As the world is gearing up for an economic recession, businesses are looking for ways to cut budgets, especially in marketing. It’s no secret that marketing spending is forecasted to be reduced by over 50% compared to 2022. We decided to look into this phenomenon closer and predict what will come in this field in 2023.
The Marketer’s Toolkit 2023, a survey of 1,700 marketers worldwide released by the World Advertising Research Center, showed that 95% expect an impact on marketing budgets due to the impending recession. According to the findings, they are also concerned about other hot topics going into the new year, such as climate change, data privacy, and brand safety. Due to these concerns, 2023 will probably be challenging for marketing professionals worldwide.
In addition, Forbes lists seven challenges for businesses to overcome. With many top organizations taking cost-cutting measures such as mass layoffs, realizing and showing where marketing can help an organization survive and thrive amidst these adversities is essential.
Major events can change how users behave and what they expect from products. For instance, there were noticeable differences in how the COVID-19 pandemic affected social media consumption. Although trying new strategies during such times is risky, continuing in this trajectory may not be the solution. HubSpot reports that 11% of leaders in marketing see changing their plans as an obstacle in 2023.
When consumers are financially constrained, they will go for more affordable brands, making it difficult for organizations to decide whether to reduce their marketing budget as they also face economic challenges. The question is, should executive decision-makers reduce their marketing expenditure to stay afloat?
Photo by Tima MiroshnichenkoIncreasing your marketing spend during the recession is a data-backed decision. For instance, an analysis by the UK’s Institute of Practitioners in Advertising shows that during the 2008 financial crisis, brands with an 8% or more excess share of voice (ESOV), a measure of advertising share compared to competitors, saw a 380% jump in profit than those with lower ESOV. Moreover, while advertising expenditure dropped by 13% during this time, companies that maintained their marketing output saw 350% more brand visibility.
Returning to the recessions in 1981-82 or even 1974-75, organizations that continued their investment in advertising saw better growth than their competitors, who either reduced or completely stopped their ad spend. Companies that advertised in the early 80s saw a steep growth of 256%.
This trend is apparent across many industries. Toyota increased its ad spend during the 70s while everyone else decreased. They soon became the top imported car maker in the US. McDonald’s dropped their expenditure in 1991, while Pizza Hut and Taco Bell did not. While Pizza Hut saw a 61% increase in sales and Taco Bell, McDonald’s saw a drop of 28%.
But other things besides increasing or maintaining budgets helped Pizza Hut and Taco Bell succeed. The effective use of their marketing budgets did.
We’ve already mentioned one good practice: refreshing your marketing plans. Even after the recession subsides, the client’s declining purchasing patterns can remain longer. We recommend using your competitors’ lowered marketing activities to increase brand presence. Increased visibility is essential when users look for less expensive products.
While ensuring that campaigns are creative, marketers should also see that the tone suits the consumers’ contexts and that the message does not upset anyone during a financially challenging time. For instance, an ad that makes fun of stingy behaviour during a recession can hit the viewer wrong. Although price promotions such as short-term sales are effective, consumers can quickly shift to less expensive products once the promotion is over. Alternatively, one can maintain the price and provide strong brand communication highlighting the product’s positive aspects, such as quality.
Marketers can also reconsider renewing audience fragmentation to suit different customer reactions to the recession. HBR’s recommendations from the 2009 recession categorize consumers based on their change in behaviour into segments like “slam-on-the-brakes” and “comfortably well-off”. Leveraging immersive marketing is also a good move. For instance, virtual events using extended reality can bring consumers closer to the brand and the product. With the advent of 5G, 360-degree streaming video can be added to the mix of immersive marketing.
Creating a comprehensive marketing budget is essential, with a recession and cost cuts looming over everyone. According to Deloitte’s Annual CMO Survey, in 2023, this will take up around 13.6% of an organization’s total budget.
NP Digital released its 2023 Marketing Spend Report based on responses from around 8000 marketers worldwide. The data suggests that everyone is planning on increasing their budgets for 2023.
Another interesting figure from the report is the presence of artificial intelligence in marketing. A staggering 98% of responders said they plan to include AI tools. For example, there is much buzz around OpenAI’s ChatGPT. While many are impressed by its generative qualities, people are still sceptical. Some are even concerned that ChatGPT means the complete automation of content production.
In contrast, others think its actual value is to be a tool that collaborates with human intelligence. Keeping all anxieties aside, ChatGPT can be game-changing in digital marketing and potentially save costs. Additionally, NP Digital’s report suggests that 83% of companies will increase their content production budget, and 68% will add to their SEO budget.
Marketers should decide how to effectively spend their budget by considering a few perspectives. Determining the customer journey can help choose the platforms, the type of messages that will gain attention, and the solutions needed to attract more consumers. Even with an in-house marketing team, companies can consider bringing in agencies. These agencies can potentially help save money by avoiding new hires while providing a team of specialists. Besides this, strategies should also be under constant review to identify channels that give the best ROI.
While it is clear that maintaining or even increasing your marketing budget can be good for a company’s growth, you should also ensure that this budget is spent in the right places. Data from NP Digital suggests that 98% of marketers intend to use AI tools for marketing and advertising in 2023. We will have to wait and see how marketers will employ it in their plans and how this will impact the growth of companies this year.