When times are hard, the marketing budget is often the first to be cut. As many of the world’s leading economies face the threat of a looming recession and the cost-of-living crisis worsens, companies are scrambling to make cuts wherever they can.
To make matters worse, the UK government has recently suggested businesses should trim down budget in the marketing department to help with cost-cutting elsewhere. ROI Hunter ceo Karel Schindler explains why marketers must fight for their budget during tough times.
It’s a common trope in marketing that brands who reign in marketing expenditure when looking to cut costs often find themselves losing share of voice (SOV) and share of market (SOM) to competitors.
Procter & Gamble, the world’s largest marketer, actually increased spending during the Covid-19 pandemic and thrived as a result. It’s an example that serves as a rallying cry to marketers to stand up for their department during times of crisis – but how should they do that?
Gaining board buy-in with data-driven evidence
When business leaders look to restrict the marketing budget, marketers need to put forward a strong case with quantifiable outcomes in order to push back.
If the current digital marketing budget is being spent promoting products that don’t sell or are out of stock, business leaders will rightly question the value of the current investment. They’ll be even more sceptical if the marketing team is unable to explain the logic behind the items being promoted in their dynamic campaigns, (e.g. whether the algorithms are optimising for revenue or profit).
With the right data, marketers can gain visibility into product performance and control over which products are placed front-and-centre and can avoid walking into these discussions without the evidence they need to plead their case.
Embracing product performance data
Much of the issue digital marketing teams face today is a lack of actionable insights to objectively evaluate their efforts and inform future decision-making.
The algorithms used for dynamic campaigns can often remain hidden in a black box, with the product-level data such as ad spend per SKU, margins, return rates and stock levels often siloed across departments. Sometimes this data (ad spend per SKU in particular) isn’t even available, leaving both marketing and merchandising teams seeing just a small part of the overall picture.
The result is a strategy based on gut feelings or best estimates from limited data sets, with budget being wasted on ineffective promotions. This means the products with true potential are often being ignored.
With product performance information at hand, marketers will be able to deliver more cost-effective and impactful campaigns which have a demonstrable benefit to the bottom line. Efficiency needs to be a priority, with the ability to identify and exclude low-performing items or products with a high return rate as doing this will quickly increase budget effectiveness and overall ROI.
If marketers could bring this data together from all channels, such as Facebook, Google Analytics, Google Shopping and even custom sources, they would be able to prove to business leaders that they fully understand where and how the promotional budget is spent.
This in turn will further strengthen their case for keeping it and is the reasoning behind new technologies such as like Product Performance Management (PPM) platforms which collect this data and make it actionable.
Further key considerations
Marketers are likely aware of the looming privacy and regulatory issues that are emerging in the context of both customer and behavioural data. The situation will escalate as Google Chrome, the most popular browser with 65% of consumers, removes third-party cookies by the end of 2023.
As restrictions tighten and retailers begin to lose the signals they need to understand and appeal to their customers, finding new sources of data will become a priority.
This is an ideal opportunity for marketers to communicate the importance of harnessing product performance data, as opposed to continuing to rely solely on customer data. With product performance data to aid in their decision-making, both marketers and business leaders can gain the additional signals they need, while remaining compliant with consumer-driven regulations such as GDPR.
Making the marketing case
Marketers have a tough battle on their hands, but it’s time for them to stand their ground. History is on their side; in the case of every recession since the early 1970s, the most successful businesses are those that increase their marketing investment.
To foster success, marketers must understand and argue the case that leveraging product performance data is the key to increased budget efficiency, the method to reducing wasted spend and the answer to customer privacy concerns.
Rather than being perceived as a budget to be cut during difficult periods, marketing departments can and should show that they play a crucial role in riding out the storm.
