The technology sector is expected to weather the massive global recession better than many industries. But that doesn’t mean we won’t see creative destruction of the weak players, to the benefit of those that are smart and lean enough to survive. And survival means cutting costs and streamlining operations across every functional area. Including marketing.
Many “experts” will argue that marketing should not be cut, but in fact strengthened, to take advantage of the industry turmoil and eventual shakeout.
I don’t agree.
Marketing expenses and investments need to be put under the same microscope, trimmed and aligned to the new realities. More output with less input. The key is to cut resources and programs that free up cash in the short term, and still leave your organization in a strong position when the upturn arrives.
Remember the old adage: “I know that 50% of my marketing $$ are wasted, if only I knew which 50%”? Well, I’m going to show you how to find that ineffective 50%.
So where do we start?
Trimming Programs
During a severe market downturn that threatens the very survival of your company, forgo any campaign - whether online or offline - that doesn’t deliver tangible, short term results within 6 months to 1 year.
Forget anything long term, like the ubiquitous “brand building” campaigns. Right now, making sure that your brand “survives” is more important than anything else. Rest assured that most of your competitors are doing the same thing. So are your customers.
To choose which programs are actually delivering short-term marketing ROI, you need to calculate the cost of acquiring (or keeping) a customer through a program, and compare that to the incremental value that each new customer will add to your income. To get there, don’t be afraid of doing a little marketing math. Use hard numbers where you can find them. Use your best gut feel where numbers are not available. But whatever you do, make the calculation. I think you will be surprised by some of the results.
One company did this calculation and realized that the cost of acquiring a new client through a planned exhibit at a tradeshow was over $6000, much less cost effective than their direct contact marketing programs, and outstripping the short term value of that client to the company.
There are many ways to increase ROI, but one of the most effective is to ensure that you are targeting the right type of customers within the right market segments. Again, use some marketing math to make sure you are targeting “the biggest trees with the biggest apples”.
As for Sales Promotion, replace anything “glossy” and “image oriented” with something clean and professional. We live in the era of digital marketing, print-on-demand and environmental stewardship. Most customers prefer relevance, efficiency, and functionality over costly glitz.
Trimming Resources
Cost-efficiency is all about alignment. Are your internal resources aligned with your core strategy?
To determine how aligned you are, consider implementing a “Marketing Dashboard”, a diagnostic tool that ensures that the skills in your team are aligned with the growth drivers in your business over the next 1-2 years.
First, map out your company’s main business drivers such as market share, revenue per customer, and customer loyalty. Then, highlight your expected organic sales for the next 1-2 years, along with any growth from new products or services in the pipeline, including their expected revenues and timing. Finally, match these requirements to the marketing skills on your team, both internal and external.
Marketing resources that are not aligned with your core strategy are not only a drag on your profitability, but they will compete for attention with those resources that are critical for your survival and growth in the upturn. What you need is focus, not distraction.
So trim and reallocate resources accordingly.
Once you’ve created the dashboard, use this tool quarterly to update your management team and board of directors on the performance of the marketing department.
Outsourcing
If you can outsource manufacturing, accounting, and customer service, there is no reason you cannot gain efficiencies through the outsourcing of marketing.
How much Marketing should you consider outsourcing? The answer: Anything that is not considered core, or an irreplaceable part of your marketing strategy.
With the economic downturn, the market is filled with marketing professionals looking for work, some of which will have strong track records and impressive experience related to your market. Consider a contract position or outsourcing on an as-needed basis. The bottom line is that you will reduce overhead costs, add flexibility, and potentially increase expertise for the task at hand.
Confidentiality, non-compete, and non-disclosure agreements should naturally be put in place if you are thinking of outsourcing anything to do with core strategy.
About the Author
Axel Kuhn, Partner - markETInc
Axel has over 30 years experience in business development and technology marketing in Canada, the US, Europe, the Middle East, and Asia. He has founded and led two industry-leading technology companies. His market expertise includes environmental technology, IT, and manufacturing technology. He holds an Engineering Degree from the University of Toronto (Gold Medalist), an MBA from Queens and an IMBA from Cornell (with distinction).
markETInc is a strategic marketing firm specializing in emerging technology .
Please visit http://www.market ET.com
Excellent article, with efficient suggestions. That said, I would argue that everything listed above should be taking place in any economy and not in a depressed economy solely. Marketing is consistently stereotyped as a pit of money wasted on non-ROI programs, which is the furthest from the truth if Marketing is properly executed. Further, I would actually endorse the trade show you referred to if the value of the customer exceeded the marketing spend. It may be a lower ROI - but it’s still an ROI. The programs that should be eliminated are those where an ROI cannot be attributed. Where that gets interesting is social media - it allows you to create awareness but the cost is minimal other than time and effort. However, not being social can substantially impact your perception as a thought leader. Accordingly, how do you justify the spend, such as the outsourcing of social media, if the ROI is short-term intangible? That’s where you gut feeling comes in - and your ability to persuade as a marketing executive.
My biggest complaint is that Canadian executives reduce Marketing spend because it’s easier than reducing head count. That is incredibly short-sighted and long-term is a very bad strategy. As you’ve suggested, reduce spend in line with the business realities but not out of context with the reductions being made across the organization.
You’ve posted a taboo article - no marketers likes to address it. Well done.