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If B2B Marketing Budget Cuts Were Haircuts.

B2B marketing budget cuts may sound counterintuitive to growth. However, it really depends on what kind of cuts you’re making and who’s behind the scissors.

Let me explain what I mean. I love my hairstylist, Ryan. My time with him is as much t-hair-apy as it is getting my hair cut (and as a bonus he knows EVERY great restaurant in Austin). The last time I was there I whined a little about how my hair didn’t just spring back to perfect after sleeping on it. He went to work. I have no idea how he did it, but with precision cutting he added fullness. What? I had objectively less hair, but it seemed like more and performed better? 

How can we get our marketing budgets to do that?

We’re having a lot of conversations right now around quivery feelings about the market. If you’re lucky, you’re in a company that is “buying the dip”—or investing right now. But many marketing functions are getting a “budget challenge.” So I started wondering, what would my awesome stylist Ryan do with this cutting challenge?

Option 1: An all-over trim.

Sounds like a great idea—especially if you feel like your marketing budget is in perfect balance right now. But a true all-over trim is simply not possible in the short term. There are too many long term commitments—like sponsorships, technology costs and event contracts—that can’t be touched. In my experience, what ends up happening is program budgets take a disproportionate cut in one or two concrete areas, such as media spend.

Not only is this not an all-over trim, but cutting a single aspect of an integrated program can put enormous strain on the connective tissue that holds the program together. What’s more, performance expectations tend to stay the same even as variable program budgets are dialed down or eliminated—leaving teams on the hook to deliver the same results with (far) fewer resources. 

Verdict: For B2B marketing budgets, the promise of the all-over-trim ends up looking choppy and lopsided. Ryan would not approve. 

Option 2: Go for bangs.

Rather than slashing the budget for an essential piece of the marketing framework, it may be more advantageous to intentionally cut one or two entire initiatives. 

One common example of this approach is shifting spend from new acquisition to retaining current customers. (We saw this at the beginning of the pandemic.) Since current customers often make up around 75% of total revenue in mature enterprises, and “known” audiences are more efficient to market to, this is often a smart and effective pivot. Other examples of  “easy” cuts include deferring hiring, doing a team meeting virtually instead of in person, and not attending or sponsoring a Q1 or Q2 industry show. Occasionally, these kinds of moves are enough to get you through a period of uncertainty. 

But perhaps it’s time to reconsider long-running programs that don’t serve current needs, such as those supporting “harvest” markets (ie. not where your growth is going to be). This can be a smart choice but is often more than a marketing decision. Marketing leaders should take the lead to look at market growth and dynamics, competitive position, and relative investment and start a discussion of where your company should limit investment across the board (including sales, product and marketing). 

Verdict: Pausing or exiting an entire program has the added benefit of removing “work” alongside the allocated budget. Ryan would tell you that bangs can look great—and they will grow back if you end up hating them.

Option 3: The precision cut.

In a precision marketing budget cut you are looking to either optimize performance with less spend or grow revenue with the same spend. Clearly this is something you should do regularly, but if you haven’t been practicing it consistently, you may need outside help.

The precision cut is an excellent way to handle budget challenges, but it requires expertise and the right set of tools. You’re not going to get it with the same scissors— and skills—used for your basic trim. I see a lot of companies sub-optimize their marketing spend because they struggle to understand the value of their current actions—and the manual process used to gain that understanding is arduous, time-consuming, and produces results too late. If you’re in this boat, maybe now is the time to “invest to save.” 

Outside companies can often challenge the “ways things have always been done” or find small improvements with big returns. For example, Iron Horse recently connected a client’s web form fills directly to their marketing automation platform. That small improvement saved them 3.5 FTEs who were manually uploading the information. It was a simple opportunity to save that had gone unnoticed.

Verdict: With the right tools wielded by an experienced practitioner, you can gain better visibility into what tactics are underperforming. Then you can make precise adjustments—increasing performance with the same or less spend. Ryan would definitely approve.

Option 4: The full makeover.

Sometimes opportunity is hidden in a problem, like a bad home dye job that makes you take the leap to a whole new look. 

One thing that makes cutting a marketing budget so hard is how we plan and manage them to begin with. The typical scenario is functionally cascading budgets. The marketing department gets a budget and splits it up by function, which splits it by subfunction. In the end, you have the “events budget” and the “media budget” and the “content budget” and so on—which must be put back together again to support various market initiatives. How much of all those functional budgets should we spend on growing our presence in SMB? Or on companies in the insurance industry? Or on customer upsell vs. prospects? 

Overhauling the marketing planning and budgeting process may be hard to wrap your mind around, but the results can be dramatic.

The planning process should start with solid identification of and agreement between sales, product and marketing about target market segments, the go-to-market strategy, the revenue target for each segment and the organization’s willingness to invest in attaining that revenue. One segment may be a cash cow with little marketing investment and stable sales investment. Another may be a growth segment where marketing and product investments will exceed revenue for some time. Once you’ve determined this—even in broad strokes—you’ll have a template for a different marketing budgeting process. 

Now, after allocating fixed, infrastructure and overhead costs, you can assign variable program dollars to your market segments based on the revenue and investment profile you agreed upon. In this process, you no longer start with the “events budget” and the “content budget,” but with the “SMB investment” or the “insurance industry investment.” Next, determine the buying journey of the segment and the marketing mix required in each. For example, one segment may need investment in awareness and thought leadership. Another might need more self-service content or access to community or advocates. 

Verdict: Budget process changes are not easy. While the reasoning is sound, implementation often becomes “HPDL”—Hard Part, Do Later—which of course gets deferred year after year. It’s a bigger commitment for sure, but imagine having the insight to adjust the mix and spend based on your revenue priorities rather than on trying to shave the budget of a marketing department. So, I’ll ask you the same question that Ryan asks me every 9 weeks: What are we going to do today?

The Iron Horse insight.

Marketing budgets that are cascaded to functions with year-over-year tweaks leave marketing departments exposed when budget challenges come. Companies that start their marketing plans with deep audience insights and robust program planning will find they are more resilient and better able to respond when they receive budget challenges.