My Massive Marketing Mistake: The Hidden Cost of Cutting Costs

It’s been 15 years, and this mistake I made still haunts me.

I’d just finished my first year as a sales and marketing manager. By all accounts, it was a tremendous success. In my first year at the company, before I was promoted to management, our revenue was around 2.6 million a year. Using our marketing spend and a digital marketing first approach, I revamped our whole marketing program, raising that number to 4.5 – 4.8 million a year in revenue. That’s a growth of around 75 percent!

It was a pretty amazing first year. But what I didn’t know at the time was there were actually some operational challenges going on, and it was much worse than I could have imagined.

The Problems Beneath the Surface

What I wasn’t privy to was that every new project that our company sold at the time was losing money. So when I made these changes, I was basically taking gasoline and dumping it on this operational fire. So, instead of the company losing a little bit of money, we were suddenly losing a lot of money.

The leadership team quickly came together to face the mandate to cut costs. When it came to reducing expenses, I had two options to consider. 

1. The marketing budget
2. Staff

I was determined to protect our team because they were great people, and I wanted to keep all of them. This is where my critical error occurred. To try to save my team and my company, my attention turned to the marketing budget.

My Critical Error

Being a data-driven marketer, well-versed in our return on investment, I knew exactly what our cost per lead was from various marketing sources. I chose to cut the bottom performing 25 percent of our marketing spend. This was a significant cut (high five figures), enough to satisfy company leadership.

Fast forward a year… this cut led to a seven-figure decline in our top-line revenue. Just because that portion of the spend was bottom performing, doesn’t mean it wasn’t performing. Additionally, attribution isn’t perfect – there were larger impacts of this spend that weren’t fully appreciatable based on the attribution data we had at the time.

The job security I had been so concerned about for our staff was ultimately compromised. This was my responsibility.

The Hard Learned Lesson

Now, owning a marketing agency, I encounter many businesses faced with similar decisions. Not everyone has to make such tough calls, but there is a consistent group of businesses that do, and I see them making the same mistake repeatedly: they cut from the marketing budget and consequently, their top-line revenue suffers, exacerbating their problems.

My key takeaway from this experience is that when you need to cut costs, it’s crucial to ensure you’re not inadvertently harming your revenue streams.

If you’re looking for an agency that’s lived through and actually learned from past mistakes, contact us or get a proposal. Don’t let history repeat itself.