How to attract more customers will be the main challenge od 2023. Lowered marketing budgets for 2023 have wreaked havoc in the marketing world in these past weeks. Marketers are desperately trying to figure out how to adapt to the new situation.
But the recession is actually an opportunity to improve and optimize your marketing efforts, resulting in better results both for the marketers themselves as well for the company.
In the essay, you will learn:
– what the impacts of lower marketing budgets might be,
– how to make the most of the situation
– an exercise to help you find problem-solution fit and come out on top.
2023 it’s coming. (Yay:))
And with it… reduced marketing budgets and a promise of an economic downturn so big, Elon Musk fears it. (Well, that went bleak really fast.)
Lately, everybody is talking about marketing spend. There isn’t a single marketer who hasn’t complained about it or offered email marketing and content marketing as a solution (to be fair, these are not poor solutions). The SEO guys are just laughing it out.
The recession is upon us and here to stay for quite a while. Which doesn’t just mean your favorite bread will get pricier, but the marketing budgets are being cut as well. Companies are reporting about 30-50% drop in marketing budgets for 2023 compared to 2022 and 2021.
If you do nothing, you’ll end up losing leads faster than you can spell out “we are in a sh*thole”.
In reality, the recession is an opportunity. A time to optimize your marketing efforts, making your marketing profitable and eliminating the competition in the process. So read on to understand how you can do more, with less.
Should you cut your marketing spend during a recession?
Maybe cutting the marketing budget isn’t your decision. Here you are, what’s done is done, the budgets were cut, and you are trying to figure out how to save a sinking boat that’s leaking water. Maybe you have some influence over the budget in which case, you’ll want to know whether the cuts are actually appropriate.
You could argue budget cuts both ways.
In an ideal world, you should never cut marketing budgets. Marketing is bringing in clients, leads, business. People that leave money. Why would you want less of that? When you receive $2 for every $1 spent, you want to spend every dollar you have.
We don’t live in a perfect world, and because of attribution problems, tracking problems, changing algorithms, failed campaigns,… marketing isn’t always profitable. For a company where marketing is an expense, perhaps cutting that expense in time of instability is fair. If you are getting $0.4 for every dollar spent, you have a problem and a budget cut might be necessary to save the company.
The issue is, the cut isn’t a long-term strategy. Let’s see what the effects of a budget cut are.
What is the impact of a reduction in the marketing budget?
Obviously, if you don’t change the way you work, the lowered marketing budget will cause a loss of leads, customers, loss of awareness… This multiplies over time, because you lose the organic word-of-mouth referrals as well. Fewer people in your product, fewer people talk about your product, fewer people recommend it to friends, you get the idea.
In the long run, that means that competitors who know how and where to place their budgets will most likely get a larger market share, pushing you off to the side.
Because you now have a lower budget, you can prevent this in one way and one way only. By focusing on organic efforts and nailing your message.
See, there are generally always two ways of attracting customers. Paid & organic. Let me drastically oversimplify it for you:
Paid = faster. It means we set up 3 Facebook campaigns, 5 ad groups per campaign, tons of ads. In testing, we find X works best, so we go with that. The X stops working after 2 weeks (because algo), so we need to repeat the process, constantly finding new ways to spending money to attract clients. This leads to marketing campaigns and overspending.
Organic = slower. It takes time. Often we try to tackle it the same way as paid. We figure out a content strategy; we create a nice social media calendar, prepare posts, put extra care in finding just the right photos on Envato, and publish these posts. People then don’t engage with our posts, we get 5 likes, and a comment for all of our efforts, which leads to us confidently telling everyone that wants to listen how digital marketing, social media marketing, and other marketing channels are all dead and Facebook is a waste of time.
In the last few years, companies used paid advertising a lot. There was tons of money in the market, leading to companies taking bigger risks in ad spend. Obviously, with a reduced marketing budget, you need to focus on organic more, which takes work.
Let’s look at a practical example of that.
A month ago, a sales agency approached me, offering a system of appointment setter for my service. The way it works is that they get 1-3 people, train them to sell my service, and then I use these people to generate leads. I pay an upfront for the training + a fixed monthly fee and a commission on every sale. Fair. And a legit choice. The sellers sell, I work on projects, everybody is happy.
Now what happens when I want to expand? I need to hire another me so we can do more projects at once. Next, I need to add another seller, upping my cost of running the business. I become an agency. But there is a problem. If something changes in the market (let’s say an economic downturn happens), or I go on a holiday and don’t work on projects for a few months,… I still need to pay the sellers or fire them. Not a pleasant choice to have. The sellers are a liability and an expense.
Now let’s say the market crashed, and I needed to fire the sellers because of a lower marketing budget. What is my alternative? How can I solve my budget problem, yet not lose the amount of leads I get?
In my example, I can build a funnel; I prepare my lead magnet that leads to my training video, that leads to a sales call + some email marketing to warm the clients up. I can schedule 10 calls a month, closing 7 of them if my funnel works correctly. What happens when I want more customers? I put more money into advertising the lead magnet, more people come through the funnel. What happens when I want to go on vacation? I turn off advertising, saving money while I am not working. The market changes? I change the lead magnet, adjust the funnel. I have practically no fixed cost, except maybe a couple of $50/month subscriptions.
This eventually leads to product-led growth. Now that I have people in my funnel, I can switch my offer from a high-ticket workshop to a product, such as a DIY course, and you have the beginnings of a product-led model.
For this to work, in fact for both of these paths to really work without overspending in marketing, you need to build your foundations. Businesses need to be built. And building them requires strong foundations. Without the strong foundations you are leaking money out of holes that you left open while skipping early steps.
And a big part of these foundations is the problem-solution fit. You need to understand your customers’ problem and craft the perfect solution for that problem, so they respond to your product.
In the next paragraph, let’s look at how to do that.
How to get the most out of your organic marketing?
You see, people don’t respond to your marketing efforts, to your lead magnets, to your cold emails, because the message you put out does not trigger them.
We are overloaded with information and to get someone who doesn’t know you to actually read something you wrote, you need to get their attention.
“Andrej, we have shouted all sorts of controversial topics at our customers and they still didn’t react. Do they even care?”
That’s exactly the problem with marketing today. We don’t know how to stand out, so we try shouting. We try being controversial. We put red font on black backgrounds, trying desperately to get someone’s attention. That’s exactly how these efforts appear to our customers. Desperate.
Standing out doesn’t mean shouting. It means really nailing your message for your customer. It means getting their attention by being super specific about their problems and how we can solve them.
Yes, you guessed it. By niching down, by nailing your messaging, by really focusing your attention on one problem you can solve for the customer, you can improve your marketing efforts. Not by 1%, not by 10%, I mean you can really change your game.
How do we do that? How do we focus?
How to reduce what you spend on marketing (without losing results)
During my positioning workshop, the first thing we look at with the clients is the product fundamentals. The section is all about finding problem-solution fit. Meaning finding one problem that’s painful enough for the customer, that your solution actually solves and makes the pain go away.
I do this part of the workshop in 3 parts, which takes about 3 hours, but here is a quick exercise you can do to find out what problem you should focus on:
1) Jot down all the problems your solution solves
Really try to figure out what problems your solution is good at. Try to have a customer in mind when doing that. What problems do they have? Where do they need help?
Got the list? Good. Let’s move to step 2.
2) How do your customers explain their problems?
Now write about the problems, as seen by the customers. These might be the same as what you wrote in step one. But it might be completely different as well. Let me explain.
In step 1, I would write problems like: “My positioning framework helps customers lower the cost of user acquisition and improve conversion rates.”
My clients usually come to me with a different problem in mind: “We need to redo the website because our sales are poor and we are not getting enough leads.”
Same thing, right?
I talk about conversion rates, but the client talks about poor sales and not getting enough leads. The result is the same. Because the client doesn’t get enough leads and has low conversion rates, this results in poor sales. But my client might not know what his conversion rates are. And whether they are good or bad. He just knows his sales suck.
If I published a post that said “Improve your conversion rates”, this client, although needing my help, wouldn’t be interested. Because he defines the problem as “poor sales”, not “poor conversion rates”.
I know we are arguing semantics, but, in this case, semantics might be what attracts this client to respond to your post and trying your solution.
Now that you get the point, try to go back in time, and think about the problems your customers first mentioned to you. If you don’t know the answer here, you have two options.
- You can catch these answers inside your product with a quick question in the onboarding process. (Why are you here? Pain 1, pain 2,…)
- You can do user interviews with your target clients and ask them about their problems.
Yeah, I know, you are going to go with the first option.
3) Choose the problem to focus on
Now that you know the problems you are solving and how customers explain their problems, you can compare the lists and choose one problem that’s the most painful to your customer. Voilá, simple, right?
Focusing on that problem (Our solution helps X achieve Y) is your problem-solution fit. It means that your solution solves one specific problem for your customers. You are now much closer to niching down.
Focus your marketing efforts around that problem and offer potential customers your solution. See what happens. With time, your marketing efforts should organically improve. You can use those posts that really work well, boost them to get even more attention, yet always staying under your marketing budget to keep your boss happy.
That way, you can be the competitor that has his sh*t together, and uses the economic downturn to attract more clients with a lower marketing budget.
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