If the current economic landscape has you going into crisis mode, you’re already a step behind. Paul Sinkinson, managing Director, Australia of Analytic Partners, reveals how brands can avoid the common pitfalls that have led to so many disappearing…
How many products do you own from companies that don’t exist anymore?
I’m sure all of us have a few. I actually think back to the Global Financial Crisis (GFC), which perhaps didn’t affect Australia as much as our neighbours in the U.S., but still saw a number of businesses shutter their doors forever. Data from the Australian Bureau of Statistics showed that more than 638,000 Australian businesses closed in the two years from June 2007.
Some businesses, put simply, weren’t able to survive the challenging times they were faced with. And unfortunately for all of us, we are about to enter – yet another – challenging time.
But upcoming difficulties mean we have the chance to look backwards, to see where brands previously went wrong, and make better choices ourselves.
What is evident from the mistakes of the past is that the decisions a brand makes in challenging times can’t be a knee-jerk reaction, as these are short-term responses to long-term problems.
That’s why Analytic Partners turned to its ROI Genome, revealing a number of insights that help form a clear pathway for marketers to navigate this troubling time. We also compiled a number of exclusive insights from senior marketers, who contributed to our recent panel at Advertising Week New York.
With a potential recession on the way, it’s time to make data-backed decisions and play the long game.
Marketing is the heartbeat of a business – so keep the heart beating
This is something I heard at a conference recently, and it really spells out why marketers need to understand how to defend their budgets.
Marketing is where the customer and brand intersect, and if the heartbeat stops, the business stops. But in 2023, marketers will need to go one step further and prove how marketing can be a growth lever.
Analytic Partners’ ROI Genome revealed that an average brand could lose almost 15 percent of its business if a similar sized competitor doubles its marketing investments. That’s right – if you don’t invest, you risk your competitors coming for your customers.
Mallory Fetters, Senior Director, Marketing Sciences at Cox Communications, has long experience in working with executive teams to ensure continued marketing investment. She explains: “We’ve established a long runway of high confidence and data-driven support around our return on investment (ROI) to help justify our suggested marketing investment. Our job is to help the organisation understand what drives a business up and down.”
There is evidence showing brands that lean into their marketing team and increase investment reap the benefits. Brands that increased media investment during the last recession saw 63 percent stronger ROI, and 60 percent had ROI increase year-on-year.
So for marketers planning to take their case to the CFO, consider how your investment choices will count. The creative quality of your messaging is fundamental, as is taking into account the “halo” effect of your advertising. Rejig your media mix to drive efficiencies, and ensure your channels are being optimised.
These decisions will all come into play when it comes to defending budgets. But it’s clear that increasing marketing during a recession is not essential for maintaining revenue – it’s a growth driver for long-term success.
Asteroid or recession? You choose
The last two years proved that anything can happen, and businesses need to be prepared for a wrench being thrown in their plans.
But to effectively handle a recession, brands will need to be proactive, and not reactive. That means scenario planning.
Samantha Meltzer, senior manager of marketing optimisation and measurement at McDonald’s, had firsthand experience of this during the pandemic, where scenario planning became a powerful tool, and often only as good as the data behind it.
“We had to get nimble and smart about the tools we were using,” she says. “That includes the different data analytic sources we were relying on to help make decisions.”
There are a number of scenarios marketers can plan for – and you probably shouldn’t go as far as an asteroid. Competitors increasing their marketing investment, changes in category demand, fluctuations in the supply chain, and inflation rises, are all situations brands should prepare for in order to begin developing a robust strategy.
Give brand the space to perform
It can be tempting to increase performance messaging in a recession – promotions and discounts usually abound when there’s a financial crunch. But when a company offers a discount, they diminish the brand. And they potentially lose revenue from customers that were intending to buy regardless.
While there is a place for both brand and performance messaging, brand messaging outperforms performance messaging 80 percent of the time.
Christof Zanecchia, senior manager of global marketing science at VF Corporations, explains that for him, brand is momentum.
“It impacts the short and long-term,” he says. “Our business has even gained market share in particular markets where we’ve gone all in on brand building – it’s really carried the business forward.”
Performance messaging offers immediate gratification and instant sales. But marketers have to think beyond that. The next 18 months will be a make or break time for any business. Those that want sustainable success will need to play the long game and avoid the allure of short-term results at the expense of the long-term.
While we don’t know what will happen next year, the lessons of what marketers can do to prepare can be gleaned from the past and backed by data. Increase investment, scenario plan, lean into brand messaging, and your company should avoid becoming another casualty in a recession.
All sources: ROI Genome, Analytic Partners