Is your organization being asked to reassess and possibly reduce marketing spend? With decisive action, Brand Marketers can be strategic about how they allocate and protect their marketing budget while optimizing their return on investment.
In times of economic uncertainty, it is the perfect time to make sure your marketing budget works smarter. Contrary to popular belief, the answer is not always to completely cut your marketing budget. Instead, Brand Marketers can use a focused and nimble strategy to maximize marketing spend during times of economic and geopolitical uncertainty. According to the 2022 Gartner CMO Spend and Strategy Survey, marketing budget recovery efforts continue to rebound after a dramatic dip due to COVID-19 unprecedented lows. This upwards trend can be the data-driven boost that marketers need to stay the course and even expand marketing spend during an uncertain economic climate.
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The Case For Expanding, Not Cutting Spend
The case can be made that investing in marketing during a downturn is the smartest decision a company can make. During the 2008 financial crisis, an analysis by Kantar Millward Brown showed that businesses that maintained or raised their marketing during a recession had significantly higher sales after the economy recovered. History is a great teacher if we pay attention. A McGraw-Hill Research study looking at 600 companies that decided to advertise aggressively during the slowdown had sales 256% higher than those that stopped. Studies during and after the core of the COVID-19 Pandemic show similar results.
We saw how turning up the heat on advertising worked in Vrbo’s favor when they decided to increase marketing spend to 90.8 million during the early days of COVID-19 while their competitor Airbnb allocated a conservative 8.9 million for their marketing budget. Such a bold move by Vrbo resulted in its bookings recovering to 61% of its pre-pandemic levels versus a drop of 15% by Airbnb.
Know Your Numbers
Know what you can change and what you should change. Every agency supplier relationship and contract is different. Do you know which agencies and budgets you can modify in the short-term if needed? If you do have to take the extraordinary step of canceling a contract, do you know how much it will cost, including penalties, to exit?
Do you know your channel performance? Knowing your numbers and which channels are underperforming is key to adapting your spend without sacrificing what is working in today’s climate. Is TV getting more traction as consumers stay home due to rising inflation costs? Are in-person events still recovering from the pandemic and likely to suffer based on the economic climate? Are there certain months where a channel underperforms for your company or industry? Take a closer look across performance so you can optimize this year’s spend and impact by combining the best of both the digital and offline channels.
Strengthen Agency Partnerships
Marketers need to work with agencies to identify the areas of opportunity to cut. Don’t just surprise your agency, saying your budget is cut by 30% starting next month. Collaborate with your agencies, and they may surprise you with how well they are able to modify plans backed up by data.
The one thing you probably can’t do is cut off all your agencies and work with an in-house team. Gartner’s insights offer that 61% of CMOs would be unable to deliver their Marketing Strategy with their current in-house talent. This is where working with the right agency is critical.
If you are working with one of the Largest Marketing Agencies in the world, don’t be afraid to get specific in your campaign brief by identifying the exact talent you need to execute the strategy. If the larger agencies present a challenge, remember the benefits of a smaller, boutique agency.
Marketing Campaign and Agency Performance are not areas where you can just “set it and forget it”. Measure campaign outcomes relentlessly and be prepared to reallocate spend to a better-performing channel or cut campaigns as needed. Some agencies are really well-tooled to change spend proactively as performance shifts.
If your current agency isn’t able to adapt to the changes you need, make sure that you can quickly access vetted agencies with verified reviews either from within your roster of approved agencies or outside of it. Finding the right partner with the right service capabilities fast is key. Showing continued stewardship of your budget and pivoting as necessary ensures that you continue to earn your budget year after year.
Confirm and Implement
Once you have prioritized the areas of your marketing budget that can be cut, you need to think about the company’s strategic bets and may need to discuss the larger company implications. For example, if your company is committed to investing in minorities or a specific geographic metro or region, and you have identified that commitment as a likely area of deep spending cuts, who should you escalate this to so that the whole company stays aligned? You may even be able to make the case that budget cuts will need to come from somewhere else if the company wants to maintain its strategic growth in geographic markets or with minority groups such as LatinX, Black, and LGBTQ+.
At a minimum, you want your company’s leadership to understand that pulling back in areas will likely lead to much slower growth both during the recession and for a significant period afterwards. Some cuts may take years to recover from if your competitors continue to invest and dominate those markets.
One more area for leadership to consider is who will leave since many organizations have invested heavily in hiring talented people and retaining staff. Cuts in budget can leave the most talented and driven internal staff looking for new opportunities at other companies where they can make more of an impact.
Once you have coordinated and reviewed your plan with the relevant leaders, it is time to set things in motion. You will need to communicate your plan internally and to your agency partners to set implementation of the changes in motion. If you were able to save part of your budget, don’t forget to celebrate that win! If you and the leadership had to make tough decisions, be honest and as transparent as possible about it. Remember, these decisions often have ramifications that impact real people and their families. While you might not be firing your agency, they may have to layoff people because of these decisions. If marketing is cut for an area that was previously seen as an area of growth, there may be staff reductions or reassignments within your own company as these decisions impact what sales and operations will be able to do.
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