Magazine article Marketing

Cutting Budgets May Be Easy but the Price Is High

Magazine article Marketing

Cutting Budgets May Be Easy but the Price Is High

Article excerpt

Marketing directors and agency heads alike view the start of 1999 with some suspicion. Surveys suggest that business and consumer confidence are low. We don't want to talk ourselves into a recession, but recession is what everyone is talking about. For marketers, that means battening down the hatches and standing by for budget cuts.

This is nonsense. Marketing budgets should be closely scrutinised to eliminate wastage, but they should never be slashed just because they are the easiest cuts to make.

How do companies, for instance, decide what to spend on advertising? There's a lot of evidence that the two biggest factors are how the economy is growing (or shrinking), and company profitability. Liquidity and access to cash also come into the reckoning.

These macro-economic issues affect how much is spent on advertising much more than questions like how much is needed for the advertising to be effective, the return on investment expected, or the long-term profits the campaign generates.

Two reasons account for this anomaly. First, ad budgets are seen as a ready source of short-term cash. Ad campaigns can be quickly turned off and on. Other easy-to-finger marketing money, such as the promotions budget, has a more immediate sales effect anyway. Newer marketing options. such as loyalty cards, are hard to start but even harder to switch off.

Second has been the difficulty of adequately proving the effectiveness of advertising. …

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