Let’s return to the first 2 questions posed at the beginning of the series:
- Can you double your sales by doubling the marketing budget?
- What will happen if you halve the budget or cut it completely?
To answer the second question, if you cut off marketing completely, only the attributed sales – a relatively small portion of total sales – would stop. The baseline sales will continue, however, over time brand equity will “depreciate” – the memories in consumers’ minds will weaken and competitors will take over those spots, and with them, the market share.
If you reduce the budget, the key question is whether it is brand marketing or short-term, sales activation that takes the hit. If it is the latter, there will be a contained impact on sales, but brand would continue to grow and over time, may compensate for lack of activation spend.
When the immediate opportunities in the market dry out, it might be a smarter strategy to maintain brand marketing even while reducing short-term spend. During the 2008 financial crisis, Ford chose to protect its brand position while competitors cut heavily; as a result, it emerged with stronger reputation and higher market share. The lesson is clear: preserving brand spend in downturns can pay off when the market recovers.
Can you double your sales by doubling the market budget? Well, your baseline is not going to move up immediately with the extra spend, but the attributed sales might. However, the cost of sales will increase as your activation spend grows - there is a diminishing number of ready-to-buy people who have not yet been targeted by you.
There is a goldilocks zone of marketing spend with maximum overall effectiveness and good balance between long term brand growth and immediate sales results. Arbitrarily increasing or reducing marketing spend will deliver suboptimal result and may result in long-term damage to the business.
What practical steps should you take to make the best use your marketing budget? Start setting up the system.