How to cut costs without damaging your business

Every company will face a time when the budget needs to be decreased. In these situations, it's imperative to be able to prioritize and cutting the right marketing activities, not to damage your business. But how do you do that? Christopher Engman, CRO/CMO Proof Analytics, has the answer and explains the three different methods of how to handle cost cuts without damaging your business.

Events around the globe are changing fast, and a lot of companies are looking at budget cuts now, preparing for tougher times. How you can shrink your marketing budget without hurting your business? There are three methods that you can use to shrink your marketing budget; The shaving method, Panic method and Surgical cut method. The last is the best one, especially when going into a recession. Here is why.

The shaving method

The shaving method is based on shaving off roughly the same percentage across all your various marketing activities. This is almost never a good method since your weakening your all of your tactics. The ones that work well and have a high impact on sales will perform worse, and the activities with a low correlation to sales will keep on running and still take a large part of your budget.

The panic mode

The panic mode which is a reasonably common reaction, means that you focus on short term converting activities. Everything that you know is converting fast and have a direct positive effect on sales is continued, everything else is stopped. The problem only focusing on short term conversion activities is that you will see a positive effect for two or three months, but if you’re not doing any marketing that has a more spread-out, long term effect you’re soon going to start seeing that your customer acquisition costs are going up. If you keep this up, your growth will slow down. So what initially looks like a good move, you might be start paying the debt for already in the next quarter or half year.

The surgical cut

The third method, surgical cut, is when you use analytics that includes time-lag effects, like marketing mix modeling (MMM) or automated marketing mix modeling (automated MMM). With this type of analytics, that is not based on cookie tracking but mathematics, you can understand what marketing activities are driving sales, and with what delays in time. With this information you can make changes, or optimize your mix, so that you cut the activities that have the lowest correlation to sales. You cut the waste in your budget. As an example, it can prove wiser to cut 40% on four activities with low correlation to sales, an instead increase one activity that shows a high correlation to sales and with an s-curve indicating room for expansion. The automated MMM analysis can also indicate if there are investments that you should strike form your budget entirely.

So, with the right analytics, like automated marketing mix modeling, you can make a surgical cut and get the same sales effect with far less money. With automated marketing mix modeling, the modeling is so fast you get quick results.

Invest to decrease spend without killing your business

If you’re sitting right now thinking about how can you can make cuts in your marketing budget, what can you do short-term to not hurt yourself a quarter down the road is investing in automated marketing mix modeling, making sure your cutting the budget where it’s not affecting your sales short term or longer term, instead cutting the activities has a proven low effect on marketing.

The surgical cut and automated marketing mix modeling gives you a tool, a method and a result that optimizes your business with a decrease in spend without killing you medium to long term sales and growth.


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