Marketing Budgets Are Getting Cut: Here’s What You Should Do Now

The costs involved in running a business are on the rise, and profit margins are declining as a result. In fact, our survey found that 13% of SMBs are giving up over 41% of monthly revenue to operating expenses.

We asked businesses which operating expenses were the most impactful on their profit margins in January. While taxes and regulatory fees were the biggest concern, 72% of businesses also found marketing and advertising costs were causing a notable drop to their bottom line.

If you’re struggling to work out how to respond to increasing operating expenses, you’re not alone – the majority of businesses we spoke to had no immediate cost-control strategies in place. But for those with a plan, the most popular strategies were reducing discretionary spending, negotiating lower prices, and reducing marketing and advertising spend.

Our survey found 11% of small to medium US-based businesses are planning to combat increased operating costs by reducing their spend on marketing. 

How Much Are Businesses Reducing Marketing Budgets By?

When we asked businesses how much they’re planning to reduce their marketing budgets by, over half fell within the 6% to 15% range. The majority were concentrated on the lower end, making cuts of 6% to 10%, but over a quarter are cutting budgets by 11% to 15%.

Here’s the full breakdown:

• 23% will reduce marketing budget by 1% – 5%
• 29% will reduce marketing budget by 6%-10%
• 26% will reduce marketing budget by 11%-15%
• 6% will reduce marketing budget by 16%-20%
• 17% will reduce marketing budget by 21% or more

Our survey responses show a strong trend towards tightening investment around marketing activity, with two specific areas being scrutinized:

1. Software: Of the 11% of businesses planning to re-evaluate their tech and software expenses, the majority (34%) were most keen to cut down on marketing software specifically.
2. Hiring: Of the SMBs using hiring freezes to combat operational costs, 22% will focus this on the sales and marketing departments. 

While cutting marketing costs may provide immediate relief for businesses facing financial pressures, the risks attached to this strategy tend to snowball. For instance, less resources often leads to worsened output (quantity and quality) and as a result, your brand awareness and visibility may take a hit. It’s also challenging to regain market share once lost, meaning you may lose more money in the long term than you save.

Brand awareness and visibility are key to a thriving business, but they take time and effort to maintain. Marketing automation AI tools are the most effective way to maintain marketing activity when short of resources.

To prove this further, marketing was one of the most common uses among the 10% of survey respondents using automation to save on costs:

• 55% are automating market research
• 42% are automating personalized marketing

While many businesses are opting out of marketing software and subscriptions to save money, there are wider benefits in committing to AI marketing automation tools. Firstly, by taking care of key tasks, these tools reduce the workload of marketing teams, allowing businesses to carry out hiring freezes.

On top of reducing strain, automations can actually yield faster and better results when it comes to carrying out repetitive tasks that take up time. For instance, you could use AI tools to create content at scale, or to time your email marketing sends for the highest open rate.

If your marketing ROI is down, you may feel tempted to make cuts. However, marketing is a key component of long-term growth, so you must weigh up the short and long-term implications of any changes you’re considering.

Before making quick decisions that could hinder your business, ask yourself if you can optimize your marketing spend using AI and automation tools first.