MANAGEMENT

Cost cutting in sales and marketing

Marketing and selling in tough economic conditions:

Prasanna Perera Marketing and Management Consultant, Chartered Marketeer, CIM U.K.

The word ‘cost cutting’ is often associated with negative sentiments. However, it does not have to be so. There are several benefits of cost cutting in marketing and sales. This brief article will explore some methods of cost cutting and the benefits of doing so.

Is it ‘cost cutting’ or ‘cost rationalisation’?

I prefer the word ‘cost rationalisation’ because this is what cost cutting accomplishes. There are numerous areas in Marketing and Sales where costs can be cut down, without affecting marketing and sales performance.

Cost cutting in marketing and sales

Critically analyse distribution costs and methods and explore how costs can be rationalised to improve profits. Selling and distribution is a substantial slice of marketing and sales budgets and expenses. Have the courage to develop new channels of distribution and cut down on unproductive methods used. Mass media advertising (TV, Radio, Newspapers) is another sizeable chunk of marketing and sales budgets. There are many new media channels available such as social networks, search engines, mobile communication, corporate blogs to name a few. New media is fast, direct, cost effective and interactive. This is an ideal recipe to reduce the cost incurred on mass media advertising. A good balance between traditional media and new media, will ensure greater cost savings.

In marketing, research is a vital and critical component. It is also an area where budgets are sizeable. Look at secondary data before embarking on expensive primary research projects. There is a wealth of information available within and outside an organization, in published form. Informal research can also be carried out on an ongoing basis. Marketeers should conduct primary research based on clear objectives and it should be decision oriented. Cost consciousness when conducting primary research is a must.

The sales force is another component of sizeable marketing and sales expenditure. Salaries, commissions, incentives, allowances etc., all add up to substantial proportions. Marketeers must ensure that the productivity levels of their sales teams are improved continuously. Proper itineraries, route planning, good product knowledge all help towards enhancing productivity. Sales team members who do not perform must be replaced. Also unproductive sales territories should be eliminated or re-demarcated. All new recruitments should be justified, in terms of return on investment. (ROI)

In Marketing, many below-the-line (BTL) activities are carried out, such as sales promotions, seminars, workshops, brand activations to name a few.

There is a perception that BTL activities are more cost effective than ATL activities. This may not be the case!

All BTL activities must be carefully evaluated in terms of effectiveness. Cost reductions should be carried out based on effectiveness, such as elimination of unproductive sales promotions and other activities.

Do not conduct certain BTL activities, because competitors are doing so! All BTL activities must be justified, based on costs and benefits. (Cost benefit analysis). I have also observed that many marketeers develop point-of-sale-material (POSM) without considering the appropriateness, effectiveness and cost of same. If marketers and sales personnel think creatively, more effective and cost efficient POSM can be developed.

Don’t simply think of standard POSM such as posters, danglers and streamers.

Hoardings, bill boards, dealer name boards are also popular outdoor advertising pursuits of marketeers. Here again, keep cost effectiveness in mind. Marketeers should not blindly affix hoardings etc., because competitors are doing so.

Methods to reduce costs in marketing and sales

All marketing and selling costs should be justified, wherever possible. Financial evaluations should be carried out in terms of ROI. Objectives should be set and results measured against the set objectives.

Outsourcing is very important in marketing and sales, since it is impossible to carry out all activities in-house. Outsourcing has the potential to save budgets, provided a proper evaluation is carried out based on the following :

Can the activity be carried out in-house?

* If not, who is the outsourcing partner we are going to work with?

* Is the outsourcing partner knowledgeable, skillful and cost effective?

Outsourcing has now become a fashion and do not indulge in outsourcing without objectivity. If the correct partner is not considered for outsourcing, costs can skyrocket! Marketeers and salespersons should be committed to Kaizen or Continuous Improvement (CI). Any marketing and sales activity can be improved in terms of effectiveness and efficiency. What is required is an active mind and awareness of same. Marketing and sales budgets should be reviewed on a continuous basis. In other words, budgets should be active rather than passive. (Live the budgets!).

Take course corrections on-the-run and save valuable resources for the organization. Service Quality measurements can also be an effective method to reduce service related costs. In providing a service there is also an opportunity cost, besides the actual cost. Product quality measurements too can reduce wastage and re-work costs.

Marketing and sales activities are high budget and must be justified at all times. The responsibility for this, lies in the hands of marketeers. I am in no way advocating an irrational budget cut. All I am urging marketeers is to be more responsible and accountable for their budgets.