Don’t cut off the marketing budget; (re)adapt your investments on campaign performance analysis, digital presence, reactive content marketing and Data & Analytics capabilities.
In these times of crisis, management’s first impulse will be to reduce costs to secure cashflow. Marketing departments will obviously not be spared, increasing pressure on CMOs. Management’s expectations are high - 70% of CEOs expecting CMOs to lead revenue growth in 2020 [1]. Yet the “easy measure” in reaction to any crisis is to stop or reduce marketing expenses. PR and events are not allowed in most countries impacted by the pandemic. Also, run activities such as campaigns can be stopped quickly and represent a huge part of CMOs’ budget, more than 60% in fact [2]. Unfortunately, the cost-reduction trend in marketing is confirmed, with 86% of marketers delaying or reviewing their campaigns in the current context [3].
The following comparison certainly has its limits but “marketing budget cuts” in times of crises is an age-old subject on which experts are formal: although paradoxical, the best strategy to face this pandemic is not to decrease, but to adapt the marketing budget. Though distant in time and incomparable in context, here’s a historical anecdote to support our claim: during the 18-month recession caused by World War I, companies that increased their ad budget during the recession and the growth period saw their sales grow much faster than their rivals, both during and post-crisis. The more cautious ones witnessed a sale decrease up to 3 years after [4].
“When the economy expands, all firms tend to increase advertising. At that point, no single firm gains much by that increase. The gains of the firms that maintained or increased advertising during a recession, however, persist. This theory is […] a simple, but strong, refutation of the theory for cutting back on advertising during a recession.”
Gerry Tellis
If neither wait-and-see nor full cost-cutting approaches power winners through adversity, what are CMOs’ options? BearingPoint recommends 4 key investment areas to maintain amidst the coronavirus recession:
It’s crucial to have an instant view on the performance of all campaigns with the associated KPIs - financial (ROI) and engagement-related (click, views, likes and shares). These insights are valuable to make fast and relevant data-driven decisions such as improving content, reallocating marketing spend and, last but not least, proving marketing initiatives support the current business strategy. Observing campaigns’ declining ROI, Coca Cola paused marketing spend. Instead, the company re-invested part of its budget on digital platforms (notably a website update) and PR campaigns until markets reopen [5]. To go one step further, take advantage of the (free) digital tools at your disposal such as Google Trends, search engines and ad platforms. The broader perspective will solidify your budget reallocation decisions.
This crisis is an opportunity to extend the company's footprint and reach more prospects and customers on digital channels. It’s the only place to meet your demand until the return to a “normal/pre-coronavirus situation”, and likely even years after the pandemic. Customers’ behavior will shift as they adopt new consumption and interaction habits [6]. Depending on your industry’s situation, (re)adapt your digital presence wisely. For companies/industries facing a drop in demand (travel, restaurants), increase awareness campaigns to communicate your added value in these troubled times. For those in higher demand (in-home entertainment, food delivery), increase reach campaigns to meet new customers. In France, meal delivery platforms have partnered with local grocers for a win-win tactic. Platforms, for which closing restaurants posed a risk in demand, have found a new traffic source. Grocers can rely on the notoriety and credibility of platforms to secure revenue sources. Museums have followed suit, with campaigns promoting online tours to permanent and temporary collections, when they traditionally relied on on-site traffic. Both examples highlight the necessity to search for digital sources of profit. The solution may stem from the lockdown but will most certainly persist post-crisis, creating new revenue streams for businesses.
In the current context, product-centric communications are near obsolete and point-based loyalty programs can hardly function. Yet, customers are eager for entertainment: they are spending more time on social media, entertainment platforms and news sites. For brands to have a relevant place in the digital space, content production is no longer an option but a necessity. High achievers will not only produce quality content but have the fastest means. Some labels are partnering with influencers as a “one-stop-shop” to produce their content [7]. In certain markets, Adidas has made its app free for a month and is relying on partnerships to generate content (live classes, tutorials) [8]. Another option is to rely on 3D technology: Emilio Zegna is maintaining its Milan Fashion Week schedule thanks to CGI. Models will be walking on stage in a pre-recorded environment with image overlap for a live performance. In preparation for the post-lockdown, the brand is also accelerating its virtual showroom project [9]. With stricter sanitary measures ahead, ask yourself how your company can leverage technology for a fully digital customer experience.
The crisis has generated the opportunity to collect more online data due to increased web browsing, ecommerce shopping, social media and app usage. Brick and mortar actors have the possibility to get a 360° view of their customers and truly understand their online patterns and behaviors. Companies need to capture weak signals on digital channels in order to adapt their tactics and ensure strategic online ad placements. Ensure data scientists and CRM teams are capitalizing on the quantity of data to create models that will enable your company to thrive during and post-crisis. Procter & Gamble has been tracking SKU performance in markets, on items such as cough medicine, cleaning supplies, cupboard staples and shaving products. Observing a rise by 20% in such categories, they “concentrated” product line-up and marketing efforts accordingly [10].
Under management pressure and the need to secure cashflow, the first reflex is understandably to cut marketing budgets. If this decision seems safe in the short-term, reflect on your long-term strategy. The key in this turmoil is to retain existing clients and, if possible, attract new customers, so budget cuts won’t cut it. These best practices have been on the rise for years but required this major crisis to occur. With the world at a halt, now is your chance to get on board: cut campaigns that do not work, bet on digital sources of revenue, invest in means to produce quality content fast and place data & analytics at the forefront of your decision-making. The short-term tactics brands have resorted to during the pandemic will become the new normal. You don’t need to have all the tools just yet, but you can build this mindset over the coming months.
Authors :
Sources:
[1] Gartner, The Annual CMO Spend Survey, 2019–2020
[2] https://www.marketingweek.com/marketing-campaigns-delays-rise-coronavirus/
[3] Gartner, How to Prove the Value of Marketing to the Enterprise, 2020
[4] Roland Vailed: Roland Vaile, Harvard graduate and advertising executive, studied the fortunes of 250 American firms during the 18-month recession caused by World War I and published his results in the April 1927 issue of the Harvard Business Review
[5] https://www.marketingweek.com/coca-cola-pauses-marketing-spend-over-lack-of-roi/
[6] https://dash.harvard.edu/bitstream/handle/1/42638988/Social%20distancing%20strategies%20for%20curbing%20the%20COVID-19%20epidemic.pdf?sequence=1&isAllowed=y
[7] https://www.businessinsider.fr/us/how-coronavirus-is-changing-influencer-marketing-creator-industry-2020-3
[8] https://www.thedrum.com/news/2020/04/29/adidas-we-have-be-creative-about-how-were-taking-care-each-other
[9] https://fr.fashionnetwork.com/news/Confine-a-milan-alessandro-sartori-concocte-un-show-numerique-pour-ermenegildo-zegna,1210232.html
[10] https://www.marketingweek.com/procter-gamble-doubles-down-marketing/