US GDP has contracted two quarters in a row and, whatever you call it, the current downturn is causing jitters. When economic times are tough, budget cuts follow, and my marketing colleagues know as well as I do that our budgets can seem like low-hanging fruit for firms looking to reduce spend.
The narrative is often that CFOs and CMOs are at loggerheads in these situations. But both have the same goal – to drive sales and business performance and maximize spend.
Analytic Partners data gathered from tracking hundreds of billions of marketing spend shows that, during the last recession, 60 percent of brands that increased their media investment saw ROI improvements. Brands that increased paid advertising also saw a 17 percent rise in incremental sales, while those that slashed spend risked losing 15 percent of their business to competitors.
While wanting to cut marketing spend during periods of slow economic activity is an understandable instinct, data doesn’t lie. Slashing marketing investment does not protect margins because short-term savings are quickly undermined by dips in sales and brand equity, undermining revenues.
Instead, doubling down on marketing will boost margins and improve ROI, putting brands in front of customers when their competitors are fleeing.
Leaning into marketing during a recession has other longer-term benefits. As competitors give up on the attention ecosystem, the price of paid advertising declines, allowing advertisers to reach more customers with less spend. This is a fantastic opportunity to build long-term relationships and gain lasting market share because the customers you gain or support during the downturn are not customers your rivals can simply win back when the economy recovers.
Of course, just throwing money at things isn’t the answer either. CMOs and CFOs can work together to ensure they understand marketing performance data and the organization’s short- and long-term marketing goals. Then, they can implement systems that monitor progress and optimize impact by tracking and quantifying the results of marketing spend.
Clarify short- and long-term goals
A well-defined plan with clear objectives and appropriate measurement tools works for both marketing and finance teams. While measurement is essential at any time, during a period of budget constraints, the need to demonstrate measurable impacts and agree to required outcomes is more important than ever.
Marketing spend is not just about driving sales today but also about longer-term brand building and the cumulative effect of a holistic multi-channel marketing plan. While real-time analysis enabled by channels like paid search provides accessible and easily understood metrics, it doesn’t take longer-term strategies into account, nor does it measure the value of brand marketing.
Being able to assess and measure the short- and long-term impacts of each element of your marketing spend makes marketing decisions clearer and more accountable and can demonstrate the long-term disadvantage of pursuing a purely short-term sales growth strategy. CFOs and CMOs working together can quantify and clarify these goals and identify the measurement tools that will monitor and assess outcomes.
Monitor progress and optimize
Marketing and finance leaders value data, and a strategic and transparent conversation between these groups hinges on the quality and accessibility of this data. By understanding how their organization, and organizations like theirs, have performed in the past, CMOs and CFOs can agree what the firm needs to continue to boost sales, build brands, and generate the required ROI. This means robustly tracking marketing data with systems and processes that can monitor and analyze it independently and against industry benchmarks. It also means enlisting the talent required to analyze the data and deliver insights in which actors across the organization have confidence.
With the right data and a strong working relationship, CFOs don’t need to make knee-jerk requests for budget cuts, and CMOs don’t need to scramble to make the case for investment in marketing. Rather, business leaders can work together to ensure the data guides the decisions they make when preparing to weather a downturn.
With major economic downturns appearing all across the world, how are you working with your CMO? Need advice on how to align your goals? Join the conversation with a global network of CFOs and finance professionals inside the Finance Alliance Community Slack channel.