Marketing Budgets: Striking A Balance

Hugh Davidson, author of Offensive Marketing, points out: “Studies show that brands that maintain or increase marketing spend in a recession tend to
do better than their rivals in the long run.” He cites Reckitt Benckiser’s results as an example. Due to strong NPD and heavy marketing support, the company’s sales rose 20% between 30 March and 30 June.

However, to escape hatchet-wielding finance directors, marketers must take steps to make their spend more efficient in ways that don’t harm demand. Marketing asked a panel of experts for their tips.


Streamline your processes:

“Our research shows that most companies can make 10%-20 % efficiency gains or more, without harming demand, by overhauling inefficient systems and processes,” says Robert Shaw, professor of marketing metrics at Cass Business School. “You can cut up to 50% from production costs by eliminating costly reworking, additional print-runs , and bureaucracy that involves one piece of collateral being reviewed by 100 people.”


Manage agencies more tightly:

Clients should push media agencies to justify their choice of media in financial terms, says Shaw. “It’s amazing how many brands still target difficult-to-reach markets through ad spots in Coronation Street, for example,” he says. Tim Ambler, senior fellow in marketing at London Business School, cites market research as one area to cut back on. “A lot of this is done in a ritualistic attempt to ‘keep in the touch with the customer’ , but doesn’t affect what the company does,” he says.


Do the maths:

“Most companies have a portfolio of brands, and if they know how big they are, their profit margins and so on, they can quickly get a rough idea of which ones are worth supporting and which aren’t ,” says Les Binet, European director of DDB Matrix and author of Marketing in the Era of Accountability. “If more marketers did those sums, they would realise how much of what they do is uneconomic.”


Optimise your price/promotional balance:

Karl Weaver, a director at Data2Decisions, a marketing consultancy that helps clients manage budgets, advises companies to wean themselves off price promotions. “Advertising can help reduce responsiveness to price,” he says. “So advertising and price promotions can cancel each other out, particularly if the advertising is run after a promotion.”


Harness the power of emotion:

The financial payback from emotionally led ads is greater than that from more rational ones. “People are motivated by how they feel, rather than what you tell them, which is another reason to resist brand-eroding tactical activity such as price promotions,” says Binet. He adds that positive word of mouth can increase the efficiency of marketing budgets by about 40%.


Creative is key:

Data2Decisions research shows that creative execution is the second-biggest determinant of an ad’s profitability, after market size. Weaver stresses its importance in a downturn. He adds: “If your current execution is not as effective as the last one, ditch it and bring back the old one.”


Harness the power of integration :

Integrated campaigns can increase efficiency by up to 100% because of interaction between different channels , claims Binet. “Similarly, using one-stop shops for all communications will presumably result in significant cost-savings , too,” he says.


Manage headcount:

Don’t cut marketing staff only to re-employ people on inflated salaries as ‘consultants’ , advises Ambler. “By creating more clarity about what people do and relating it to clearer marketing goals, you will need fewer people,” he adds.


Cosy up to the finance director:

The finance director runs a business, so being able to engage with them is vital. “You do that by talking in terms of investment, rather than spend,” says Andrew Challier, managing partner of media analytics specialist Billetts. Michael Uzielli, head of pricing & promotions for British Gas: “Marketing spend is discretionary and easy to cut. British Gas spends about £40m annually on marketing , and you think, ‘If we spent £20m, would our world fall in?’”


Learn from what you do:

Evaluate everything in business terms to identify what works, advises Binet, who claims that Dell has increased its marketing efficiency in the US by 50% in the past two years by testing everything it does. “If you want to learn and improve, you have to recognise and admit to failure, rather than brushing mistakes under the carpet,” he says.