Cutting Your Marketing Budget in a Recession? 5 Reasons Why This Is the Biggest Mistake

Human behavior rarely changes. So does the way businesses react to their marketing budget.

In this article, I’m going to share my thoughts on the hoopla about shrinking marketing budgets, the mistakes brands are making by doing so, and opportunities for brands who are brave! We don’t want to lose our customers, we want our cake and eat it too. We can if we are thoughtful about the future by remembering past events.

It’s clear by now that we are conditioned by our surroundings. Regardless of what job title you hold, you are influenced by life’s experiences. A CEO of a business is no different.

What you like to eat today will be what you’ll eat most of your life. How you handle stress today will be very like how you deal with stressful situations ten years from now. Your allergies most likely won’t change either.

But, seasons change. Our appetite for quicker and cheaper things change (increases exponentially!). 

You get the idea. Human behavior is the constant in everything that changes, and everything that doesn’t.

So what does this have to do with digital marketing? A LOT!

Recession Life in 2008 vs 2022

If you’re too young to remember the great recession of 2008, then let me introduce you to it’s cousin, 2022. But please read up on what happened in 2008-2009 for context.

It will blow your mind on how much has not changed when it comes to startups, venture capital and how these young founders managed to blow through their money, mismanage product teams, and eventually lay off or shut down their operations.

So, what is happening in 2022 is not much of an evolution or elevated way of thinking.

Young founders come up with some idea, convince VCs that they will make the world a better place, get tens of millions in funding, race to unicorn valuation status…

Then implode! KABOOOOOM! 

Rounds of lay offs happen, and the very people that help build the business get kicked to the curb. CEOs make idiotic decisions on operations and come up with the saddest strategies to recover.

It makes you wonder how these high-powered intelligent beings we call “CEOs,” the leaders that thousands of people rely on to make sound decisions can be so fragile and tone deaf when times are tough! It’s infuriating!!

The Vicious Cycle of Economic Maelstrom  

Economies go through complex cycles, beyond our common understanding on what really caused a downturn. Even economists and the financial experts get it wrong. 

Hundreds of factors influence shifts in our daily lives – as we go along and order our chai latte and croissant.

Over the decades, businesses have been swept away, survived, and some thrived. Was it chance, preparedness, or tenacity? I’m sure there are plenty of nouns you smarty pants can come up with — but let’s save that for the fireside chat, shall we?

Things we take for granted like the materials used to make the cup, the ink that is used to print, the box that the cups are shipped in, and a plethora of other raw materials passes through a complex web of producers and supply chain — nobody can understand the entire ecosystem, no matter how smart they say they are. 

All I am saying is history may be a full of lessons, but humans are terrible students. 

Go ahead, prove me wrong!

I am willing to bet against humanity – specifically when it comes to these three things:

1. Ego
2. Greed
3. Jealousy

I’m no scientists, but after a healthy dose of human interaction, it is my personal conclusion that humans are creature of habit and when faced with adversity will cower and make the easiest choice that puts them out of harms way.

Marketing Budgets Are Often Among the First To Go

This is the same move CEOs make 20 years ago, 10 years ago, and even in today’s more mature environment. 

From my years of observation, this knee jerk reaction is not a calculated move! Not at all. This is done to save the top echelons. Cutting marketing budget is one of the easiest way to cut costs – duh! Right after lay offs, right?

One would think that young founders in this generation know better and learn from their predecessors’ mistakes and poor choice of strategies during downturns. After seeing how many startups before their time failed to grow sustainably and responsibly, one would expect the trend to slow down. 

But alas, if 2022 has shown us anything, the number of bad actors increased many fold! YUCK!

Trying to win at all costs is one of the worst mindsets of all time.

5 Reasons Why Businesses Should Avoid Cutting Their Marketing Budget

Here are just a few of the reasons why slashing your marketing budget, while a common and perceived-as-easy choice, is almost never the best idea.

Reason 1: You Are Throwing Your Brand Equity Down the Drain

If you are one of those VC-funded startups, you’ve probably spent hundreds of thousands if not millions on building your brand across search, social, in-home, billboard, and other activation channels. You have invested heavily in making people aware of your existence, promoting your products or services, and built assets to support your business.

And to throw all this away is a shame. 

If your business should survive the downturn, you will almost need to restart your marketing engine. If cases where businesses crippled its marketing team, it needs to rebuild. In a digital age where things move quicker than ever, brands cannot afford to lose equity. Think about this for a moment…

Technology has enabled software to be built quicker. Entrepreneurs are willing to take risks. Brands with deeper pockets will be at-the-ready to pounce. Customers will buy from your competitor. Your customer acquisition costs will be higher when/if you return. Your website traffic will suffer. So many other terrible things will happen as a result if equity deficit.

You could be digging a hole you cannot climb back out from. 

Of course, this is also one of the reasons FMDM exists, to work with brands and businesses to support marketing efforts. We’re not structured for every business, just the ones that find value in partnering with digital ninjas 🙂

Reason 2: Rebuilding Will Cost You

Crippling your brand equity by eliminating your marketing budget will not make for a fun Thanksgiving dinner conversation. But that’s just the beginning of worse things to come.

Let’s say your business stayed afloat in a downturn. Congratulations. But by this time you have laid off your marketing team, lost precious market mindshare, and will need to put a plan together to regain market share and customer trust. 

Question. How quickly AND effectively can your skeleton team go-to-market? 

In my 20+ years of digital marketing experience, recovering from a marketing budget slash is easier said than done. No skeleton crew can pull this off without losing their mind. The whole thing of “do more with less” doesn’t necessarily apply to marketing budgets.

NO NO NO! Here are some fundamental questions.

• Can you get MORE website traffic with LESS spend? NO!
• Can you create more content with LESS budget? NO!
• Can you fuel innovation and testing with no budget? NO!
• Can you meet your topline revenue goals? NO! On this point, businesses must be realistic and understand revenue goals will suffer and acquisition slows down. There are executives that continue to have misaligned revenue expectations after taking away the marketing budget – WTF!?!?

Because of the hand you chose to play with slashing your marketing budget, you’re left with very few options. Your brand’s reputation does not necessarily suffer, but where you leave a gap, 

Putting your business through this challenge can make sense — but mostly this is the universal knee-jerk reaction that every business takes as far back as I can remember. 

Yes, we’re not a creative race 😉

Reason 3: You Stop Learning and Collecting Data

When you stop investing in marketing, you significantly reduce the volume of visitors your website receives. You’ll see a drop in comparison data — and please DO NOT ASK whatever is left of your marketing team why traffic AND sales are down!

I have met with prospect countless times and every single time, they talk about CRM data. Well, if someone can tell me how to collect massive amounts of data without a marketing budget of any sort, I’m all ears!

Data is just as important during the uptick as it is during a downturn. Let me say this again for the people in the back!

Collecting data should never stop! As a business, you want to learn as much about your customers during the good and especially the bad times.

Once you limit what data your business collects, you will create inconsistency and dissonance in your customer database behavior. 

This thought process appears aggressively (borderline insane!). I get it. In a downturn, businesses should be saving money and not spending more on marketing. But if you are open to my proposition of bucking the trend and doing crazy things — then maybe, just maybe, you could change your mind and keep your marketing budget alive.

Reason 4: You Are Giving Your Competitors a Chance at Cheaper Media Buys

At FMDM, we welcome this. Our clients are thriving, this is exciting for us! Period.

Reason 5: Losing Your Marketing Talent Helps Someone Else Beat You

This is guaranteed unless, as the CEO, you are admitting that you made the wrong hire and executed terrible marketing campaigns. Then, you must admit defeat.

However, if you invested in great marketing hires, believe that you have the right team, then you owe it to your business to rally the troops to come up with tactics beyond the expected.

Of course, this only works if, as the CEO, you have been running the business with complete accountability. Otherwise, this is moot. You will not command the loyalty of your troops.

Slashing your marketing budget will only make things worse for your path to recovery. Losing your team, that’s the best opportunity for your direct competition to put the nail in your coffin.

Final Thoughts: Startups and SMBs, Listen Up

There are many other logical and reasonable reasons why marketing budget should not be slashed. Yet, this is one of the top three things businesses will be doing in a downturn. 

Is is the right thing? You be the judge for your business.