Part 1: Recession, Time to Cut Costs?

There’s an interesting article on Petronas today…

http://www.themalaysianinsider.com/malaysia/article/petronas-says-no-job-cuts-in-worldwide-operations

… where they announced there will be no job cuts, instead, marketing budget has been cut by 50%.

Such stories are quite common during economic downturns.

This is a common knee-jerk reaction in many organizations in response to downturns, they cut expenses to make their accounts look better… and usually the first expense to be cut is marketing because it is classified as an ‘expense’ in accounting terms.

However, our clients (and entrepreneurs who understand Direct Response Marketing principles) understand such a move is a big mistake.

Here is why…

Businesses grow their profits through 3 main activities:

1. By increasing their number of customers.
2. By increasing the frequency of purchases/repeat orders from their customers.
3. By increasing the amount their customers spend with them, also known as the Lifetime Value of their customers.

Cutting marketing ‘expense’ means cutting off your sources of fresh leads, which results in fewer customers, which in turn means sabotaging your own business. What you should be doing instead…

1. DILIGENTLY TRACK the results of your lead generation strategies.
2. Stop strategies that are not working.
3. Re-allocate the budget from Step 2 to increase the frequency of executing working strategies  and to test new strategies.
4. Repeat Step 1.

Cutting your marketing ‘expense’ also means cutting your activities to increase the frequency of purchase or repeat orders from existing customers.

It is easier (and research shows it’s at least 5-6 times cheaper) to get existing customers to repeat their orders(or purchase other products/services) from you than to sell to a fresh prospect… cutting your marketing ‘expense’ here means, again, sabotaging your own business.

Ditto for customer retention. Reducing your marketing budget to retain customers at a time when you need your existing customers’ support most will drive them to your competition.

Bottom line is, economic downturn or not, a business needs to constantly look at ways to cut costs. However, cash-flow is the lifeblood of a business and sales & marketing is the fuel to create cash-flow… in recession, if your competitors react by cutting their marketing budget, they are in fact clearing the ‘clutter’ for your sales & marketing efforts to be noticed, giving you the advantage.

Having worked with clients in different industries through 2 downturns (the 1990s and the more recent 2007-8), we have seen our clients bucking the trend and achieving great results, not only maintaining their profitability but in some instances, also grew their market shares.

To know more about how to buck the trend and continue to grow during periods of economic downturn, Register NOW for our FREE Business Optimization Clinic, valued at RM699. We guarantee you will get at least 1-2 ideas you can implement immediately, even if you do not engage our services.

Have a profitable week ahead!

ps: Only 10 sessions every month for qualified business owners. Claim yours today!