It’s a tough time to be a small business. Along with rising interest rates and spiralling costs for energy and materials, companies must also consider how to tempt customers to part with their hard-earned money during considerable inflation.
With your business finances feeling the strain, you might be tempted to find cuts somewhere. And why not the marketing department? Purchasing ads and investing in things like SEO can be extremely costly, so it’s an easy place to find savings.
Despite an endorsement from the UK government, there are downsides to cutting your marketing budget, and you may have to think twice.
What the Government Says
The UK government has launched a campaign to encourage businesses to reduce their prices to push down living costs. How can they do this? By lowering their marketing spending.
Many small businesses have had to raise their prices in the last 12 months thanks to rising inflation, which hit a record-breaking 9.4% in June 2022. However, this has subsequently put pressure on average households.
Naturally, the government are trying to do all it can to lower inflation. The high cost of living puts strain on all areas of society. However, many marketing professionals have accused the government of “demonising” the profession in their advice to cut marketing budgets.
Why Marketing is Important
Despite business running costs rising in the last year, marketing budgets have largely increased. At the end of Q1 of 2022, 24% of marketers reported that their budgets had risen. The subsequent growth rate represents an eight-year high.
There are reasons why companies would choose to prioritise marketing budgets during periods of financial crisis. For starters, concentrating on brand loyalty through marketing can make it easier to introduce price increases to consumers.
Loyal customers can feel reassured by a strong marketing campaign and thus continue to buy your products instead of switching to competitor brands to save money. These loyal customers are your ‘primary’ customers, and prioritising them will bring in more revenue.
Thinking more long-term, it’s also true that strong brands have more control over their pricing. In the end, investing in your marketing could result in better prices for consumers, rather than the other way round.
Our Advice
It may be tempting to seek reductions in your marketing budget to withstand significant financial pressure. However, the consequences of cutting marketing spending could stay with you for a long time.
In the most extreme cases, cutting marketing spending–or pausing marketing activities entirely, as Coca-Cola did in 2020–could give your competitors the advantage, a loss it may take months or years to recover from.
It’s still too early to say if the government’s campaign will cause any changes in marketing budgets. However, we recommend that SMEs carefully consider any plans to cut marketing budgets. While consumers may be actively seeking lower prices, this might not be worth sacrificing brand awareness.
