The question for businesses as they return to work after Covid 19, is how much (if any) should they spend on their marketing budget, particularly if money is tight. It seems common practice for businesses to assign a certain percentage of their turnover to marketing. By this approach, when a business’s turnover is down, marketing will be cut, but when business is booming, more will be spent!
Can you spot the problem with this? If turnover is down, then your need for additional sales is greater, yet if you spend less on marketing, then the benefit derived from marketing is likely to be less! This is exactly the opposite of what you need!
Conversely, when turnover is up, by applying the same approach, your expenditure will be up, even though your need for extra sales is likely to be less. You could even find yourself in the position of having too much demand relative to your capacity and have to turn business away. This would represent a waste of your marketing budget!
It seems typical for small businesses to see marketing as discretionary. When their bank account is healthy, they are more inclined to spend on marketing, but when the bank account is low, they consider it time to cut back or even cancel the marketing budget.
This approach exacerbates cycles. Highs are likely to go even higher and lows even lower. This is particularly problematic if you are wanting to avoid turning away business, so you gear your business up to meet the highs and then find you have excess capacity for significant amounts of time, which will prove very costly!
How to flatten the curve? Expenditure on marketing should be counter-cyclical. When turnover is down, you want to spend more in real dollar terms, than when turnover is high, as this is when you need the sales the most. A lot of small businesses may be reluctant to adopt this approach when their bank account is looking light, but how else do they expect to solve the problem? By spending less, or spending nothing, that is a sure-fire way for the situation not to be resolved, leaving the business to wait for the general market conditions to improve.
Aside from the bank account looking dismal, the other reason for small business reluctance to spend is that marketing is not guaranteed to bring results. If small businesses could get a guarantee with their advertising, then I am sure they would all dip into their pockets, but quite simply that is not possible. That said, with online marketing the information that can be gathered and used to maximise the chances of success, is so much greater than traditional advertising forms. It is important however to be systematic in your approach. That way you will learn and refine to get the best results. A knee jerk approach is always likely to result in heart break!
Sadly, too many small businesses will ignore the realities and spend less on marketing in a downturn, but that is great news for the few smart ones. As your competitors spend less and their profile falls away, by you spending more, you can get the jump on them and potentially grab some of their market share that they could find difficult to ever recover!