If you're a chief marketing officer (CMO), today's economic uncertainty is causing concern for you, your team, and your organization. The Mobile Marketing Association (MMA) analyzed historical data to show the close correlation between economic indicators such as ad spend and GDP growth. Most importantly, marketers know from experience that when the economy takes a turn, their budgets are easy targets.
So with a volatile stock market, ongoing supply chain issues, strategic layoffs and job cuts, inflation fears and a freeze in consumer spending, the big question is; What should experts do now?
First, it's worth going back. Slowdowns can have very different dynamics across sectors and geographies in terms of intensity and duration. No matter where your business lives, we know that finding a customer can be expensive. Some argue that it is worth five times (or more) to maintain what we already have. Regardless of what one thinks of shifting costs, retailers who value sustainable value and customer relationships do not want to repeat the mistakes of the 2007-2009 global recession, which made customer return difficult and expensive.
It should also be remembered that difficult situations can encourage innovation. During the pandemic, we've seen a number of effective marketing advances, many of them long-term, from more flexible budget allocations to accelerated digital transformation linking marketing and e-commerce.
A quick response to cut marketing costs may be inappropriate, especially if the crisis is short-lived. But the financial pressures facing the executive suite are stark and real. Based on my experience in media and marketing over several economic cycles, here are six steps CPAs should consider when facing a potential downturn:
1. Build a close relationship with the CEO and CFO.
Under the pressure of economic uncertainty, maintaining an open dialogue is more important than ever. Make sure you have the right math and language skills to interpret direct and indirect marketing spend results.
Leaders under economic pressure are likely to prioritize short-term growth metrics, so there will be a bias toward marketing strategies with clear ROI, such as search, social media and e-commerce. Critical strategies that build a valuable brand and tell a brand story have long challenged marketers because they are often overlooked for their performance deeper in the conversion funnel. For example, an audience may respond well to a highly creative TV ad and go online to make a purchase, but the "last click" may be due to a product promotion. Whenever possible, marketers should help their member-directed leaders thoroughly understand the math of marketing activity and results throughout the funnel.
Above all, how does the marketing function deliver the broad financial results that management wants and, if possible, speak their language? Partnerships, transparency and communication between the CEO and CFO and perhaps the board are possible antidotes to reducing cash costs in these challenging times.
2. Eliminate costs and efficient work methods.
strong inertia Every organization has outdated cost practices or inefficient or ineffective processes. Inflation is an opportunity for discipline. This does not mean reducing overall investment. It may simply be a matter of reallocating resources to get the most out of them and put them to better use. Politics and priorities have allowed some pet projects that do not achieve sustainable results. Now is the time to stop all projects unrelated to the current goal and consolidate unrelated efforts.
Often this is due to empowerment and alienation. For example, are different business units targeting the same customers in the same way and could they be increasing costs relative to each other or reducing their collective purchasing power? It's natural for different brands or products to want to control their ordering tool, but this often doesn't lead to the best results.
Leading companies are optimizing budgets in previously restricted areas of investment, such as media channels and marketing, merchandising and retail spend, and working to ensure that pockets of spending are not confined to individual parts of the organization.
3. Embrace speed and agility.
Covid-19 has accelerated innovation around marketing practices, from creative execution to budget approval. Marketers must continue to prioritize speed and agility to respond to today's dynamic economic development.
Today's uncertainty will force marketers to look more at real-time media buying and planning strategies, encouraging strategies such as auction buying and flexible terms. This can put pressure on marketing programs such as expensive sponsorships, long-term strategies, or initiatives involving large-scale production. While large-scale events can change cultural moments, now is the time to weigh this brand impact against the risk of giving up financial flexibility in the most volatile of times.
After all, in a world of speed and agility, companies and their partners (and especially their organizations) cannot operate at different scales. Identify the metrics that matter most and make sure everyone is working on that data, internally and externally, across functional silos (such as marketing, sales and supply chain) and at different levels of the organization.
4. Isolate yourself by staying at home.
As some competitors recoup their costs in the downturn, advertisers who stay the course will reap huge benefits. For traders with the right data-driven mindset, dips can present unique opportunities to buy more or buy at better prices, especially in large-scale digital markets.
As some players exit the demand pool or sit on the sidelines, the same budget has allowed marketers to differentiate themselves from their competitors by more effectively capturing short-term volume with significant long-term impact. For example, a prominent brand during this period will have a lasting impact on organic search results, ensuring its relevance.
5. Make decisions in the context of the dynamics of your industry.
CMOs in industries driven by long-term value relationships (such as financial services) or large consumer behaviors (such as consumer packaged goods or quick-service restaurants) tend to maintain or even grow. Lessons learned from previous crises have taught these CMOs that recovery costs are high. Other industries, such as the pharmaceutical industry, focus more on the innovation life cycle of their products than on macroeconomic conditions as an indicator of their business performance, so the experience of downturns can be relatively neutral.
CMOs in tight categories, from entertainment to consumer electronics, will likely have to make quick decisions, knowing that if sales fall due to cost shifting, they will be under pressure to cut costs. For departments under pressure to cut marketing budgets, the best strategy would be to cut advertising in places with poor supply. Leading marketers are working increasingly closely with their supply chain and technology partners to use data to more accurately target demand based on actual inventory positions.
6. Continue to drive data-driven digital transformation.
Transformation is not a short-term endeavor and for most retailers who have taken full responsibility for their growth agenda, it is going well, especially as they move up the organizational ladder as the voice of the customer during Covid-19. These leaders have already presented feasibility studies to the CFO and actively collaborate with the Chief Information Officer (CIO) to align business and technology priorities.
While CMOs are known for mastering the art of marketing, they must champion the disciplined use of data and technology to connect the customer journey with business functions. This transformation is complex and time-consuming, and for many companies it is time to deliver the brand promise from sales to service. Given the size of this mandate, CPAs who drive greater transformation will be well-positioned to stay the course, perhaps surviving this period of economic uncertainty. These CMOs need to develop the right data strategy, the right technology infrastructure, align the talent agenda and drive adoption so they can deliver significant short- and long-term economic value.
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Of course, it is difficult to predict the future state of the economy and its impact on marketing. For now, at least, a relatively stable labor market appears to be mitigating other, more volatile factors, but CMOs have faced the pandemic with increasingly significant changes. Today's uncertainty presents a new opportunity for marketers to demonstrate that they are not only the front-line leaders that matter in times of crisis, but also have the strategic and quantitative precision to maneuver as the situation changes.
The views expressed in this article are those of the authors and do not necessarily reflect the views of Ernst & Young LLP or other members of EY worldwide.
