Why you should not cut marketing budget when inflation bites

In the last couple of weeks, many companies have been issuing notices of price increases to their customers. Even schools have indicated their intention of increasing fees and transport due to the sharp increase in prices of fuel and other basic needs.

This is the foremost indicator that we are in the middle of inflation and we need to take decisive actions in order to survive the storm.

Basically, inflation is a measure of progressive increase in the price of goods and services over time. Inflation is a normal continuous process but when it happens too fast, it becomes a serious issue that can drive you out of business or make you poor if not well managed.

The first effect of inflation is reducing the purchasing power of consumers who start buying less. This leads to overall low sales to firms.

It is notable that out of many firms that are increasing the prices of their products, very few are increasing the salaries of their employees who are also affected by inflation because they are consumers in various industries.

Rising prices makes running a business costly and reduces or wipes away your profit margin.

Increasing prices to remain profitable may have the risk of reducing sales even lower because some customers may be unwilling to buy or unable to afford.

However, it may be the only option available option to stay in business. This being the case your price increase should be accompanied by managing expenses such as cutting overheads and increasing efficiency so that you are able to produce more with less.

A common mistake that must be avoided at all cost is reducing the marketing budget. Such a time is when you need to market more in order to increase sales. You can manage marketing budget efficiently by ensuring you invest every coin in areas of higher returns on investment.

Be creative by positioning your products in a way that gives already heavy burdened customers value for their money or the opportunity to cut cost. Remember everyone is looking for ways of cutting cost and getting value and if your products can do that, you carry the day.

It is also important to avoid another common mistake of avoiding spending or investing to preserve cash.

What you need is to distinguish between strategic and nonstrategic spending. Spend money on areas that are aligned with your long-term growth strategy. Do not jeopardise your long-term goals at the altar of the present-day need for cash flow. You must balance because things will come back to normal after some time.

Avoid keeping large amounts of cash during inflationary times. This is because your money loses purchasing power and you end up buying less in future. Instead, put it in tangible assets or stock that does not depreciate. If you have loans you can repay to lessen the burden of interests.

Invest in your employees as well because they are your greatest asset. Think of how you can help them too to cope with inflation and stay on the job to help you make customers happy.

Mr Kiunga is a business trainer and the author of The Art of Entrepreneurship: Strategies to Succeed in a Competitive Market

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