand a competitive advantage. When McDonald’s dropped its advertising budget during the 1991 recession, Pizza Hut and Taco Bell kept marketing. Pizza Hut sales grew by 61%. Taco Bell sales grew by 40%, and McDonald’s sales declined by 28%.

What To Do Instead of Cutting Your Marketing & Advertising Budget

It’s natural to want to make cuts and shifts when economies and markets slow. But, be sure you are making the right moves that support your brand not only in the short-term — but in the long-term. Instead of making a quick decision to cut your budget, here are a few things to do instead.

Look at your data. Use your historical data to find out how you can do more with less. Review analytics to see what is working and what isn’t. Rather than trying something new, ramp up on what is already producing a strong ROI.

Look at your competitors. Consider how your competitors are handling the change in markets. What do you need to do at a minimum to keep up with them? Are they leaving opportunities for you to fill?

Focus on your loyal customers. You are more likely to sell to existing customers than to new customers. Employ remarketing and communication touchpoints to connect with the people most likely to engage and buy.

Focus on different parts of the buyer’s journey. If customers can’t buy at this time due to economic conditions, don’t focus on sales conversions. Instead, focus on keeping your brand top-of-mind so customers think of you when they can buy again.

Reframe your value propositions. In difficult economic times, the needs and wants of customers change. Consider the new challenges facing your target audience and reposition your brand, products, and services to solve new problems and pain points.

Be understanding. Remember, rough economic times are difficult for businesses and consumers alike. Be mindful of the experience and circumstances facing customers, and be empathetic as you approach your marketing and advertising strategies.

Build a Sustainable, Long-Term Marketing Strategy

It might seem like a quick fix to cut your marketing budget and advertising spend. But before you do, consider your long-term goals and the long-term impact of your actions. Be strategic before you make cuts, and build a sustainable long-term marketing strategy.

Need help balancing the right marketing budget during a transitional time? Let’s talk. SpotOn’s team of marketing strategists can help you create a plan that moves your business through challenging times while keeping your marketing active and effective.

Learn more about our marketing strategy services, and contact SpotOn today.

Raubi Perilli