The CFO is coming for your marketing budget. Here’s what you should say…

For the past two years, the worldwide economy has been in a pendulum swing from boom to bust.

This week, City AM published a series of comments from Stephen Poloz, former Governor of the Bank of Canada and author of the recently published ‘The Next Age of Uncertainty'. In the comments, Poloz comments that five “tectonic forces” – population ageing, technological progress, rising inequality, growing debt and climate change?– are driving the economic and policymaking processes.

If these aren’t enough, perhaps your industry has seen major losses due to the upheaval of COVID, is struggling with supply chain logistics and provision as a result of Brexit or has frozen commerce with major markets engaged in illegal warfare. For evidence of the likely impact on the global economy, look no further than the World Trade Organisation, which adjusted the global growth forecast down to 3% last week. ?

In the UK, people are bombarded by daily news stories about ‘record level double-digit’ inflation, rising interest rates and a historic cost of living.??

It’s fair to say the CFO hasn’t arrived at the doorstep of the communications team without justification. Indeed, during the early months of Coronavirus in 2020, marketing budgets were an easy target for savings. Marketing budget cuts even a year later weren’t exclusive to the UK and Gartner reported a steep decline from previous years.

Understandable though this may be - the cuts are a mistake and there are many reasons why.

I’ve focused on these three: the need to demonstrate resilience, the opportunity that arises as competitor contraction and the academic evidence argument.

The need to demonstrate resilience

Not only is there a clear and robust business case for operational resilience – there is a firm need for the optics of it too. Audiences in almost any capacity, be it ‘archetypal consumers’ or ‘b2b operators’ need to know that there is fundamental reliance on commercial viability. Put simply, we need to know that our chosen brand or business can weather its storms, stand strong, reward staff and act with genuine purpose.

Examples of businesses that failed to demonstrate this kind of resilience can be found in the bankruptcy listings at companies’ house. Maintaining a robust marketing budget brings your business front of mind as a reliable entity or an investment that enables you to react quickly to reputational risk.

Competitor contraction

During the normal course of business, marketing experts Les Binet & Peter Field indicate that a 60:40 split should exist between long-term brand building and short-term sales activations for a successful marketing strategy – but an excess share of voice can help accelerate brand growth (for a working demo look see this video from the internationally renowned brand consultant and former marketing professor, Mark Ritson). Given that the evidence above would seem to indicate that your competitor is likely vacating ground by slicing their budget, coupled with the fact that scarce budgets can increase the value of return for marketing spend, you will get more for your money hand over fist as contraction occurs.

Academic evidence

Although there is no time in history when you can make a direct comparison to the events listed above. It is possible to look to the past to assess what actions led to positive outcomes for businesses facing economic disruption and shifting tectonics. Examples in this article from the Harvard Business Review underpin the summary that found, when studying recessionary budget decisions, that firms that maintained marketing spend (adjusting tactics to meet the context) typically fare better than those that cut budgets.

For more grey matter on the subject, you can look further back. One prominent research study on marketing during recessions comes from a?McGraw-Hill Research study?of 600 companies from 1980 to 1985. The outcome of a review of companies indicated that those who maintained spending, or increased it recovered quicker than those that didn’t. In fact, it also shows that those who marketed aggressively benefitted from a 256% sales increase.

A more modern example can be found last year in the ‘To ESOV and beyond’ paper from Robert Brittain and Peter Field.

If the predictions cited in the introduction to this blog are accurate – we’d all get pretty familiar with this material. Fast.

For any comments or questions please do drop me an email. I'd love to connect and hear your views.

KWT Global is a multi-specialist agency based in New York, Los Angeles, Chicago, and London. We combine the most impactful elements of brand strategy, media relations, influencer engagement, digital and social media, creative design and content marketing to create breakthrough moments and build momentum.?Our business development team can be reached here for any enquiries.