Removing the Blindfold When Making Budget Cuts

Posted on March 2, 2009

I really tried to avoid diving into the discussion of budget cuts as I’m a demand-side thinker — always looking for ways to grow sales/profits rather than becoming mired in trying to save $3.00 per year on domain name registrations.  However, with such a steady diet of “doom & gloom” from the media and companies consuming this poison — it seemed appropriate to offer some insight for executives stuck with the task of budget reductions.

It’s been my experience when I was an employee of small, medium and Fortune 500 employers that any time a RIF (reduction in force) or other budget reductions were taken — they appeared to be random or without consistency.  From the perspective of some — they almost appear to have been done wearing a blindfold.  Budget items are often whacked without truly understanding their quantitative impact to the future of the business.

Making matters more difficult for many executives is that they simply won’t commit the discipline to ongoing metrics that provide business insights relative to customer value, financial performance by sales funnel, and related aspects (beyond sales/profits by geographical region and product line) such that they are operating without their “eyes wide open” when making these decisions.

I want to propose a couple of areas to think about:

(1) Marketers spend money every day on product promotions, advertising, trade discounts, merchandising, sponsorships, events, and a host of other tactics — all in the hopes of driving sales.  However, not all will work — and some are completely irrelevant to your target customers.  This is akin to General Motors having hung onto the Saturn brand for over 20 years despite the fact the brand has NEVER turned a profit.  How could this happen?  It happens for the same reason marketing executives will cling to familiar tactics such as certain kinds of broadcast advertising, interruption direct mail, and other tactics — because its familiar/comfortable.  The solution?  If you’re not measuring each of these with a detailed purchase funnel map (see our posts on Marketing Forensics) then you need to at least obtain a proxy for what your customers & prospects think of these tactics via the social web.  You can monitor, track, and record conversations on the social web through a benchmarking process that will give you an idea of the effectiveness of your tactics — specifically, if nobody is talking about them then how effective can they be on driving sales?  Don’t know how to do this?  We can help and there are resources out there such as Dave Evans’ book “Social Media Marketing: An Hour a Day”

(2)  Buyer journey analysis is another cool approach to identify which tactics are creating profits and sustained value for your firm.  I’m not sure if anyone else uses this approach, but we’ve developed it as a quantifiable way to plot a firm’s marketing activity and then put some metrics around these activities to rate how they contribute to profits.  This process takes some time (it can be fast-tracked over several weeks but should be maintained monthly); but its absolutely invaluable before you “cut advertising by 20%” or “reduce the marketing department by three head count” to know where you’re wasting time/money and where you’re actually establishing long-term value with customer dialogue and converting qualified leads into sales.

You’ve read it in my blog posts and heard me say it publicly — you can’t manage what you can’t measure. Diligence in measuring your marketing performance removes the blindfold and provides new vision/insight to make the right decisions — be they budget cuts, or increasing spending.

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