Finalising your budget?
In the never-ending conversation about budgets, it’s tempting to cut corners. However, neglecting your marketing budget could impact your company’s growth more than you realise.
Even in tough times, the game isn’t about whether or not marketing is worth it. It’s finding a sweet spot to ensure ROI. So, can you grow your business without compromising your margins? Let’s find out.
Insight: Investing in a strategic marketing plan is the difference that lies between stagnation and exponential business growth.
Data: Modern marketing unlocks 5 to 15% of additional growth and trims 10 to 30% of marketing costs. (McKinsey)
Key Action Point: Invest in results-based marketing to help your business weather storms and position yourself for growth when the economic climate improves.
The Impact of Marketing
In stagflationary environments, companies are quick to pull the plug on marketing. However, this puts you at risk of stagnation. Without marketing, your brand's voice fades amidst the noise of competitors. Your potential customers are left oblivious to your offerings. While this might sound like a nightmare, it's a reality many businesses face by not investing enough in marketing.
It’s important to stay optimistic as cutting your marketing in times of recession and downturns can lead to:
- Reduced visibility – Your target audience is less likely to see or hear about your products or services.
- Loss of market share – Competitors who continue to invest in marketing might capture the attention of your existing customers.
- Missed opportunities – The chance to capitalise on changing consumer behaviours or emerging trends that could benefit your business can pass you by.
- Longer recovery period – Scaling back your marketing efforts might impact momentum and extend your post-recession recovery period.
- Brand erosion – Your brand's identity in the minds of consumers weakens, making it harder to rebuild that perception later on.
- Decreased customer engagement – Neglecting existing customers reduces repeat business and customer loyalty.
- Perception of financial instability – You’re telling the world that your business is struggling financially, affecting trust among customers and partners.
- Missed audience insights – You cut access to valuable insights into your audience's needs, preferences, and behaviours.
- Diminished innovation – You stifle your ability to develop new ideas and address challenges.
- Difficulty rebuilding momentum – You play catch-up with businesses that have maintained or even increased their marketing efforts.
Investing in a results-based marketing strategy can help your business weather the storm and even position it for growth when the economic climate improves.
Data will give you an objective, factual report of where your marketing efforts are working and where they need to improve.
Getting Back on Track
Here are some ways to help your business supercharge your marketing while making the most of the resources available
1. Get your pricing right
Pricing often takes the backseat behind product, place, and promotion. But more than just assigning numbers to products or services, pricing is a delicate balance of several factors that determine:
- How customers perceive your offerings
- How you compare against competitors
- How your offerings contribute to your revenue and profitability.
In a recession, when consumer spending tightens and choices are scrutinised, pricing becomes a powerful tool for influencing buying decisions.
A McKinsey & Company study found that if companies increased prices by just 1% (with demand remaining constant), profits would increase by 11%. This illuminates the immense impact pricing can have on a company's bottom line – a significance often underestimated.
In a recession, strategic pricing solutions can look like:
Remember, pricing isn't just a number – it's a strategic lever that can drive your business forward despite uncertainty.
2. Think like an investor
Every decision has the power to shape your brand's trajectory. If there’s a choice you have to make now, it’s adopting an investment mindset for your marketing. Here are the best areas to invest energy and resources in:
- Extra Share of Voice (ESOV) – ESOV ensures your voice stands out in a noisy playing field. It's a ratio thing – how much you're shouting (your ads) versus how much space you're taking up (your market share). Even if you're adopting the zero-dollar marketing approach, keeping your ESOV strong is like being the life of the party. Don't just join the conversation; make sure you're the talk of the town.
- Zero-Dollar Marketing – This isn't about being stingy. It's about using free stuff like social media, user-generated content, giveaways, and word-of-mouth to spread the word. Free stuff can be seriously powerful. Zero-dollar marketing is all about getting people excited about your brand without cracking open the piggy bank.
- Cruising vs. Conquering – Imagine you're on a boat. Spending 4% to 7% of your revenue on marketing is like keeping a steady course – you're floating along but not making waves. Now, if you're looking to kick things up a notch, that's where spending around 17% to 13% comes in. It's like launching that rocket and watching your brand soar.
As markets evolve, attention spans shorten, and competition intensifies, simply viewing your marketing budget as an expense can leave you trailing behind. Marketing is not just about spending money. It's about investing in smart moves.
3. Consider the competition
Keeping an eye on your competition's budget strategies is like a compass guiding your decisions. It provides insights into what's working and what isn't. Here’s how to navigate that:
- Monitor competitor moves – Consider where your company earnings are and what next year’s goals for revenue look like. You also need to consider the marketing avenues working the hardest for you. Then, apply these questions when assessing the competition.
- Flexibility in budgeting – Recession-driven changes are rapid. Be ready to adjust your budget strategy in response to shifts in market demand and consumer behaviour. For example, a study by Deloitte reports:
- 10.4% growth in overall marketing spending in 2022.
- This is double the growth reported in August 2021.
- The pandemic accelerated digital marketing investments to 13.8% — the highest level in the survey’s 14-year history.
You also want to see how much your industry spends on its marketing on average as a benchmark.
(% OF COMPANY REVENUE)
|Banking, Finance, Insurance, and Real Estate||8%|
|Consumer packaged goods||9%|
|Mining and construction||3%|
- Strategic resource allocation – It's about making your budget work smarter, not just harder. Align spending with well-defined growth goals to achieve tangible results.
- Adapt to stay relevant – As your competition adapts, so should you. Continuously evaluate and innovate your marketing approach to maintain a competitive edge.
The key here is to keep your pulse on the current business landscape to outspend and outsmart the competition.
4. Get your data in order
Before finalising your marketing budget, you need to conduct a review of your marketing analytics. Data gives you an objective, factual report of where your marketing efforts are working and where they need to improve.
This is where key metrics come in. Be sure to define your Measures that Matter and carefully plan how to obtain and qualify reliable data to inform your marketing. Then, organise them in an accessible and easy-to-use dashboard to track progress.
As you go through your data reports, you need to be able to answer the following questions for each marketing channel you utilise:
- Did our advertisements reach our intended audiences?
- Once we reached our target audience, did they respond to our call to action?
- What percentage of new clients did our marketing efforts obtain?
- What percentage of clients did we retain through marketing efforts?
You need to distinguish the ROI of individual marketing channel expenses. This information will help you structure a plan moving forward to maximise costs in the areas where your marketing efforts are successful.
An excellent data analysis will reveal both areas of success and weakness. You may see that your company has increased reach for less expense on a nontraditional social media channel for your industry. These areas should specifically be noted.
5. Target your expenses
With your data in hand and a clear idea of the goals for business growth in the next year, the next question to answer is, “How should marketing funds be distributed?”
Deloitte breaks down average expenses:
- 57.9% of the total marketing budget is spent on digital marketing.
- 44% of digital marketing budgets go to paid media.
- 34.4% is spent on owned media
- 11.2% is spent on earned media (11.2%). The remainder goes to digital marketing activities outside of paid, owned, and earned media.
- CMOs expect to spend 9.6% more on branding and 6.8% more on CRM.
This gives you an idea of which marketing aspect will see more or less saturation. Instead of blindly following the crowd, you want to link your expenses to the unique results you’re trying to drive. RAMM is a results-first approach to marketing that we use with our clients. Here’s how:
From there, you’re able to identify must-win and quick-win areas while cutting out low-value tactics and improving your resource allocation.
Tying It Together
In a world where competition is fierce and attention spans are fleeting, your marketing budget holds the power to shape your brand's success.
Neglect it, and you risk stagnation. Nurture it, and you open doors to exponential growth. By understanding pricing's role, embracing an investment mindset, staying attuned to the competition, and leveraging the might of data-driven insights, you can strategically allocate your marketing budget.
Remember, marketing isn't just an expense. It's an investment in the future of your brand, poised to yield remarkable returns in the ever-evolving landscape of business.
Worried about the economic climate? Download the Marketing and Advertising in a Recession PDF to guide your strategy today.