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“We’ve got to reduce our marketing budget by 20%, and we need to deliver it to the CFO by Friday.”
If you’ve led marketing teams long enough, you’ve likely gotten a similar call. Reducing marketing budgets — and reducing them effectively — is as essential as strategy development itself. Indeed, any good marketing strategy should plan for this kind of event.
“You need to start operating in the world you are now in. You’re not trying to do the same amount of things with less money, you’re doing fewer things with the right amount of money.”
So what are some best practices on managing a marketing budget through a crisis? And how do you make the reductions that will soften the impact on your marketing goals?
Let’s talk about Plan C
“A plan that cannot be altered is a bad plan.” — Publilius Syrus, Ancient Roman Humorist
You know all about Plan A. That’s the plan you whiteboarded in the conference room with your team. It was a perfect equation that backed into your revenue goals. When you finished high-fiving, you shared it with stakeholders and got it approved by the CFO. You put it into market, and it was going great. You loved plan A.
But then, something changed. Maybe your revenue targets increased, revenue was declining, one of your products was pulled from the market, or a meteorite hit your office. Whatever the reason, the situation in which you were operating your marketing budget is now different, and you need to adjust. You need Plan B. So, you grit your teeth and build a new version of your budget. Reductions? Sure, but only in the single digits. It’s not easy, but you tighten the belt and your Plan B budget will probably still work well.
Then you get the phone call: “We’ve got to reduce our marketing budget by 20%, and we need to deliver it to the CFO by Friday.”
Time for Plan C. Plan C looks nothing like Plan A. It doesn’t even look like Plan B (which, let’s be honest, was just your attempt to do Plan A work with Plan B money). But whenever marketing leaders build a strategy — whether it’s for marketing campaigns, content management, or running an entire department — they should always be thinking “What is Plan C?” That is, what if your original plan doesn’t work and your plan fix to that plan doesn’t work either?
This doesn’t need to be a secret thought exercise. You should encourage your team to consider a Plan C as well. In many cases, some of the most creative ideas will come from someone who thinks differently than you.
The first step in managing your budget through a crisis is to acknowledge that you don’t know what the future looks like. So plan for multiple outcomes — not just one new budget, but three.
Your first scenario should budget higher than the asked cut — maybe 5–10% higher. This budget will look like your best attempt at making your current plan work. In the unlikely event that you don’t actually need the full 20% cut, you now have a “shovel-ready” budget in front of your CFO.
Your second scenario should roll up to the ask — the actual 20% cut. It’s not fun, and you’ll need to re-think your strategy so it aligns with this new budget (more on that below). There’s always next year.
Your third scenario should be lower than the 20% ask. This scenario isn’t going to be sent to your CFO, but you should create it for yourself. If you’re in a situation where you need to cut 20% from your marketing budget, there’s a chance you’ll need to cut more. This will start your thinking as to what this might look like. And as a bonus, it will make you feel a lot better about only having to cut 20%!
Where to cut?
This is your real question: How do I cut parts of my budget in a way that will minimize impact on my marketing goals? Every marketing team is different, but there are some guiding principles you can use to help make these tough decisions.
- Rewrite your strategy. Remember, you built that Plan A strategy with a Plan A budget. In order to make the best use of your dollars, you need to start operating in the world you are now in. This means going through your original marketing plan and making changes that align with a new overall number. I recommend doing this before you start reducing numbers on a spreadsheet. This way, you’re not trying to do the same amount of things with less money, you’re doing fewer things with the right amount of money. Linking this back to your three scenarios, make new projections as to what you can accomplish. It won’t be what you planned to accomplish with Plan A.
- Look at the big numbers first. We all know the usual suspects in this category: paid media budgets, technology stack, large events. I would not recommend treating all of these big numbers equally, but there is usually more flexibility than the smaller line items. If you have multiple campaigns planned this year with paid media behind them, consider doing fewer of them rather than reducing the budget across all of them. Same for events — you want to show up well at the events you’re doing to maximize return out of each one.
- Think about your goals, and let them guide your decisions. Your objectives this year might be focused on acquisition. If so, minimize your reductions in paid media if you can. If you’re focused on retention, renewals, or loyalty, keep investing in existing customer programs and find creative ways to pair your initiatives with other customer-facing ones.
- See where technology can help you do more with less. We’re obviously biased here at Acoustic, but there are many ways that technology can improve the efficiency of the marketing team’s work whether that’s through marketing automation, project management tools, improved personalization, and more. Technology can improve your yield, so consider these investments seriously. And when your budget eventually gets back to normal, those investments in efficiency will have a huge payoff.
Reducing a marketing budget is never easy. Building multiple scenarios will help you prepare and get creative with your thinking. The best way to operate in a new world isn’t just to change your budget but to change your mindset as well.
Now, take a deep breath and get to work.
For more advice on building plans that will help fortify you through a crisis , watch our webinar “Building a martech stack from scratch.”
And check out more topics relevant to today’s changing environment as part of our Brilliant Basics series.