08 May 2009

Marketing Cost Cutting in Downturn

Marketing budgets have been severely cut during the economic downturn. A recent study by the Finance Marketing Association in Vienna found that up to 60% of financial marketing departments have responded to the crises by cutting costs. Is this wrong? Not necessarily.

Looking at the dire situation from the point of view of the agencies, they should shoulder some of the blame for this reduction of marketing budgets. Why? Because in economically strong times the agencies sold anything and everything to image-obsessed CMOs and CEOs.

The main consideration seemed to be that the client manager was "happy" at the moment of campaign launch. Concerns about the Return of Investment (ROI) of such campaigns were an afterthought, if at all. Maybe they were eager to win one of the prestigious prizes, but it was not cash they were after.

Insightful is the fact that the only category getting more budget in the crisis is direct marketing. This makes sense, because direct marketing is much more performance oriented and supports the hypothesis that performance was lacking until now.

Also, the explanation that companies cannot "afford" the marketing budgets seems odd. This sounds like marketing is something like luxury, reserved for good times. In fact, marketing needs to be an investment. And like every investment it needs to return the cash plus a profit margin.

Taken it from this angle, the solution is quite simple: rigorous marketing controlling with pre-testing and performance measurement, based on hard data.

However, this is not an entirely new thought and many agencies would offer it to their clients. The only question then is why it was not marketed before?