Posted on Apr 22, 2020 by Kelli Tejada

Rightsizing Marketing During the Downturn

Every company is considering cost-cutting and streamlining operations to weather the storm of business closures due to the Covid-19 downturn.  Even those companies whose workforce is able to continue working remotely are belt-tightening. And wisely so.  Published estimates of the cost of the pandemic range from $3.3 trillion, if it’s controlled and we are back to normal in 12 months, to $7 trillion if it takes three years.  Everyone is going to be on a fiscal diet. 

47% of CEOs surveyed identified Marketing as the first place to reduce budget because of  business pressure caused by COVID-19.

Not good news for Marketing. As a technology marketing veteran, I’ve watched the economy recover after 9/11, the 2008 crash, and several smaller ups and downs along the way.  But nothing has been quite so devastating as this.  In a recent survey that we conducted with one of our clients, Fortra Search, we surveyed Silicon Valley tech CEOs and senior executives to get their outlook on the business impacts of the virus.  One of the things that came to light is that they are all looking at streamlining costs, and forty-seven percent (47%) said that the first place they’ll be forced to cut is Marketing. But, marketing is designed to support the sales process. So, how can a company stay relevant in the marketplace without a marketing team to create demand for its products, or building its brand?   For some companies, the answer can be outsourced marketing. 

Applying Business Realities to Right Size Marketing

To determine the right mix of marketing resources consider where your company will be when the economy begins to recover.  Companies will likely fall into four categories, each with a different approach to marketing.

  • Survival at all cost.  Marketing is a necessary casualty in this category. Companies may need to cut marketing completely, redirecting all resources to sales, engineering, and extending the cash runway. In this case, internal and external marketing teams and budgets should be eliminated.
  • Surviving and ready to emerge even stronger.  In this category, marketing can help to keep the company stay relevant as it recovers from the downturn and rebuilds its sales pipeline and cash supply.  In this category, a scaled-down marketing program focused on building pipeline is important. Internal marketing teams can be downsized. External agency resources can cover the gap, and can cost 70% less than the cost of internal employees. The CEO or VP of Sales will need to oversee marketing strategy, but the work is executed by experienced external marketers.  In our survey, one-third of respondents (33%) said that combining marketing and sales under one executive is a good strategy for reducing costs. For these companies, it may be time to rethink the cost of internal marketing vs. the cost of external agency resources.
  • Ramping up with elastic resources. Some companies have seen little or no slowdown in sales related to the downturn.  While remaining cautious about spending, these companies often maintain internal marketing teams but reduce the program budget. In this case, marketing really does become a cost center. Without budget resources to support lead generation programs, marketing teams will struggle to produce the pipeline that is needed to return to growth. In this case, thinking of the overall marketing budget as elastic is the answer. A company may choose to reduce internal headcount and redirect savings toward lead generation. A senior internal marketing person, with the support of cost-effective agency resources, can deliver the pipeline needed to support the business without increasing overall marketing costs.
  • Growing by being part of the solution.  For these fortunate companies, the downturn may have actually presented new opportunities for growth. Companies in the collaboration, remote learning, supply-chain automation, crisis communications, delivery service, cybersecurity, or infrastructure fit into this category.  Because of the nature of their business, these companies are thriving during the downturn. They have an opportunity to expand lead generation programs, differentiate from their competition, and grab as much market share as possible.  For these companies, internal marketing staff and budget should be augmented with agency resources to rapidly capitalize on the opportunity, expand market reach and capture new customers with a strengthened brand. 

Outsourced Marketing Teams Can Cost 70% Less Than In-house Marketing Teams

Although it seems counter-intuitive, external marketing resources can actually be a company’s most cost-effective approach. We ran an analysis of the cost of a completely outsourced marketing organization vs. an in-house marketing organization. Both teams have the essential team members for cost-effective, sales-oriented marketing. In our simplified model, outsourced marketing can save over seventy-percent (70%) in employee costs alone, and often have access to more seasoned marketing resources. We used average U.S. salary data and calculated federal and state taxes as well as the cost of benefits to get an overall cost. 

Of course, different markets have different salaries and benefits costs. But the general savings dynamics still apply. 

Redirecting budget toward outsourced marketing resources also saves money that can be reallocated toward program costs like media or investments in content, virtual events, or your website. 

A Right-sized Marketing Effort Probably Requires Both Internal and External Resources

We’re not recommending that you replace your entire marketing team with outsourced talent. But a dedicated agency can bring new perspectives, deep understanding of the marketing craft especially in rapidly evolving areas like SEO or Social marketing, and can work side-by-side with your internal team to maximize results. Most of our clients don’t need every practice that an agency like ours offers, and most have an internal marketing leader, CEO or Founder that works with the agency team. Budgets and requirements vary based on actual company needs, but in general, we have found that a mix of internal and agency resources leave more budget for programs, and result in stronger pipelines and brand.

While it may seem like hiring an agency is exactly what you can’t afford to do, be sure to run the numbers.  You may find that you can’t afford not to. Read more about KTC on our website. www.ktcmarketingandpr.com


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