Hold on to your marketing budget during a recession
Most marketers know that, when the economy takes a turn for the worse, their budgets will have to shrink. In the face of today’s wobbly economy, rapidly changing markets, soaring inflation, etc., what should marketers do? In the author’s experience in communications and marketing through economic cycles, she offers 6 solutions for CMOs to ponder when they encounter a possible recession.
- Build a strong relationship with your CFO.
- Eliminate inefficient expenditures and working styles.
- Increase speed and agility in work.
- Stay in the market and be different
- Make decisions based on the strengths in your field.
- Accelerating the digitization of essential data.
If you’re a marketing manager, you, your team, your agency have a headache facing the current bleak economic situation. The Mobile Marketing Association (MMA) has demonstrated that there is a strong correlation between marketing spending and indicators of the economy such as GDP growth in previous data. But more importantly, for marketers, when the economy takes a turn for the worse, their budgets are easily the top target for cuts.
So for the rapidly changing market situation, the supply chain is constantly malfunctioning, the recruitment strategy is broken, mass layoffs, inflation is soaring, consumer spending is slow. The question is: What should marketers do?
First, take a step back. Each industry and geographical location will be affected differently in both intensity and duration by the economic downturn. No matter where we are, we know that finding new customers can be expensive. Some claim it costs five times (or maybe more) to retain loyal customers. Despite the price murmurs, marketers who value sustainable value and customer relations don’t want to repeat the mistakes of the 2007–2009 global recession, which proved that customer acquisition is incredibly challenging and expensive.
Remember, in the difficult, there is wisdom. During the pandemic, we saw countless advances in marketing effectiveness, though much of them have long since expired – from smart budget allocation to digital transformation to connecting marketing and e-commerce.
A momentary cut in marketing spending can be a mistake, especially when the crisis doesn’t last long. But the financial pressures faced by C-suites are real and extremely stressful. In my experience in communications and marketing across economic cycles, here are 6 solutions for CMOs to ponder when faced with a possible recession:
About the author:
You lead EY’s team of consultants in the Americas and lead EY’s CMO practice. She served as a partner at Betaworks, publisher of The Huffington Post, and director of Sales and Marketing communications at Martha Steward Living Omnimedia. In addition, she is a member of the Global Board of Directors of the Mobile Marketing Association and the International Academy of Television Arts and Sciences as well as an advisor to Harvard University’s Digital Business Project.
1. Build a strong relationship with your CEO and CFO
Under recessionary pressures, communication is key. Make sure you have sufficient metrics as well as adequate explanations for direct and indirect marketing spending. Under economic pressure, business leaders will prioritize shorter-term growth goals, which also means they will favor marketing strategies that deliver clear returns such as search, social and e-commerce.
These strategies are important in the early stages of a marketing campaign with the aim of telling and building the core values of the brand and are always challenging for marketers, because they often do not receive recognition for their performance. For example, audiences respond positively to highly creative TV ads and decide to go online to make a purchase—but the “last click” button will get recognition because it drives sales. CMOs must help their C-suite colleagues understand how marketing works most broadly and the results it delivers throughout the campaign.
Above all, be transparent about how marketing drives the returns that company leaders want — present it from their perspective, if possible. Partnerships, transparency, communication with your CEO, CFO, and even the board are also a potential antidote to cutting important expenses during tough times.
2. Eliminate expenses and inefficient ways of working
Stagnation is incredibly powerful, Every organization inherits inefficient spending patterns or processes. Recession is an occasion for us to become more disciplined. This doesn’t mean we have to cut back on overall investment; simply redeploy and make good use of resources. Perhaps politics and personal preference have allowed some ineffective projects to survive. Now is the time to “disconnect” projects that don’t align with current goals and “connect” related ones.
Often this leads to accountability and a lack of alignment between subsidiaries. For example, are subsidiaries in different business sectors targeting the same customers in the same channel, even willing to bid on costs against each other, or will they leverage their collective purchasing power? It’s not uncommon for different brands or products to want to leverage their demand, but this often doesn’t lead to the best results.
Companies with a trend towards digital transformation are rapidly optimizing previously segregated budgets across communication channels and investment areas such as marketing, commerce, and retail spending to ensure expenses are not “stuck” between disconnected parts of the organization.
3. Embrace speed and agility
The Covid-19 pandemic has accelerated innovation in agile marketing trends from creative implementation to budget approval. Marketers will now need to continue to quickly seize opportunities to promptly react to the dynamic economy.
Market uncertainty will likely lead marketers to deploy more buying strategies and create more media plans in real time, favoring tactics like auction-based buying and flexible terms. This continues to put pressure on marketing programs, such as expensive sponsorships, tactics with longer wait times or well-invested production initiatives.
As large-scale events can produce disruptive moments, now is the time to put brand impact on the scale with the risk of abandoning flexible financial planning during more uncertain times.
Above all, in a world of speed and agility, companies and their partners (especially agencies) cannot operate in unison with different numbers. Identify the most important metrics and ensure that individuals – both inside and outside the company, are operating that dataset across separate functions (marketing, sales, and supply chain) and across different levels of the organization.
4. Differentiate yourself by staying in the market
When some companies cut spending during a recession, advertisers who stay in the market will find huge benefits. For marketers with a good data-driven mindset, a recession is a golden opportunity to buy more or buy better, especially in large-scale digital markets.
When several companies leave the demand pool or sit on the sidelines, with the same budget, marketers can differentiate themselves from competitors by earning short-term revenue more efficiently and with important long-term impacts. For example, a brand leading in this stage will see a lasting impact on organic keyword search results, which guarantees its values going forward.
5. Make decisions based on strengths in your field
CMOs in sectors that are run by valuable long-term relationships (financial services, etc.) or high consumer demand (e.g., consumer packaged goods or quick-service restaurants, etc.) will stand firm or even increase spending. Lessons learned from past crises have taught CMOs that customer acquisition is too costly.
In other industries, such as pharmaceuticals, businesses in this sector will focus on the product innovation lifecycle when they see signals that drive business activity rather than macroeconomic conditions, so the experiences they offer during an economic downturn are reasonably neutral.
CMOs in option categories, from entertainment to consumer electronics, will most likely have to make decisions immediately, knowing that if their sales decline due to consumer shifts, they will be under pressure to reduce spending. For sectors under pressure to reduce marketing budgets, the best strategy would be to reduce advertising where supply is constrained.
Top marketers are increasingly working closely with their supply chain and technology peers to use data to stimulate demand with far greater accuracy on warehouses that actually exist.
6. Continue to drive essential data digitization
Digital transformation of essential data is not a one-day endeavor, the process is happening quite well as CMOs take on growth strategies, especially when they are the ones who represent the voice of customers during the Covid-19 pandemic. CMOs have reported their business case to the CFO and are collaborating with their chief information officer (CIO) to align priorities in the commercial and technology sectors.
CMOs, in addition to being known for nurturing the marketing industry, must also be at the forefront of using data and technology in a disciplined manner to connect customers end-to-end across every business function. This transformation is incredibly complex and long-lasting, and for most companies, it is underway to ensure brand promises are fulfilled, from sales to service. With this enormous responsibility, CMOs leading the larger digital transformation will be injected with money to stay in the market, as it is likely that process will outlast this volatile economic period. CMOs must continue to drive the right data strategy, build sound technology architecture, train talent, and accelerate adoption, thereby delivering meaningful economic value in the short and long term.
. . .
It is really difficult to predict the state of the economy and its impact on the marketing sector. At least the current stable job market is mitigating other volatility factors, but CMOs have weathered the pandemic with greater responsibility than ever. The wobbles during a recession also prove crucial in a crisis: marketers are not only the leaders closest to customers’ mindsets, but they can also devise the right strategies when economic conditions are constantly changing.
The views expressed in this article are subjective views of the author and do not reflect those of Ernst & Young LLP or any other member of the EY global entity.
Now, as you have read this far, you must be very interested in branding, as well as finding effective solutions for business growth activities. Metta Marketing is delighted if you connect with us, and we are willing to offer a free brand consultation, as a thank you from Metta to you, the person reading this article.
Source: Harvard Business Review
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