Thursday, February 12, 2009

More pressure on marketing expected

A few short months ago there were worries about marketing budgets being cut but most professionals were sounding reassuring in saying that the bulk of marketing budgets would be transferred to online and interactive initiatives. The theory went that brands would want to keep taking initiatives and would continue the same intensity of communication by shifting their marketing dollars to more affordable channels like the Internet.

Even then this thesis did not seem to hold against careful analysis and discussions with senior decision makers even back then. Recent news seem to confirm the pain to come for agencies and marketing professionals, irrespective of the nature of their business, with an exception that is not what most people seemed to think, but makes economic sense.

A recent survey carried out by the ANA (see clipping at the end of this post) shows a bleak outlook for big classes of marketing spending and therefore for agencies and professionals offering services in those fields. I think this is particularly relevant for the European market because it’s only a matter of time before we see a similar contraction in Europe and because, with just a few exceptions, European decision makers tend to be even more reluctant to any spending in hard times (it’s a sort of all-or-nothing approach to marketing budgets). More specifically here are a few points worth considering:

  1. there will be painful budget cuts across the board and cuts are a priority of senior management that will not be adequately addressed by a mere shift of money to online and interactive marketing.

  2. the nature of initiatives taken will be seriously and increasingly scrutinized to make sure they are compatible with the mood of our times. No advertiser can afford to seem completely oblivious to the hardship suffered by the market. The survey shows quite clearly that the focus will be on initiatives that address the increased price sensitivity of buyers.

  3. the survey shows the top five areas where marketers plan to reduce costs or expenses in marketing and advertising and looking at them carefully we see that four out of the top five are areas which will affect “creative” initiatives with important investments in media and event / interaction management. So much for the idea that there would be some sort of magical immunity for online and interactive marketing.

The main implications of the way things pan out are:

  1. of the six competencies identified by the Media Management Center (see their excellent post here), there’s ony one that seems 100% essential and critical in this environment and that’s the Data Miner.

  2. because key decision makers are still largely professionals that in most cases have only a very limited vision of the benefits they could get out of the web and interactive technologies, the marketing dollars will go to very basic, simple, no-nonsense, zero-risk initiatives for which there’s a clear case for the return on investment.

  3. this is the golden opportunity to set standards to make absolutely all initiatives traceable and measurable, which means that one can feel positive about anyone involved in providing enabling technologies for tracing the performance of marketing initiatives like promotions and direct marketing.

It does seem that the crazivity of the past couple of years is going to be out of question for some time…

What’s crazivity? It’s initiatives that are primarily crazy and yet presented as creative: in this business the crazier something is the more creative it’s called even though it’s not always so and that often comes at the expense of relevance of an initiative with respect to the brand’s goals.

Marketers are cutting costs, putting pressure on agencies to do more with less, and reducing budgets much more than they were six months ago

37% of respondents today plan to reduce budgets by more than 20%, up substantially from the 21% in the first survey.

  • Departmental travel and expense restrictions (87% vs. 63% in the previous survey)

  • Reducing advertising campaign media budgets (77% vs. 69%)

  • Reducing advertising campaign production budgets (72% vs. 63%)

  • Challenging agencies to reduce internal expenses and/or identify cost reductions (68% vs. 63%)

  • Eliminating or delaying new projects (58% vs. 61%)

“In the current economic environment, there’s a need for brand building that’s right for the times - that acknowledges consumers’ financial circumstances

For some marketers, that will mean skewing their media mix toward promotional spending and direct marketing. For others it will mean framing a new, relevant and timely brand message.

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