How to Cut your Marketing Agency Budget the Smart Way

When economic times are uncertain, many companies look for areas in which they can reduce their budget. The area that tends to get the brunt of the cuts is marketing, especially if you are using a marketing agency. Companies may look to bring more of their marketing work in-house or pull back on the overall marketing agency budget. I’m not advocating that companies should cut their marketing budget. In fact, during economic downturns, companies should put a higher focus on marketing. But, if you’re in a situation in which you don’t have a choice, be smart about how you decide to cut your marketing agency budget. Work with your agency and ask questions to find the right solution. The more you understand about the strategy, the smarter decisions you can make for your budget.

I examine two categories affecting your budget in the sections below. First, I discuss understanding the strategy and tactics the agency is running. Then, I focus on more tactical and practical checks that can impact what you are paying.

Strategy and Goals

Are You Aligned on Goals?

Most agencies work with clients to create an annual marketing plan. They base the strategy and plans on the company’s overall business goals. But, situations might cause your company to change its goals. In these cases, you need to keep your agency updated so you’re all on the same page.

If your business goals change enough to affect your current marketing strategy, then the agency needs to adjust its plans. This is also a good opportunity to lay out any new budget constraints. But, allow them to propose additional tactics that might be effective enough to justify a higher budget.

Even if your goals haven’t changed, make sure your agency’s work is still laser-focused. Ask how each program contributes to your goals and how they work together in the full strategy. If they’ve started drifting away from your goal, then you need to rein them and your budget back in now.

Do You Understand How the Marketing Tactics Work Together?

When your agency developed the initial (or annual) strategy and brand messaging, did you understand the full plan? All the tactics they include work together to get the best results. Blog posts, for example, serve multiple purposes. The posts benefit SEO by adding new content to the site and increasing search rankings for specific keywords. They improve customer experience by answering customer questions or solving their problems. For thought leadership, they show your industry expertise and build your credibility.

This strategy built the foundation for the program the agency is running. Beth Kapes, president of Cleveland-based Moving Words Into Action, understands better than most the importance of the strategy. Many companies call her in to fix programs in which there was no initial strategy or the companies drifted away from the plan. She offers this advice:

From a marketing agency budget standpoint, each of the tactics has a cost. But, the tactics work together to reinforce the strategy. So cutting a whole tactic (i.e. blog posts, emails, social media, etc.) can have a bigger effect on the whole program. You need to understand the different ways each tactic is benefiting you. That’s not to say if you stop or slow down on one thing, it all collapses. But, knowing how it affects the full program helps you make a better decision. Plus, if you get to the point where you need to call Beth to get your program back on track, you’ll be adding more costs from what you’re trying to reduce.

Is the Work Itself Defined?

The work itself is sometimes an area where companies like to let the agency just do what they do. That makes sense because that’s why you hired them. But, be sure you understand what they include with certain jobs.

Search engine optimization (SEO) and website optimization are two examples because “optimization” is a vague term. There are specific tasks for these that the agency should be willing to go over with you. Are they performing the same tasks every month or are they prioritizing a large list of tasks? How are they showing you that the work they are doing is effective?

There is also usually a category of Marketing Management (or similar) which are the charges for the miscellaneous tasks for the account manager. It includes client calls/meetings, reporting, budget management, and more. It can be a bit of a catch-all for things that don’t fit under specific projects or monthly tasks. So, have them define what this category includes and their process if they run out of budget.

Are They Delivering Results?

Results aren’t a cost, but it is a check to show the agency is being effective for the money you’re paying. Not every program is going to give you results right away. Some tactics may not be consistent from month to month. Find out what you should expect each month and what triggers the agency to know they need to adjust a program. Understand what steps the agency can take to adjust underperforming programs (tactics, personnel, etc.) and if that will affect your budget.

Are you getting reports of the results as often as you need them? These are generally monthly reports or dashboards. Work with the agency on what they should be reporting. It should be based on what you (or your boss) need to see to justify the marketing agency budget. Don’t take standardized reporting if it doesn’t give you the information you need. Depending on how long you’ve been running the program, the data may show tactics that can easily be adjusted from a budget standpoint.

Tactical and Practical

Who’s Doing the Work?

Internal Employees

Your main contact is the account manager. He/She might be your only contact, but it’s rare that others aren’t working on different aspects of your account. Some information you should know:

Who’s doing what?
- What is the level of experience for each person working on your account?
- Does the agency charge differently for different employees?
  - If so, how is this determined (employee level, type of work, etc.)?
  - The agency should be transparent in how they charge.
If there’s a personnel change, how does that affect the work they do for you?
- Are you notified?
- Are there changes in billing if there’s a personnel change?
- If there’s a gap in hiring, who’s doing the work (if anyone)?

3rd Party Resources

In some cases, agencies may use freelancers or contractors for aspects of your work. Some may be using trusted people they’ve worked with for years. But, some may be hiring freelancers from sources like Upwork for each client and/or job. There’s nothing wrong with that, but finding resources from these types of services may be something you can do internally to save money.

Regardless of their sources, it’s important you know if the agency is marking up the price. This is standard, but you need to know how much. Are they marking it up by a certain percentage or are they charging you the same rates as an internal employee? Again, this may be an opportunity to save a considerable amount of money by doing it in-house. That takes time, so you may be willing to pay the extra amount to have the agency do the legwork.

How Are You Charged?

Most agencies tend to charge in three ways, and it can be a combination. All are based on the time spent doing the work. An hourly cost is simply $X per hour in which the agency charges based on actual time spent. Monthly retainer costs are specified monthly recurring charges based on a set amount of time allocated to spend on a task. Project-based costs are one price for the whole project. These are for projects that have a defined start and end the costs are determined by the number of hours they expect to work on the project.

While those are straightforward, make sure you understand the following:

Are you charged the full amount even if they don’t use all the time allocated?
- Does any unused budget roll over to the next billing period?
What happens if they run out of budgeted time?
- Are you charged for extra time?
- Do they stop the work and pick up with the next billing period?
- Do they notify you beforehand in either scenario?

Agency Tools for your Account

Agencies use many tools to run their businesses and to benefit their clients. Many of the costs are passed on to you, sometimes at a lower shared cost if used for many clients. Understand what you’re paying and if the charges will fluctuate (if add or removing other clients) or static. Also, ask about their process for ensuring charges are removed from the invoice if they stop using a certain tool.

These include:

Software Tools: Some of the tasks may have specific tools that make their work more efficient or are just necessities. Examples may include SEMRush or AHRefs for search engine optimization, HubSpot for marketing automation/blogs/email, or separate email tools like Mailchimp.
Website Tools: If the agency developed and manages your website, there may be extra costs. These include hosting, plug-ins used on the site, domain renewals and more.
Overhead Items: These can be tools like their conference call service (yep, some agencies bill that to clients) and video conferencing services. Find out any other miscellaneous costs that will be on your invoice. There may be opportunities to save costs here by using tools you may already have access to.
Marked Up Items: As mentioned above with third party resources, most agencies mark up these costs. This also includes handling working with outside vendors like printers, third party web hosters, and more. The cost generally is for their time. If you want to avoid those costs, you can take on those tasks. Again, it’s time you then have to spend which may be worth the extra cost.

Make sure you know what to expect to see on your invoice. But, if you don’t know what a charge is, ask them. And if you need them to label things a certain way, they can do that too.

These are the ways you can reduce your marketing agency budget without cutting your marketing success. The biggest key to getting to the price you need is open communication with your main contact. Along with getting the budget that you’re comfortable with, you’ll also build a better, cost-effective relationship with your agency.

What other tips can you share for reducing your marketing agency budget? Tell us in the comments below.