What to think about before you cut your marketing budget

It has been a challenging couple of years for many companies in the HR tech space – as many have struggled to hit revenue targets. There have been less buyers in the market. And those that are looking to make a purchase often take longer to decide. Revenue shortfalls can put companies in the position of having to make tough decisions to keep the business healthy – and that often means that marketing investments get put on the cutting block. But is slashing the marketing budget a smart move when growth is the mission? 

(00:00:21) The challenges faced by HR tech companies 

(00:01:15) The pressure on marketing budgets during revenue shortfalls

(00:04:37) The potential consequences of deep cuts in marketing budgets on long-term growth

(00:05:58) Identifying essential marketing programs before making cuts

(00:08:13) Importance of continuous marketing

(00:09:10) Companies that invest in marketing during downturns seeing better recovery

(00:10:28) How to determine which marketing programs to cut strategically

(00:12:24) Continuing to build brand awareness and trust for future sales

(00:13:30) The potential negative impacts of cutting marketing programs on brand presence

(00:15:16) Stay focused on maintaining market momentum

The Demand Gen Fix is hosted by Deanna Shimota, CEO of GrowthMode Marketing. Listen to our team of marketing experts and featured guests drop knowledge on how HR tech companies can maximize the success of their marketing for today’s B2B prospects. Learn more at www.growthmodemarketing.com.

Transcript

Jenni Geiser 00:00:01  Hey, everybody, it's Jenny from GrowthMode Marketing. You're listening to The Demand Gen Fix, the podcast where our team of growth Motors and our guests discuss the ins and outs of demand generation and why we believe it's the key to long term sustainable growth, especially in the high tech industry.

Deanna Shimota 00:00:21  Hello, everybody. Deanna and Greg back for another episode of The Demand Gen Fix podcast. And this time we're talking about what to think about before you cut your marketing budget. It has been a challenging couple of years for many companies in the HR tech space, as many have struggled to hit their revenue target. There have been less buyers in the market and those that are looking you may have fallen take longer to make a purchase decision. When revenue shortfalls happen, it puts companies in the position sometimes of having to make tough decisions to keep the business healthy And Fortunately, that often means that marketing and investments get put on the cutting block. But we're going to ask the question is slashing the marketing budget really a smart move when growth is the mission? Let's talk about it.

Greg Padley  00:01:15  Well, clearly the pressure is on, right? Everybody's feeling it. Whether it's the board of directors, the CEO, the sales team, marketing team. If you're not making your numbers, then something's got to go. So this is the first thing. One of the first things on the list is marketing.

Deanna Shimota 00:01:32  Yeah, it kills us as professional marketers that marketing is often one of the first areas that companies look at when they need to make budget cuts, because the revenue is not where it needs to be, and therefore the budget they projected probably isn't where it needs to be. Right? And sometimes they have to find quick ways to slash the budget to save headcount, to make sure they're not impacting the customer experience. And quite frankly, just to keep the company healthy. And the reality is there's a trickle down effect as the board of directors puts the pressure on the CEO. Like Greg said, that pressure goes down to the sales team, and ultimately that pressure also lands on the marketing teams. And I'm sure many of you have had the experience where the team comes to you and they say, okay, we're not hitting our revenue numbers.

Deanna Shimota 00:02:29  We really need help. We need to find leads now and then. On the flip side, the budget's getting cut. Why is marketing often the first on the list for cuts, do you think? Greg.

Greg Padley  00:02:42  I think a lot of times people think that marketing investments must not be working, right, because our sales are not there, our numbers aren't there. So that must mean the marketing isn't doing its job. So let's cut.

Deanna Shimota 00:02:53  It. And I think there's a fine line. You absolutely have to take a look at your marketing programs to see if they're working, but you've also got to look at the economic factors out in the market where people buy in. We know right now for the last year and a half, two years, even though we haven't officially been in a recession in the tech space, it feels like it's been a recession, right? Like you see layoffs at all these big companies in the space, and the small ones too, because the revenue is not there. And that means the buyers just aren't out there.

Deanna Shimota 00:03:28  Companies are more cautious right now in spending, and they're looking for ways to cut costs. And unfortunately, air technology is one of those areas where companies aren't opening the purse strings quite as willfully as they have prior to the last couple of years. Also, I think when you talk about why marketing is first often on the list for cuts, I think and a lot of companies, the marketing budgets are often a large expense, meaning that if you cut there, you can have a big impact on the immediate bottom line. And if you can't show the ROI of marketing programs because let's face it, some of the things we do are more difficult to track and justify. There's no strong proof of its impact. It's harder to make the case not to cut the budget for it. Right?

Greg Padley  00:04:22  Yeah, and if you were the person that had to make these decisions, it's like, do we want to cut some of the marketing budget or do we want to lay off people? Sometimes I think they decide to cut the budget rather than letting people go.

Greg Padley  00:04:34  So I think that probably plays into it too, sometimes.

Deanna Shimota 00:04:37  Absolutely. I certainly been parts of budget conversations when I was on the corporate side where that was the case, where they're like, we can either cut this marketing budget or we have to cut five positions and we don't feel good about cutting positions, and we worry about how that will impact the client experience if we cut these positions. So therefore, our friends in marketing are the ones that have to take the hard hit on the budget. But when budgets cuts happen, you have to be careful not to cut the budget too deep in marketing. And I've seen organizations that have made major cuts. I've seen organizations that have just shut off marketing altogether. We have to be good corporate citizens, and we may have to look at budgets and how we tighten them. But as you're looking at making budget decisions for an organization and as you're fighting for the marketing budget, you've got to make sure that the cuts aren't so deep that they hurt the company in the long run.

Greg Padley  00:05:37  If you're cutting programs that are essential and impactful, those are the ones you don't want to do anything with. It's obvious if you are cutting your food at home, right? You cut out the things that aren't that important to. They're not essential. So it's the same thing with your marketing budget. What are the things that are really working there? Really make the most impact and try to keep those as intact as you can.

Deanna Shimota 00:05:58  Right. And looking at your budget programs and this is probably more of an realistic for organizations that had large budgets to work with, because smaller companies tend to be a bit more scrappy on the marketing front. But if you have to make those budget cuts, look at what maybe is not as essential, impactful or necessary. So if you were testing something out because you had a theory around marketing, but you haven't actually proven it out, maybe that's a spot to cut. If you're doing things that are more nice to have to help create a little extra brand awareness out in the market, but it's not going to be detrimental to the business if you cut it.

Deanna Shimota 00:06:37  Maybe that's where you make the budget cuts, but I think what you have to keep in mind as you're looking at budget cuts and avoiding cutting so deep that you create future growth challenges, like don't let common obstacles get in your way, like short term thinking that can turn into long term revenue shortfalls. Quite frankly, we've seen organizations I've been a part of organizations on the corporate side, where the budget cuts happen to programs that you just get up and running, or that you've been running for a while and it kills the momentum. And quite frankly, restarting the marketing programs later. It isn't easy and it isn't quick. And a company may not feel the impact right away of cutting marketing programs, but I've seen it too many times where it ultimately catches up with the company. So you might cut your Demand Generation programs right now to save budget. And then a year from now, you're looking at it saying, okay, the market recovered. Why isn't our company recovering the same way? Some of our competitors are? Right? And it's like, well, because you pulled those marketing programs that continued to work for you through the tougher times and your competitor didn't, and now you're seeing the Impact that you didn't see a year ago when you cut the budget, because marketing's not this overnight thing, that you just turn it on and it works and you turn it off and no problem.

Deanna Shimota 00:08:13  Pause is fine. I mean, you've got to always be doing marketing to build that brand awareness, credibility and trust in the market.

Greg Padley  00:08:21  That's like you stopped putting money in your 401 K for 15 years. And then when you go to retire, like, well, what happened? Where did all my where's all my retirement money? And it's well, you cut the budget and then you never that investment isn't there anymore, right? It's gone. You missed the boat and you.

Deanna Shimota 00:08:37  Didn't get that compounded interest during that time. So even when you did restart it, you don't have as much money assuming the markets worked in your favor, right?

Greg Padley  00:08:48  I mean, you have to remember, right, marketing is a long term investment, right? It's done. When you do it well, it helps to fuel the growth of your company. And then the less company, when people are pulling their budgets back and you are able to keep more of your budget, then you have less competition in the market. If everybody's pulling back and you're still going, then you stand out a little bit more just because everybody else is pulling out.

Deanna Shimota 00:09:10  Yeah, I think there is something to that. When you think about cutting budgets and tough times, reality is companies that invest in brand building and awareness during economic downturns have bigger growth in the long term. There's been plenty of marketing studies out there that have shown over the decades a time and time again that whenever we've had an economic downturn or a recession, the companies that continued to invest in marketing bounced back quicker. After. Then the companies that pulled back and backed. I was just looking at one of those reports last night, and it was saying how companies who continued to invest, they performed 20% higher coming out of the economic downturn than their competitors, and their competitors performed 7% lower than they did pre-economic downturn. So now you're talking about a 27% difference because you didn't invest during the economic downturn. And marketing done well is the field of growth. So you have to keep that in mind as you look at whether you're going to cut and how much you're going to cut. But the reality is, and we know this, that sometimes budget cuts are unavoidable.

Deanna Shimota 00:10:28  Like we said before, you've got to be a good corporate citizen. And so how do you determine how much budget you can cut and what programs you should be cut? What are some of the things you would recommend that people evaluate with their current strategy and programs as they're thinking through this?

Greg Padley  00:10:48  Yeah, I think we said before, right. If you're managing your own budget at home, what things do you need to cut out? What is working? You know what isn't working, what's proven as opposed to like you mentioned before, if you were testing something out or what are you unsure of so you can prioritize where the money should be spent. If you are testing things out, did they have enough time to gain any traction? If it's starting to gain traction, maybe you want to keep that one, or maybe it's not gaining traction. Then you're like, okay, well, that's got to go. And then of course, what things are critical on the top of the list, like these are the must haves that we can't cut out oxygen and water.

Greg Padley  00:11:22  Right. There's certain things that you obviously can't cut.

Deanna Shimota 00:11:26  Yeah. And as you think.

Deanna Shimota 00:11:27  About if your company's on a growth mission and you have to cut budgets, which is counterproductive to trying to achieve your growth mission. To Greg's point, what will move the needle the most and what is moving the needle the least that you can tell. And unfortunately, we can't measure everything, right? Maybe you've got a podcast that you've spent three years building an audience up on. Okay. You might not be able to easily measure it back to the revenue it's driven. But if your gut is telling you, hey we've got this big audience. Now is not the time when we want to stop doing a podcast. For example, you may not have the hard numbers, but it may make sense to say we have a lot of traction with this, and we will lose that momentum and we will lose a lot of this audience. If we pause this for six months or a year or whatever it takes from a budget standpoint.

Deanna Shimota 00:12:24  So you've got to really think through those things and just make sure you're making the right decisions on what to cut. I also think you need to determine what programs do support that long term success through Demand Generation and demand creation. So ask yourself is you're evaluating these things. Does it build brand awareness and trust in the market? Because at the end of the day, we know the way that B2B prospects by now, and this is no different in the HR tech space than anywhere else. They're making up to 80% of their purchase decision before they will engage with a sales rep. And so maybe that 80% purchase decision is during the economic downturn. And when things suddenly open up and they're able to make that purchase and they're truly in market, if you weren't already on their radar, you've got a problem because you're not going to make their shortlist.

Greg Padley  00:13:22  Yep. Ship is sales, right? Your budget has opened up and they're ready to spend, but they don't know who you are because you cut some of those important programs.

Deanna Shimota 00:13:30  Yeah. Unfortunately, if you decide to cut marketing programs, I think it's important to be realistic about the impact those changes will have and to communicate that to the powers that be in the organization. So if your CEO saying, hey, we got to cut marketing budget by 50% this year, okay, we're a team player, we're going to figure this out. But I want you to know, Mrs. CEO, that these are the consequences that we will experience when we make those cuts, we're going to have a smaller market presence. We're going to have decreased brand awareness because, like we said, buyers today are making 80% of purchase decisions before they're willing to contact sales. And that's why that's an issue for us. And quite frankly, if they don't know you exist, they won't buy from you. You're not going to make the short list. And so having those conversations internally can help prepare people to know, like, hey, smaller market presence. We've got a growth initiative. Is this truly what we want to do right now? Okay.

Deanna Shimota 00:14:39  We can do that. Just no, you can't expect our lead volumes to increase as we're cutting the programs that actually drive the brand awareness, the trust, the credibility and ultimately the demand for our solution in the market, because that sometimes gets lost. The decision that we're on a growth initiative. I've talked to many marketers out in the market who have said our budgets got slashed. What we're supposed to accomplish has not. We still have to bring in this leads. Right? And it's common, but it's not a realistic perspective a lot of times.

Greg Padley  00:15:16  Yeah. It's true. So I guess at the end of the day, right. You can't pivot so much that you lose your momentum in the marketplace. Unfortunately, there's no silver bullet to solve any of these problems or solve the revenue shortfall. But you have to remember that it takes marketing, takes time. Effective marketing takes time for it to work. And when it gets undermined a little bit, it just affects how things are going to work out later down the road.

Deanna Shimota 00:15:39  Right? Don't completely turn off marketing if there's any way that you can prevent that, because the reality is it's going to take longer to get results if you have to restart marketing from scratch down the road. We know it's never fun to be faced with revenue shortfalls, and sometimes the hard decisions like cutting the marketing budget are going to be a necessary evil. Just make sure to thoroughly think through the impact those decisions have to your long-term growth potential. Before cutting too deep and if it's out of your control, meaning someone higher above is making that decision, have that conversation with them so that they go into that decision with eyes wide open, well informed about what the impact may be long term on cutting some of that marketing program out of there, because quite frankly, there is nothing worse than looking back and realizing the decisions made in the heat of the moment ultimately had more of a negative impact on your company than expected.

Jenni Geiser 00:16:43  Thanks for joining us on The Demand Gen Fix, a podcast for HR tech marketers brought to you by GrowthMode Marketing.

Jenni Geiser 00:16:50  I sure hope you enjoyed it. Don't forget to subscribe for more perspectives from Demand Generation and B2B Marketing strategies. Plus, Give us a like. Tell your friends. We'll see you next time.