For most businesses, marketing is a practical necessity. It’s the only viable strategy to increase your brand visibility, attract more people to your brand and ultimately grow the business. But let’s face it; marketing is expensive.
Sure, you could reduce what you spend on marketing directly. You can downgrade the plan you have with your marketing agency of choice. You could slash your ad budget. You could even lay off some of your internal staff members in favor of hiring freelance contractors. But there are downsides to these approaches. You’ll often end up with lower-quality work or inferior results.
So how can you reduce what you spend on marketing without losing those precious results?
Before you start cutting anything, it’s important to take a snapshot of your current marketing budget by conducting a thorough audit. Document everything you’re spending in the realm of marketing and advertising — and figure out how much value you’re getting from each investment.
That means accounting for direct costs (like the cost of placing advertising or hiring an agency), but also indirect costs (like software subscriptions) and labor costs. Once you have all your expenses laid out in front of you, from A to Z, it will be much easier to make cuts.
In the marketing world, everything depends on your return on investment, or ROI. Let’s say you spend $1,500 on a set of advertisements that ultimately bring you $3,000 in new profit — that gives you an ROI of 200 percent. In an alternate scenario, you spend $3,000 on a set of ads that bring you $9,000 in new profit. This gives you an ROI of 300 percent.
The former scenario has you spending less money on marketing, technically allowing you to cut your budget, but the latter scenario gives you much more profitability, both in terms of total profit and profit as a percentage of what you’ve invested.
There are many ways to improve your marketing ROI, but the most important initial strategy is to focus your efforts on the tactics and strategies that are most likely to be productive, especially in the long-term. Search engine optimization (SEO), for example, demands a significant upfront investment, but it also has the capacity to be one of the highest-ROI strategies in your arsenal.
Don’t be afraid to cut tactics that aren’t working. It’s a good idea for new businesses to experiment with many different marketing strategies, to capitalize on multiple channels and figure out the best path forward — but it’s crippling to continue investing in areas that just aren’t giving you a return. Stop paying for channels or tools that aren’t adding value to your organization.
Conversely, you should figure out which of your strategies are working best and double down on them. If your email marketing strategy is generating 50 new leads per month while your PPC ads cost twice as much to generate 25 leads per month, consider cutting your PPC ad budget and dumping it into email marketing.
Many marketing strategies are cost-inefficient because they suffer from poor customer targeting. Companies either don’t know who their target audience is, or they aren’t doing a good job of filtering out people who don’t fit those audience parameters. Spend some time reviewing your company’s target market and refining how you target those people. Once you stop spending money on people who aren’t interested in your products anyway, you’ll start noticing much better marketing results.
Automation is one of the best ways to improve your marketing cost efficiency. You’ll get to keep your marketing strategy running while spending less manual effort on each task — and improving consistency at the same time.
For example, you could set up a drip email campaign to execute itself, based on predefined rules and templates you create. You could also automate your lead scoring and lead management, or implement chat bots to guide customers through the earliest stages of your marketing/sales funnel.
How much are you spending on marketing and advertising tools? If you’re like most businesses, you could be spending hundreds, or even thousands of dollars per month on tools that aren’t adding much unique value to your operation. Thanks to open source platforms, much of the features you get from paid tools are available for free — you just have to know where to look.
Cutting your marketing budget and improving efficiency doesn’t mean you have to drop the quality of your work, or even drop the volume of the marketing and advertising material you’re circulating. Instead, it means reducing costs intelligently and focusing on the work most likely to give you results.
Originally Appeared in Entrepreneur