How to Decide What to Cut From Next Year’s Marketing Budget

How to Decide What to Cut From Next Year’s Marketing Budget

Striking the right budget for your business is no picnic, but getting your marketing dollars right can pose a unique challenge.

You want to spend enough to get your sales team the traffic and leads they need, so they aren’t sitting on their hands or having to waste time with bad prospects. But you also don’t want to overspend, as every extra dollar hurts your return on investment (ROI).

Here’s how to figure out what to cut from next year’s marketing budget without undermining your store’s growth.

1. Start with Your Goals and Where You Are Now

If you’re looking to put something on the “marketing budget” chopping block, that means you aren’t getting where you need to go — or you’re where you want to be, but you need to cut back. Any worthwhile look at your marketing budget has to focus on where you’re trying to take your business.

You need to have a realistic goal. Maybe it’s total increase in revenue, or maybe it’s more unit sales every month. Whatever it is, establish that goal as your guiding North Star. Each decision you make needs to bring you closer to that goal.

If you’re looking for a big leap in your marketing ROI and revenue, and your current marketing strategy isn’t trending toward that type of growth, you’ve got two main options:

  1. Spend the same amount (or less) way more effectively.
  2. Spend more.

Standing still isn’t an option for you. If you’re really struggling, let’s start a conversation to find what’s working and what’s broken so we can help!

Now, if you are attaining your goal already, but you want to cut down your costs to become even more profitable, your big challenge becomes not snipping the wrong wire — the one that’s actually fueling the traffic and leads your sales team is converting. So how do you know which wire you should cut?

2. Work Backward

Once you know where you’re headed, you need to find the best way to get there. I always work backward.

If you sell 80 cars a month but want to sell 100, you need to find 20 more sales. So, going back through the sales funnel, maybe you find that, along with 80 sales a month, you average 320 leads.

(Which is convenient, because it gives you nice, clean numbers to work with.)

320 leads turning into 80 sales means your sales team closes 25% of the leads you get them. So, if you keep the same close rate of 25% and want to hit 100 sales, your team needs 80 more leads a month for a total of 400.

That’s the “more leads” route. Another option would be to increase your close rate, say from 25% to 30%. In that case, your team needs only 13 more leads each month to reach 100 sales. Your close rate can be increased by improving sales team performance or by generating higher-quality leads.

And, while we’re talking about higher-quality leads, there’s even a scenario where just getting the right leads (instead of more leads) results in higher sales numbers. That means your 320 leads could turn into 100 sales without more traffic.

Once you have a sense of what kind of change to the sales funnel you believe you can make, it will be easier to decide which cuts or modifications to make to your budget.

For example, to raise the quality of leads, you might focus more on lead nurturing efforts, like automated email marketing and lead tracking.

Or, if you think increasing the volume of leads is the way to go, you can analyze your biggest lead generators and see if you can push them further. For instance, you could raise the ad spend budget for your top-performing Facebook campaigns while cutting one of your third-party vendors from which you don’t see ROI.

3. Jump into the Details

Now that you have your North Star goal, and you’ve analyzed your sales funnel, you’re ready to start adjusting individual parts of your strategy.

This isn’t easy. A lot of your efforts might be compounding, where one Facebook ad campaign doesn’t bring in initial traffic but is your biggest driver of repeat traffic, spurring shoppers to convert into leads.

Plus, there are certain areas in which you aren’t the expert. Make sure that you have partners you can trust (and that you know which questions to ask them). It can be a huge challenge to measure a clean attribution for some digital efforts — and nearly impossible for older marketing channels, like TV, print, and radio — but the people who help you understand those platforms should at least be able to show if your efforts are on track.

Businesses have an increasing ability to measure ROI and return on advertising spend (ROAS) more deeply with multi-touch attribution models, like the ones we use at 9 Clouds. These can take time to set up, but they’ll give you the data to make the right decision on not just strategies like Facebook ads, search engine optimization (SEO), and radio, but also vendors like, Autotrader, and other third-party sites. Reach out to learn more about these attribution tools.

Finally, you can make sure your efforts measure up to the industry averages by checking out our latest Performance Benchmarks Report.

Learn More with Our Webinar!

Making budget cuts is a tough process. It takes a mindful tactician to survey the field and make the right call on which services you can downsize or lose without hurting your bottom line.

We covered this topic in even more detail in this on-demand webinar, so check out the recording and get to work analyzing before putting together next year’s budget. Watch it here!

Again, we can always hop on the phone and take a look under the hood with you, too!

Watch the On-Demand Webinar