In times of economic uncertainty, companies often overlook the significance of marketing and consider cutting costs there first. However, this approach is shortsighted. The report emphasizes that marketing should be seen as a key driver for long-term growth rather than a cost center. It encourages Chief Marketing Officers (CMOs) to adopt an investor mindset by eliminating inefficient spending and reallocating resources into areas with high growth potential.
During economic downturns, consumer sentiment weakens and costs rise, leading consumers to seek better value-for-money deals. This impacts purchasing behavior significantly, with 80% of respondents indicating changes in their shopping habits. Marketing expenses have also increased, with a reported 20% rise in average click costs from 2021 to 2022. Facing macroeconomic challenges and disruptive market dynamics, margins may shrink, compelling many businesses to cut marketing costs.
However, adopting a short-term profit-focused mindset can have severe long-term consequences. According to a McKinsey Quarterly article, companies that drove growth during the Great Recession in 2008 experienced above-average returns for their shareholders over the following ten years, with a cumulative total shareholder return (TSR) increase of 150 percentage points compared to industry peers.
The report suggests three strategies for CMOs in challenging economic times:
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Optimizing Marketing Spending: By controlling marketing expenditures, CMOs can identify areas where they could have been more efficient. They can then strategically allocate funds towards initiatives with higher ROI potential.
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Maximizing Existing Resources: Focus on maximizing return on investment and value creation. Speed is crucial given the changing consumer behavior and economic climate. Implementing agile practices like a 'Marketing-Win-Room' can help teams analyze customer behavior in real-time, make decisions quickly, and adapt swiftly when necessary.
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Investing in Growth Drivers: Carefully evaluate budgets and optimize resource use. This might involve rethinking marketing and value creation strategies, potentially shifting significant investments to new approaches that combine strengths of brand building and performance marketing through integrated teams, metrics, and Key Performance Indicators (KPIs).
The report concludes that during uncertain economic times, CMOs must demonstrate the substantial value marketing contributes to a company's worth. Four steps are recommended to achieve this: conducting a thorough assessment, setting clear goals, planning strategies, and making decisive actions. Emphasizing focus on quantity and growth, CMOs must lead their organizations towards strategic decisions and committed action to progressively achieve peak growth.
