Think Ahead While Cutting Back

by Pat LaPointe, Feb 10, 2009, 10:15 AM

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Setting aside for the moment the fact that no company can succeed by cutting expenses alone, let's dwell for a moment on the practical necessity of today's world: cut, cut, and cut some more.

Yes, we all should have been smart enough to build sufficiently robust measurement capabilities BEFORE the dramatic assault on our budgets began. Yes, we should have put some water in that bucket BEFORE the fire consumed so much of the house that marketing built.

But we didn't. So what do we do now that we're caught in the downward cutting spiral? Where do we turn once all the "fat" has long since been excised and all that's left is muscle and bone?

First, get your head out of the emotional sand. You've lost the battle over the power of marketing to drive the business in the near term (see Jim Sterne's post from last week). Don't let your fog of disappointment cost you the war. Suck it up and look ahead. And don't take it so personally.

Second, define the objectives for making smart cuts:

 

1. Achieve the target reductions the CEO is asking for (most people stop right here).

2. Clarify the mid- to long-term strategy for competing successfully.

3. Conduct a thorough and unbiased analysis of the options.

4. Provide a comprehensive assessment of the near- and long-term implications of the cutting alternatives.

5. Preserve your credibility. Live to fight again another day.

If you're not thinking about all five points, you're likely suffering a very slow death by 1,000 cuts yourself.

Third, frame your cutting analysis on the basis of strategic dimensions of competitiveness, NOT on the basis of what's easiest to cut (e.g. travel and outside contractors), and for heaven's sake do NOT cut proportionately across the board (which strengthens the hidden weaknesses in your plan while weakening the strengths). Think about the relative value/importance of customer segments; product groups; channels; or even geographic regions. Consider the marginal returns of a dollar spent in each one. Cut ruthlessly from the bottom of the importance rankings.

Fourth, engage people in finance, sales, or SBUs in your thought process. You have nothing to gain by being an island now.

Fifth, get comfortable with making educated guesses on expected impacts. You're beyond the point where data-driven analysis is likely to help. Think about using monte carlo simulation and other probabilistic assessment methods to make intelligent guesses now (and loop back to "fourth" above).

Finally, present your findings with passion, but not bias. The time for "I believe..." is past. The mantra of the moment is "Having run many options by the good people in finance and sales, we all feel that the smartest course of action is..."

And by the way, NOW is exactly the time to begin building that measurement capability you really wish you had over the past few months.

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0 comments on "Think Ahead While Cutting Back ".

1. John Grono from GAP Research
   

   commented on: February 10, 2009 at 5:08 p.m.

   Pat a refreshingly honest and frank piece - I concur 100% and applaud you for posting it as I suspect a few feathers may be feeling ruffled in the roost.

   I'd one small thing though - cut the BS and hyperbole (no, not you Pat ... the marketing-speak-merchants).

   Cheers.

2. Deborah Gray-young from Tradigital Communications
   

   commented on: February 11, 2009 at 12:34 a.m.

   Thank you for this excellent and thoughtful counsel. This I will not only pass on to my colleagues, but will print out as well.

3. Pat Lapointe from MarketShare
   

   commented on: February 11, 2009 at 9:08 a.m.

   Thanks for the feedback. Pass the word. It's time we all started thinking about what the future of marketing looks like, given that we may be granted/forced the opportunity to change it.

4. Mark Newstead from MediaMARK Australia Pty Ltd
   

   commented on: February 25, 2009 at 7:53 a.m.

   I've come across this a little later than when it was first posted
   With this rational approach in assesing savings you have to make, don't forget that there will be bargains that can be had from media. A genuine negotiation will surely make your media spend go much further so you can get the virtully the same impact you originally planned and still meet your internal requirement to cut your budget outlay. Make sure you negotiate this honestly, good operators will co-operate if they can partner longer term with their clients in this time of travail.

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