Its all in the numbers

With the current economical climate, most companies are scaling back on their marketing operations to weather the storm. Although this may seem logical, my questions to these companies would be as follows:

• Are you reducing your marketing budget strategically?
• Do you know which customers are contribute the most and the least to your company's profitability?
• Do you know which part of the marketing program to downsize?
  

These questions are illustrative to understand the reasons behind the decisions. 80% of the company's profits are typically generated by its top 20% of customers. This is the well-known aspect of the 80:20 principle. However, here's the second part of that famous principle: 50% of the company's profits are eaten away by the bottom 30% of its customers.

What does that mean? Unless you know what your customers mean to you in terms of profitability, you would not know which one to keep or toss, not to mention allocate your resources accordingly especially in times of economic downturn. Where's all this information coming from? Your most valuable asset: customer and performance data. With some purposeful digging, you can find out who should you focus your resources on, not to mention who you should cater to in terms of your products. For example, after examining a company's marketing efforts and their dollars generated, I realized that the most taxing efforts realized the least returns. So we balanced things out according to their perceived rewards.

Bottom line: Your marketing budget should be strategically driven by insights from your data.