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Facing Brexit’s Budget Challenge

By Ewan McIntyre | February 13, 2019 | 0 Comments

MarketingMarketing Organization and Talent

We live in interesting times. Regardless of your opinion regarding the UK’s relationship with the European Union, what’s clear is that Brexit is starting to bite, as evidenced by major brands like Sky, Unilever and McDonald’s cutting their UK ad spend. This is no surprise – with only tens of days until the UK is due to leave the EU,  the British Chamber of Commerce (BCC-  a body representing 75,000 businesses that employ 5 million people in the UK) have stated that uncertainty over Brexit is stifling business investment.

The purpose of this blog is not to discuss the rights or wrongs of Brexit, rather to raise an important point – that marketers are often painfully unprepared for fiscal uncertainty.

Protesters outside the Palace of Westminster in London
Photo by John Cameron on Unsplash

Gartner’s CMO Spend Survey looks every year at current marketing budgets, but also looks forward to future budgets. Late in 2018 we published the latest CMO Spend Survey, which captured the budget outlook as of late summer 2018 – to put this timing in context:

  • This was more than two years following the vote to leave the EU
  • It was 18 months following the triggering of Article 50 – an act that defined the exact date the UK will leave the EU in March 2019

UK CMO Spend Survey respondents seemed upbeat – UK Marketing budgets had climbed back from 9.9% of company revenue to 11.8%. Furthermore, 65% of UK marketers surveyed thought this upward trend would continue heading into 2019. So, to be clear, two thirds of UK CMOs felt confident that budgets would increase in a year that was bound to be impacted by Brexit.

Falling media spend is often the first sign of larger marketing cost cutting pressures. It seems likely that UK marketing budgets will decline this year, and tough decisions will have to be made. It’s now time to develop a cost optimization strategy. To be clear, cost optimization is not cost cutting. Gartner defines these related, but different terms as follows:

  • Cost cutting is a one-time undertaking aimed at reducing expense levels
  • Cost optimization is a business-focused, continuous discipline to drive spending and cost reduction while maximizing business value

As a marketing leader you must drive budget efficiency while protecting investments that are needed to deliver success in the future. This goes beyond short-term cuts to media investment – you need to develop an approach that considers all areas of marketing’s operations, and addresses all costs, from near-term variable costs to long-term fixed costs. Talk to Gartner today to find out how we can help.

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