Cutting marketing budgets

Wielding the axe on marketing budgets – how can you cut creatively?

In today’s challenging times, many organisations are looking to reduce their marketing budgets while minimising the overall impact on sales.

Of the £20 billion+ spent per annum on marketing in the UK, the challenge is to identify which parts of a marketing budget are actually wasted. If you Google ‘How to cut my marketing budget’ you will find yourself flooded with generic advice, but no specific guidance on how or where to wield the axe.

So, you need to be creative. Here are some specific questions you need to ask when assessing your marketing budget allocation:

1. Which customer segments should we focus our marketing budget on?

This question should always be asked at the start of a budget reduction exercise – and the answer may not be what you expected. For instance, at UniFida we recently discovered that for an insurance client of ours their least affluent customers were providing the highest longer-term value per sale.

As well as investigating specific market segments, you should look at splitting your investigation between the impact of marketing to recruit new customers compared with spend on existing customers. Both will respond in very different ways to similar campaigns.

2. Should you start your investigations at a channel or a campaign level first?

The problem with starting at a campaign level is that you are very quickly swimming in the weeds. You may find that there are literally hundreds of campaigns when you look across all your channels and by axing individual ones you are ignoring what their cumulative effect is, as well a potentially stopping, say, the worst ten emails, when in fact they perform better that some of your AdWords campaigns.

We suggest you start at the channel level and aim to get to the same marginal ROMI (Return on Marketing Investment) for each one. If you can achieve this then you will have a perfect channel level budget distribution. The marginal ROMI can be described as the return from making a small increase or decrease in the spend for any channel.

To measure marginal channel level ROMI you will need some quite specific tools, a description of which comes later.

3. Having fixed your channel level budget allocation, how do you progress with campaign pruning?

An initial risk is that some campaigns do not need to be axed – they may just need better targeting, or revised content. Clearly these problems need to be dealt with before any cuts are undertaken.

Then, turning to the individual campaigns, you must regard each one as part of an overall marketing ecosystem that, working in combination, encourages customers to undertake customer journeys that may or may not end in a sale.

steps in customer journey diagram

So, you will need to judge the effectiveness of the campaign in terms of how much it contributes overall towards the journeys that lead to a sale, but you may also be interested in the role it plays in initiating, holding, or closing sales.

To achieve both of these you need to know where events created by the campaign crop up in your customers’ journeys and what impact they have. As an example, a social media campaign may be very good at getting new customers to visit your website, but it may need some PPC support to get them to actually purchase.

What specialist tools do you need to achieve all this?

All this will only become achievable when you start examining your marketing effectiveness at the granular level, i.e. each step in a customer journey. A step may be receiving a catalogue, opening an email or a visit to your website from a referrer.

In combination, and ignoring indirect channels like press or TV for a moment, these steps in your customers’ journeys are what marketing delivers. On average there are around three steps preceding each sale, but some journeys will consist of one step, or others twenty.


The right tools for the job

With this in mind, you need a tool that gives a value to each step based on its contribution towards a sale and allows you to aggregate these steps up to all those created by a campaign, and then up again to all campaigns that take place in a channel. (Interestingly there are many questions around timing in this as well because campaigns can have long tails).

This requires technology to link online and offline customer journey steps and then give to each step a weighting based on the contribution it makes to the overall journey.

Alternatively, if you are looking at indirect channels like press and TV, then you need to introduce an entirely different technique, ’econometrics’, which will also determine the value they contribute towards your overall sales. Econometrics works in a very different way by examining the impact of changes in the spend in any channel over time on the overall level of sales.

How UniFida can help

UniFida provides a one-stop shop for delivering the tools and services for both of these approaches – customer journey attribution for direct channels’ ROMI and econometrics for indirect channels. We can also help with a proof of concept to demonstrate just how effective these approaches are.

For more information email [email protected] or call + 44 203 9606472.

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UniFida is the trading name of Marketing Planning Services Ltd, a London based technology and data science company set up in 2014. Our overall aim is to help organisations build more customer value at less marketing cost.

Our technology focus has been to develop UniFida. Data science business comes both from existing users of UniFida, and from clients looking to us to solve their more complex data related marketing questions.

Marketing is changing at an explosive speed. Our ambition is to help our clients stay empowered and ahead in this challenging environment.