It is a fact of life that because of the reports of economic slowing, marketing departments at communications and IT vendors are considering budget cuts. Because most analyst relations teams report to marketing, there will be trickle down cuts hitting AR as well. Unfortunately, most AR functions are already short of staff and funding resources so the natural reaction is to perceive that budget cuts are only bad. However, if AR managers use the budget cutting as an opportunity to rethink how they do business the cutting exercise can have at least some positive outcomes.
Any business function can accumulate outdated expenses, activities and techniques like barnacles on a ship. An example can be always buying 20 advisory seats during the annual analyst services contract renewal even though only 14 are really being actively used. Another example is spending too much money on analyst events by selecting fancy destination hotels when analysts would prefer a more convenient and often cheaper location. Yet another example is buying expo floor booth space at firm conferences because “everybody knows” that they are great sources of leads when no investigation of lead generation effectiveness has been done for years, if ever.
Besides eliminating unnecessary spending, a budget cutting exercise can also surface innovative approaches to accomplish tasks that actually might be more effective done in some other way. An example here is substituting “Deep Dives” for the annual analyst event. A typical vendor analyst conference or summit might have 80 to 100 analysts in attendance with a plethora of vendor spokespeople and staff. A hotel conference facility has to be rented with expensive catering and outside resources hired (e.g., designers, graphics artists and events management). T&E expenses are huge because of the sheer number of attendees. Yes, there is a lot of information that is given out, but personal contacts between spokespeople and analysts are not always maximized because of the size of the event.
A Deep Dive is smaller, more focused, and significantly less expensive. Eight to 12 analysts from the same firm or a collection of boutiques are gathered for a full day of briefings. Executives and spokespeople drop in for an hour or so to have an open and candid discussion using flip charts instead of giving Death by PowerPoint speeches. Rather than renting expensive hotel conference facilities and add on resources, AR can just use a company conference room and normal catering. Executives like this approach because it requires less of their time, both at the event and in preparation. All analysts like the informal approach because it tends to be more open. Large firm analysts like it because their competitors are not in the room. AR can do four or five Deep Dives and hit half to two-thirds of the analysts that would come to a traditional analyst conference for one-tenth the cost with better results. It also will require less staff resources to conduct these small events as compared to the many hours required to successfully do a large event.
At a number of vendors, some expenses go to AR because they have the word “analyst” in them. For instance, AR teams might be responsible for the cost of expo floor booth space at analyst conferences just because it is a Gartner or Forrester event. This makes no sense if the rest of the lead generation work, including industry events, is handled by another department. If the analyst conference expo floor truly does generate high quality leads then AR should cut this expense and let the normal lead generation team pick up the expense if they think it has a good ROI. BTW, the vast majority of analysts at major firms with expo business at their conferences will not “punish” a vendor that cuts or eliminates sponsorships.
Another example is AR funding analyst contracts with firms that are not aligned with AR’s objectives. Often these are the “pet” analysts of some executive. Having smart advisors is critical for executive decision support, but AR should not have to fund these contracts just because the advisor happens to be an analyst firm. If the executive truly finds the advice valuable, he or she will fund the contract.
In this and future posts, we will discuss ways for AR mangers to cut costs without cutting effectiveness. In addition, we will be discussing ways to avoid the budget axe by proving the value of AR.
- AR should take a zero-based budgeting approach to any expense reduction exercise with everything on the table
- AR should revisit its charter, objectives and priorities to ensure that they are aligned with the company’s strategy and tactics, especially if the company strategy is changing
- AR should examine every expense for its relevance to AR’s objectives and cut those that should be handled by another budget
- Annual analyst contracts should be scrutinized to make sure that everything in the current and prior contracts was fully utilized with underused items cut from the new contract. This will produce howls of protest from the firms’ sales representatives but will not impact analysts opinion
Bottom Line: Budget cutting is never painless and is fraught with political challenges. However, taking a systematic approach rather than generic across-the-board cuts can produce significantly better outcomes.
Analyst firm sales executives – Are you working to ensure that every part of your contract is getting fully utilized and delivering visible business value?
Analysts – How does budget cutting that impact your firm’s contract affect your opinion of the vendor?
AR managers – How do you approach budget cutting? How much of your current spending really belongs in someone else’s budget?
Are you concerned that cutting your budget will hurt your relationships with the analysts? SageCircle can help. Our strategists can:
- Identify spending areas that can be safely cut
- Brainstorm innovative – and cheaper – substitutes for expensive activities
- Discuss whether it will be necessary to hold a conversation with an analyst to explain the cuts to his or her firm’s contracts
SageCircle strategists understand your opportunities, challenges and priorities because we have been AR practitioners and executives as well as industry analysts and AR researchers. SageCircle emphasizes the use of phone-based inquiry through its Advisory Service, which is your lifeline when you need timely access to an AR and analyst expert to exploit an opportunity or mitigate a problem. Advisory is available through an annual “all you can eat” contract or blocks of two or five hours “by the drink.” Click here to learn more about our advisory services.
To learn more contact us at info [at] sagecircle dot com or 650-274-8309.