Woolley Marketing: To cut or not to cut the budget in a recession
In his regular column for Mumbrella, Trinity P3 founder and global CEO Darren Woolley explores an area ripe for innovation that marketers should be considering in the face of tightening budgets.
When capital markets tighten and the cost of money rises, organisations are faced with several choices. If you read the marketing industry media, those choices are either cut marketing spend to maintain EBITDA or look for ways to maintain or even increase investment to increase sales in the face of falling demand.
Those that are championing maintaining spend invariably have a vested interest, as either marketers or one of the many agencies and suppliers who depend on the marketing budget to maintain their own revenue and profits. And besides, why shouldn’t they make this recommendation? The evidence from past economic slowdowns (recessions) and disruptions (pandemics) indicates that those organisations who build and support their brands through these times often come though it in a more dominant position than their competitors who did not.
But as my colleague Dennis Flad reminds us in his cartoon here, there is a third option that is often overlooked or simply rejected – innovation.
Copyright Dennis Flad – reprinted with permission
You can be forgiven if your mind immediately went to product innovation. It is typically what is being discussed when the topic arises. Then quickly the conversation turns to the long lead times, the cost, high rate of failure and difficulties in developing truly innovative products and services.
But there is an area ripe for innovation that marketers should be considering in the face of tightening budgets. An opportunity to extend the value of their marketing budget either to increase effectiveness of the existing budget or compensate for a significantly reduced budget.
This opportunity, like innovation itself, is often overlooked. If something is not seen to be broken, then why would anyone fix it? Other times it is simply relegated to the too hard basket. But economic challenges are exactly the right time to address the opportunity – by reviewing and optimising your marketing supply chain. Or for the non-procurement types reading this, looking at how you go to market.
This does not mean immediately going to pitch, or tender, hoping that either your incumbent or a better agency will offer to do the work at a reduced fee. That may have worked in the last downturn of 2008, but today agencies are struggling with a reported talent crisis, where retaining or attracting the good talent is costing more than before. Besides, it is not very innovative. Brands have been squeezing their agencies on fees since the demise of media accreditation, last century.
No, the smart marketer needs to approach this with new thinking. Performance, Prioritisation, and Production are the new top of the list.
When I say performance, I am not talking performance marketing. Unless of course, this is the only way you can measure the performance of your marketing investment. Today, there are many ways for marketers to be able to identify the drivers of marketing performance. Technology is making it easier to turn oceans of data into marketing insights to deliver better outcomes. But no matter what you have at hand, make sure you embrace a marketing performance mentality, rather than a performance marketing approach.
Next is prioritisation. And while most marketers will tell you this is their first step when faced with budget cuts, the difference is you need to prioritise against point one – performance. We advised a client who, when faced with a significant cut in their budget, complained that everything in their marketing plan was essential. While most of it was committed, very little was essential if the filter was strategic and financial performance, in equal measure.
Finally, and ultimately, is production. No point doing all this work if there is nothing to show for it. But here marketers are faced with a conundrum. The very digital (and social) channels that promise them hyper-targeting and cost-effective reach come with a hidden cost – content production. So, while budgets for advertising production have remained relatively stagnant in real terms over the past decade or more, the volume of content has increased exponentially.
Whether we are facing a recession or not, there are many more options than either cutting the marketing budget or not. And while it may not be your ultimate decision on this, it is worth noting there are more alternatives than trying to squeeze agencies and suppliers on their fees.
They say the definition of insanity is doing the same thing over again, hoping for a different outcome. Then perhaps this time, in the face of downward budget pressures, the big opportunity is to innovate the way we manage the marketing process, rather than simply reacting to the economic forces we face?
Darren Woolley, founder and global CEO Trinity P3
