In order to beat the tax man, many businesses pre-paid expenses last month for the next financial year. This can be a good strategy but ONLY if the expenses that you are parting your hard-earned cash with are those that directly contribute to growing your business and increasing your future cashflow – which counts out extra stock purchases, overhead outlays and acquiring new “toys” or technologies.
At tax time – or any time – there are some expenses that you should be prioritising over others, and particularly in the current economic climate. So what are they? Probably the exact expenses that you’ve been cutting back on as soon as your cash gets a bit tight or your industry starts to falter. That’s right – your marketing and promotional activities.
Decreasing your marketing spend in tough times is one of the single biggest mistakes that business owners can make. Marketing is the single biggest driver in attracting new customers, increasing your average transaction value and conversion rates as well as retaining your current customers – all critical components for maintaining the revenue stream in your business in a tight economy. In fact, it’s more important now than ever before to start INCREASING your marketing spend.
Hang on a minute, you might be thinking. The cash in my business is already tight enough as it is – I’m not going to blow it all on a marketing campaign.
Let’s start then by looking at a few different market scenarios:
- You maintain current marketing activity: Reduced consumer confidence and spending will naturally start to impact the sales of products/services across your industry, therefore, leading to a gradual decline in your revenue.
- You decrease your marketing spend: Reduced consumer confidence and spending coupled with the effect of no pressing reminders, reasons or call-to-actions to buy your business’s product/service will bring about a sizable decrease in revenue – maybe not immediately, but it will be very noticeable over time.
- You increase your marketing spend: Reduced consumer confidence and spending impacts the demand for products/services in your industry – however, with your competitors maintaining or most likely decreasing their marketing spend, your marketing is able to stand out and draw attention to your products/services, motivate more people to choose your business, and increase your business profile.
A quiet economy also means less advertising and promotional dollars spent across the board – which means suppliers and media outlets are often much more amenable to reducing their rates or offering you special deals/discounts, which all contributes to your Marketing ROI.
While a marketing push can impact your profitability levels in the short term, it is important to remember that it is the critical component for maintaining your sales on an ongoing basis and growing your business in the long term.
More Reasons To Increase Your Marketing Spend:
- You can out-perform non-spending competitors and increase your market share in a quiet market and leverage the profit from that share as the economy picks up
- On the other hand, reducing your marketing spend can leave your brand and your business in a far worse and less competitive position when the economy recovers
- Will keep your brand awareness high and position you as a leader in your industry, which may lead to new opportunities down the track
A word of warning: not all marketing campaigns are created equal, so increase your spending wisely. Focus on those that are direct-response in nature – that is they are a targeted lead generation strategy designed to attract new customers rather than simply a branding exercise.
Keep a tight check and rein on all of your marketing and promotional campaigns and evaluate the impact and effectiveness of each and every marketing activity. Monitor your response rates and your conversion rates and then assess and re-evaluate accordingly. If you adopt this type of strategy, you’ll be able to identify your highest-performing marketing campaigns and implement them consistently. This approach guarantees that every marketing penny has a measurable Return On Investment that boosts your sales and your bottom line. If you look at it in this light, your marketing spend should be a much higher priority than most other expenses in your business.