I’m sure it’ll come as no surprise to you that things are not looking good for marketing budgets in 2020. But how things have changed. Just over 6 months ago we published Gartner’s 2019-2020 CMO Spend Survey, and while budgets had declined a little in 2019, confidence was very high regarding the outlook for 2020. But, as I said, things have changed, and they’ve changed fast. The latest Gartner data shows that 65% of marketers face moderate to significant budget cuts due to coronavirus disruption. When we ran this poll we defined a “significant” cut as being greater than 15%. And, while many marketers have faced cuts in the order of 10-20%, some Gartner clients have reported much deeper cuts, especially in industries where demand has fallen away due to social distancing measures.
The Shape of Things to Come
We don’t yet know how this crisis will evolve and the shape of the economic impact that will follow. Early indications suggest that many marketers believe that this will be a deep, but narrow V-shaped impact, with demand and budgets bouncing back quickly. This represents the best case scenario. It’s worth noting that at least a proportion of CFOs are building scenarios that include a second decline – a W-shaped impact (check out Forbes’ handy guide “Alphabet Soup: Understanding the Shape of a COVID-19 Recession”). This means that the first set of budget challenges you faced in 2020 are likely not going to be the last.
Optimizing Costs is a Marketing Imperative
Pre-COVID, we’d been advising clients for many years on the importance of a marketing cost optimization strategy (see below). This crisis has supercharged the cost optimization imperative, shifting it from being something you should do to something you must do.
Focus needs to shift from simple near-term cost cutting to a holistic approach that’s informed by your evolving strategy and laser-focused on squeezing the most value out of all of marketing’s budgetary commitments. Cutting events, shifting media spend and imposing hire freezes will only get you part of the way – plus these are not necessarily the right tactics to take.
The global COVID-19 crisis is still very much upon us, but you can’t wait for the dust to settle to plan your next steps. While still focusing on immediate response tactics, you must plan for recovery and eventual renewal, and what this means for budget and spending commitments. Start by asking yourself three simple questions:
- How do I prove the value of the marketing investments I need to protect?
- How do I identify the costs I can afford to cut?
- How do I optimize my marketing costs to drive greater ROI?