Recognizing When to Cut Marketing Investments

Cutting a marketing budget when consumers are spending less makes sense if another condition exists. The product has to be a matured.

Companies will use defensive marketing strategies when a product is near the end of the product life cycle. Consider DVD players. You never see advertising for these because they will be obsolete soon. DVD manufactures are trying to maximize profit, which requires lowering marketing and advertising spend.

It’s important for companies to understand why sales are declining. Are they declining because the product has matured? Or is it because consumers are generally buying less?

If consumers are buying less of your product because they’re buying fewer products in general, companies shouldn't cut marketing. John Quelch, a professor at Harvard’s Business School, argued that point as the U.S. was entering a deep recession in 2008:

This is not the time to cut advertising. It is well documented that brands that increase advertising during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times.

Companies need to understand why consumers are buying less of their product. If it’s a result of economic conditions and the product is still early in the product life cycle—a determination that is not easily made—companies should refine their marketing strategy but not cut marketing and advertising. If sales have slowed because the product reached the end of the product life cycle, companies should reduce marketing expenses in order to maximize profits.