Marketing teams make budget cuts worse than they already are— or at least, that was our hypothesis going into episode nine of our video series, The Hypothesis. In this episode, we talk about why marketing teams should always be looking for places to cut budget, how bottom of funnel is not the solution for every problem, methodologies behind effective spend reductions, and why you should be working with other departments. Watch the full video below or listen to the episode here to get this conversation in its entirety. More of a skimmer? Keep reading for our top takeaways.
Top takeaways from this episode
When are some good reasons to cut marketing spend?
- Marketers should always think of ways to be efficient with marketing spend while achieving the same results anyhow. It’s an always-on mindset.
- Along the same vein, budgets can be redistributed to test new channels or tactics, these new channels can drive new growth in your marketing program..
- Ultimately, looking for proactive budget cuts is a way to keep yourself and your team sharp, and keep your executive team happy.
If we have to cut marketing budget, what should we cut first?
- One method we like for a budget cut is the bottom up approach:
- Start by evaluating the true value of each tactic from the bottom of the funnel up, rather than cutting budgets from the top down.
- Let’s look at a common bottom of funnel tactic for an example: branded search. Consider whether branded searches (bottom-of-funnel tactics) are driving significant value. Test budget reductions to assess the incrementality of the channel.
- Focus on reaching users who drive long-term value for the business.
- Lean heavily into testing and your data to determine who your high value leads are and prioritize spending on the channels and tactics where you’re most likely to reach them.
- Don’t forget about other channels like email, SMS, and organic, which are cheaper and can keep users engaged without relying solely on paid channels. Evaluate the impact of all growth-driving channels, not just paid ones, when considering budget reductions.
What are risks to watch out for that come with budget cuts?
- Teams often fall into the trap of cutting things that aren’t easily measured and top of funnel, or awareness, efforts are paused in favor of short-term, bottom of funnel plays like retargeting or branded search campaigns. This puts you at risk of losing valuable long-term gains.
- Along the same lines as prioritizing bottom of funnel efforts only, watch out for over emphasizing ROAS without measuring incrementality.
- Not working with other departments like organic or social to make the most of your efforts and get more holistic data doesn’t help anyone. This is a risk even in times of abundance but it’s worth mentioning here that you could be losing out on a lot of opportunities.
Tools, tactics, and methods to make budget cuts easier
- Consider using tools like marketing mix modeling and incrementality testing to inform decision-making. Working from data instead of assumptions is going to be very important. We have a whole episode on incrementality here you should check out if you haven’t yet.
- A useful tactic is conducting channel audits. Learn as much as you can about how ad spend is performing on each channel and try making cuts in each for test periods to see what is performing well.