Why cutting your marketing budget shouldn’t be your first step to saving your business.

We are facing a tough future with inflation at its highest for 40 years, consumers are feeling it in their pockets and the government is advising us to cut our marketing budgets in order to help businesses survive.

At first glance it seems like reducing your marketing budget is a sensible thing to do, you can save money straight away, but is it right for your business?

We all know that your marketing activity drives new business as well as stimulates existing clients. Cutting your marketing budget will only reduce your new sales and repeat business. Which will ultimately impact your bottom line.

This article is going to look at how you can keep your current budget while increasing sales without spending a penny more.

Understanding your marketing spend

Before you start cutting your marketing budget take a look at how your current marketing budget is being spent.

Where are you spending your budget?

Where are you spending your money, which marketing channels are you using. What activity is it driving – impressions, clicks, enquires and sales.

What would the impact be to your business if you suddenly stop spending your money on that marketing channel? How many enquiries and sales would you for-go and what impact would that have on your business.

How efficiently is your budget being spent?

You know where you are spending your money, you understand what impact it would have by cutting the budget.

Now you need to think about how efficiently you are spending that money, how much is it costing you to drive clicks, enquiries and sales. In other words what is your cost per acquisition (CPA), how much is it costing you to get your enquires and sales.

Calculating your CPA is simple, it is the marketing cost divided by the number of sales or enquiries.

Once you understand this you can see which channels are driving sales most efficiently.

Consider the indirect impact of your marketing activity

We have looked at the direct impact of your marketing activity but what about the indirect / halo impact?

One of my customers wouldn’t reduce their email marketing budget although the direct CPA is higher than their other channels. They can see in the business that once an email has been sent they see an uplift in their sales for the products featured online and instore.

Google has a fabulous report that helps you to understand the interaction between marketing channels.

For example, a piece of social activity may initiate the initial view of your website, the customer than comes back to your site via a brand search. The branded search will be attributed to the sale but the social activity initiated the site visit and without the initial interaction you wouldn’t have the final sale.

Cutting the social activity will then reduce your sales for PPC and impact your CPA.

Steps to improving the efficiency of your marketing channels

Improve the efficiency of the marketing channel

If you can see a marketing channel which has a higher than average CPA or a CPA that isn’t sustainable what can you do to improve the performance of your channel.

Move budget between marketing channels

With this information you may decide to move your budget between your marketing channels. Removing budgets from inefficient channels to more efficient channels. Which will result in driving more sales with the same budget.

The take away from this article is before you go cutting your marketing budgets you need to really understand your current performance, what can be done to improve efficiency of your campaigns.

If you would like help getting started, drop me a message.

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