Thinking of Cutting the Marketing Budget? Think Again!

The year is already almost half over. Profits are below budget. Market rates are flat. There is little hope for loan yield enhancement. Raising fees is not an option. If income cannot be increased, the only way to make the year-end goal is to cut expense. Sound familiar…?

You pull out the expense statement and start searching for things to cut. The largest expense categories are staffing and IT. Both are large big but IT expense is defined by contract, no opportunity there. Cutting staff is a last-resort option. Office supplies? How much money can you really save by recycling rubber bands and paper clips? Eureka! We can cut the marketing budget!

Hold on Kemosabe! Here’s a news flash! Members don’t wake up every morning thinking about the credit union any more than they wake up thinking about the neighborhood dry cleaner or the local pharmacy. A visit to the cleaners, the pharmacy, and the credit union is a chore, just one of many items to check off a “to-do” list. Bottom line, when the credit union is out of sight, the credit union is often out of mind. So, before you pare back on marketing you might want ask yourself a few questions:

1. Just how “top of mind” are you? Most credit union members also have an account at a bank and many have accounts at multiple credit unions. Could inconsistent or ineffective messaging degrade chances of being chosen as your member’s provider of choice the next time they need a financial product or service?
2. How much income budgeted for the third and fourth quarters is dependent upon the current marketing plan? If marketing is cut, how much income could be lost?
3. Who decides which marketing initiatives to cut? No offense intended for the highly creative minds of credit union marketers, I have a high regard for the work you do, but there is a sometimes a wide gap between the decision processes of right-brained marketers and their left-brained ALM counterparts. Who decides which projects survive arbitrary budget cuts? Are the projects that you KEEP the ones that will produce the greatest bottom line results?
4. How much of your total marketing budget is earmarked to maximize financial performance? In some cases, it could be more profitable to redirect than to reduce. Funds designated for “institutional” marketing might feasibly be redirected to promote revenue generating products or services (i.e., LOANS!) and create a more positive outcome than expense cuts.

It is cliché, but you have to spend money to make money. Financial performance shortcomings are sometimes a result of sub-par revenue rather than excessive operating expense. Credit unions should take a cue from the for-profit world. Marketing is not an expense. Marketing is an investment. The question should not be, “How much of the marketing budget can we cut?” The question should be, “What can be done to maximize the marketing ROI to support the Credit Union’s near-term and strategic goals?”

By Dean Borland, SCMS, CUDE, VP Product Development, Credit Union Resources, Inc.