Focusing on value-based marketing in the face of upheaval
Strategic cost optimization is needed now more than ever, in the face of a global pandemic that has prompted corporate leaders to cut budgets affecting marketing spend.
According to Gartner's 2020 CMO Spend Survey, 44% of CMOs expected an in-year budget cut of more than 5% as a result of COVID-19. Another Gartner poll taken less than two months later reported those expecting a cut of more than 5% had jumped to almost two thirds (59%) of respondents, with the remaining third expecting a cut of at least 15%.
In light of the above, it is important for leaders to know what to spend on and what not to spend on. There are 3 main mistakes that CMOs make in the COVID-19 era:
- Mistake 1: Blanket cuts to in-year budgets with unrealistic targets:
Most leaders apply blanket cuts that spread across most channels e.g., cut on 20% marketing expenses for the year. The main issue with this type of thinking is that marketing's cost base is varied, with a mix of near-term, variable costs (e.g. media spend), and longer-term commitments (e.g. marketing technology costs). From a practical point of view, it's easier to cut some costs than others and some marketing items deliver higher value than others. Rather than applying blanket cuts, leaders should spend time prioritizing marketing's investment, with the objective of retaining the bundles of resources that yield the greatest ROI, and cutting the costs with the weakest return. This is the basic essence of zero-basing: ranking investments based on their return, and considering if better returns could be achieved through alternative investments.
- Mistake 2: Choking-off investments in marketing innovation
Because the value of innovation efforts is hard to measure, innovation investments is placed in a precarious position when it comes to budget planning. Based on mistake No. 1 above, if you can't measure it, it's difficult to defend it. However, the answer should not be to cut innovation programs, it should be to find a better way of measuring the impact of innovation programs. But, why is that?
Gartner analysis from the Great Recession found those companies that focused on costs, talent and innovation achieved efficient growth, outperforming their peers in the immediate aftermath of the crisis, but also sustained (and grew) this advantage in the following years. Efficient innovation investment makes good economic sense.
- Mistake 3: Mistake cost for value when building multichannel budgets
Throughout 2020, Gartner survey data has reported shifts in channel spend e.g., some of the leaders that previously spent heavily on digital channels now shifted to traditional channels and vice versa. But have all these shifts been to the right channel? Are these channel investments being made in the most efficient ways? Evidence from Gartner's Digital IQ analysis, "B2B: How to Maximize the Efficiency of Digital Marketing Assets Amid Budget Scarcity," indicates there are still issues faced by brands. Digital ad spend may have increased, but there's evidence that this spend is not deployed efficiently or with appropriate calls to action. The problem is that very often, channel value is mistaken to channel cost. Even in budget constrained times, channel investments must be driven primarily by their ability to reach the target audience and to move them to the next stage of their journey as cost efficiently as possible.
The above are the key mistakes that CMOs can make during COVID-19, when tackling budget challenge. Getting good at strategic cost optimization ensures that marketing is sustainable in the face of upheaval and it should be part of all marketers' strategic marketing tool kit - whether budgets are climbing or falling - to ultimately lead with a value-based marketing approach.
Source: https://www.marketingdive.com/news/3-mistakes-cmos-are-making-with-covid-era-budgets/589217/
