The world has turned strange, the future is uncertain, the way is unclear. The C-suite is rumbling with threats of budget cuts, and no department is safe. But will cutting the marketing budget do more long-term harm than good? That was the subject of research from the Boston Consulting Group. Spoiler alert: The data suggests that marketing shouldn’t take a hit, especially in uncertain times.
It’s tempting to cut your marketing budget in times of economic uncertainty, but marketing cuts result in losses across almost all pertinent metrics.
Budget cuts are a common response to an uncertain future, but think twice before cutting your marketing budget. When you reduce marketing investments, you can also expect a reduction in TSR (total shareholder return), CAGR (compound annual growth rate) and market share. After marketing budget cuts, brand health is likely to flounder, and awareness-to-purchase conversions will also take a dip.
There’s a marketing truism that maintaining customers is always cheaper than capturing new customers or regaining those you’ve lost. The data backs that sentiment up. Companies that increased brand spending between 2017 and 2019 boasted a TSR 6% higher than those that decreased marketing investments over the same period. Companies in the upper quartile for brand spending had sales CAGRs 13 percentage points higher than those in the lowest quartile, and companies that decreased...
David Ratajczak, Mario Simon, Leonardo Fascione, Emily Kruger, Chris Murphy and Alex Almeida are professionals with the Boston Consulting Group.