Should you be cutting your marketing budget?
Obviously, as a marketer, I’m biased. But hear me out.
Not sure about anyone else, but when I saw the Marketing Week research earlier this week showing that 86% marketers are delaying their campaigns in response to the Corona crisis, I wasn’t shocked. When times are uncertain, or tough, cutting spend makes sense. But is marketing really the right place to cut budget from?
Marketing Week reported that:
- 90% of marketers surveyed said that their budgets are now delayed or under review
- Just 14% are continuing campaigns as usual
- 85% have paused new hires
- 81% are no longer spending on tech of infrastructure
Sobering stats to say the least. However, while it’s terrifying for some marketers, for others, it presents a unique opportunity.
A finite window of opportunity
Kelloggs
Prior to The Great Depression, Post was the category leader in cereals. However, during the depression they significantly cut their marketing & advertising budget, whilst Kelloggs doubled its spend, investing heavily in advertising and even introducing a new product (Rice Krispies!). Long story short - Kelloggs’ profits grew by 30% and became the category leader, where it still remains almost a century later.
Target
In the 2000 US recession, Target upped its marketing and sales budget by 20%, whilst cutting back in other areas, and as a result grew sales by 40% and profits by 50% during the recession.
While their rivals were cutting budget, both Kelloggs and Target understood it gave them a finite window of opportunity to grow their share of voice. With less competition & less noise, the budget that may have given them 10% share of voice before could now afford them exponentially more.
Increase in share of voice > increase in share of market > increase in revenue
A study by Kantar and BrandZ found that strong brands recovered 9x faster than weaker brands after the 2008 financial crash. Put simply, determined brands that continue to invest in marketing are more likely to prosper.
Don’t carry on as usual
It’s clear you shouldn’t jump the gun and cut your marketing budget. In the same vein, don’t just carry on as usual, or quickly switch tactics and plug more money into digital channels. Yes, adapting and being nimble is vital, but the first step is understanding the new customer segments that are emerging. As marketers, we’re used to segmenting according to demographics or lifestyle (mid-twenties, male gym goers for example). John Quelch and Katherine E. Jocz recommend that in times of economic crisis, such as a recession, to segment by psychological markers instead, “taking into consideration consumers’ emotional reactions to the economic environment”.
They identified four main groups of customers:
- Slam on the breaks
- Pained but patient
- Comfortably well off
- Live for today
What next?
Step 1. Understand which group(s) your target customers fall intoStep 2. Analyse how your products / services appeal to them
Step 3. Identify any elements of your proposition and customer journeys which could now be a blocker
Step 4. Adapt
I’ll use one of Rawnet’s clients, Hunters Estate Agents, as an example. Rather than carry on plugging money into digital marketing, or shutting down entirely, they analysed their customer journeys, adapted their home visit valuations to virtual ones, and enjoyed a huge uplift in bookings as a result.
So, is marketing the right place to cut budget from? It’s a resounding no from me. It’s a short term solution that creates a long, hard to return from problem in the future. We might not all have the budgets that Kelloggs and Target do, but let’s get creative, keep creating great campaigns and help our companies come out of this stronger.
