How Do You Know If It's Time To Spend MORE?

by Pat LaPointe, Mar 10, 2009, 12:00 PM

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In times like these, budgeting and resource allocation decisions tend to get made fast and furiously, with little time for clear thinking. Unfortunately, it's exactly these times when some real discipline is required to both make smart decisions and  build credibility with the rest of the senior management team. So if you're thinking about recommending that your firm should be spending MORE on marketing right now, STOP.

If you're thinking "Let's spend more now to gain share" -- good luck. Headline-grabbing stories of marketing heroes who have taken this approach tend to emphasize the few who have succeeded, and gloss over the vast majority who have simply squandered more by throwing money into an economic hurricane. The fact is that there's not much empirical data to prove the merits of this strategy beyond a reasonable doubt. Many "studies" have been done, but none have derived their conclusions from projectable samples that account for the primary risk factors, nor have any led to any high-probability "formula" for succeeding with this strategy. The margin of error between success and failure tends to be very narrow. It's a roll of the dice against pretty long odds.

If you're thinking "We've got to keep up our spend to maintain our share of voice" -- be careful. Matching competitive levels of spend (or making decisions on the basis of "share of voice") is most often seen by CEOs and CFOs as foolish logic. How do you know the competitor isn't making an irrational decision? What do you know about the effectiveness of your spending versus theirs? How much ground would you lose if they outspent you by a substantial amount? If you don't have specific answers to these questions, relying on anecdotal evidence won't help. It may get you the spend levels you're requesting in the near term, but if it doesn't work out, the memory of your recommendations will undermine your credibility for years to come.

When times get tough, buyers reevaluate the value propositions of what they buy. They make tradeoffs on the basis of what is or isn't "necessary" any more. Shouting louder (or in more places) is unlikely to break through newly erected austerity walls.

To make a sound case for spending more, tune into what the CEO is looking for: leverage. CEOs want to find places to squeeze more profitability out of the business. To help, focus your thinking around:

-    The relative strength of your value proposition, channel power, and response efficiencies versus your competitors.

-    Your assumptions about customer profitability and prospect switchability as buyers cut back.

-    Your price elasticity to find out where the traditional patterns may collapse or where opportunities may emerge.

-    The relevance, clarity, and distinctiveness of your message strategy, and your ability to defend it from copycat claims.

And make sure to check with finance to see if the company's balance sheet is strong enough to handle higher levels of risk exposure during revenue-stressed periods. If it's not, the whole question of spending more is moot.

If your comparative strengths seem to offer an opportunity, then increasing spend may just be a smart idea. But even so, you have to anticipate that competitors aren't just going to let you walk away with their customers or their revenues. And that may just leave you both with higher costs in times of lower sales. In technical parlance, this is known as a "career-limiting outcome."

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0 comments on "How Do You Know If It's Time To Spend MORE?".

1. Errol Menke from Smart Talk Media
   

   commented on: March 10, 2009 at 12:18 p.m.

   interesting, however i would have made it clear, its not and never has been the amount, IT IS THE UES OF THE AMOUNT. live event marketing is rapidly replacing conventional costly print, and TV message communications strategies. Live Event Marketing is about Viral spread of a solid message presented to the exact demographic at the time in which they are prepared to hear it.

2. Tom Cotton from Progatonist LLC
   

   commented on: March 10, 2009 at 12:45 p.m.

   To build on Errol's comment, it's all about maniacal focus on the "who, what and where" (and ONLY that) which counts right now: WHO is the specific BEHAVIORAL target that presents the best upside (and who should you ignore)? WHAT do you tell them to move them into action? And WHERE do you reach them most effectively/efficiently? (To Errol's point, it could well be live events that best reach and move your most valuable customers...it could be email marketing...hey, it could be skywriting over the Hamptons!...the question is, do you have the data and insights that can LEAD you to the answer, whatever it is?)

   In the marketing triage we're all living through right now, any money you are spending BEYOND this audience, message and channel selection is probably wasted energy, and wasted money.

   A great primer on this is Rex Brigg's "What Sticks," the first, big quantitative clarion call to our community that 40% of what we're doing is probably wasted.

   We are now identifying similar waste with our ExactCast quant process that delivers behavioral segmentation, messaging and channel planning in 60 days for clients in the US and Europe.

   There's a lot of money going to waste out there.

   Don't be a wastrel!

   For more information on our model, contact me at tcotton@beaprotagonist.com

3. Paul Demars from ColorsNW.com
   

   commented on: March 10, 2009 at 1 p.m.

   Pat- What heresy! Actually, I appreciate thinking (even if I don't necessarily agree) that makes me go "What !?!". Thank you for that. From my desk, most clients are keenly aware of ROI. In that case, if you liked your placement at $10/100/10,000 a pop, why wouldn't you buy it @ a discount? I think it's counter- productive to lump marketing only in the expense column. Which comes first: the marketing budget or the revenue producing client? I see much value (and yes, market share) available for advertisers who are willing to say "we're here, we're open for business & we're not going away!" Nice CTA's on your site, BTW.

4. Paula Lynn from Who Else Unlimited
   

   commented on: March 10, 2009 at 1:22 p.m.

   1. Advertising/Marketing = investment, not an expense

   2. Audience/consumer = limited funds to spend (now and in cases always) = increasing market share/sales means stealing market share/sales from other businesses.

   3. As always, more is not always better. Less is not always better either. Finding a balance a what you have and what you need is the key as most all of you already know. Just don't stand there and wonder what happened when you were not looking. Now you can all figure out what that what is. Some businesses still will not survive due to overall poor planning and not due to their ad/mktg program or lack thereof.

   4. All of the above written in very small words.

5. Frank Watson from Kangamurra Media
   

   commented on: March 10, 2009 at 1:27 p.m.

   It all depends on the type of advertising and the type of product... it is a tricky walk between short term saving and long term goals... if leads are lessened then you have less when the market bounces back... if you are using good CPA measurement you should be able to weather the troubles

6. Kevin Horne from Lairig Marketing
   

   commented on: March 10, 2009 at 1:46 p.m.

   Great stuff and written so cogently (altho obviously not persuasively enough, based on some commenters ;)

   Anyway, kudos above all else for knocking down those "studies" of prior recession spending that keep being brought up every other day. You did it in a very eloquent, analytical, defensible manner. I shall cut and paste it everywhere i see another mention of these (2 or 3) studies.

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