Today’s challenging economy is top-of-mind for every marketer. While the unemployment rate has remained relatively stable, US inflation fluctuated from just under 6.5% to more than 9% throughout 2022. Add in the same fluctuation in consumer confidence, and it’s no wonder that marketers spend sleepless nights worrying about a recession.
But, no matter what the future holds, there is always help and great advice. SmartBrief spoke with Bob Liodice, CEO of the Association of National Advertisers for recession-proof marketing advice.
What are three things marketers should do differently in a recession?
Liodice: Let’s look at budgets, balance and fresh thinking.
- Marketers must resist cutting budgets. Every empirical study and almost every anecdotal report from past recessions strongly suggests that brands may deliver on their short-term financial goals but often lose those gains in the long term. The power of brands erodes as advertising and marketing spend declines. The cost of recapturing lost short-term sales due to spending declines more than offsets the temporary financial gain. Highly branded organizations perform better than the S&P 500. When marketers pull back investments, market capitalization is undercut and sub-optimizes long-term performance.
- Ensure that the balance between performance marketing and brand-building marketing investments stays constant. While the impetus may to rebalance the portfolio to performance-focused investments, the long-term brand impact will be felt for years to come. Brand messaging outperforms performance messaging 80% of the time. On average, video performs better when considering longer-term impacts and multimedia campaigns tend to have a higher ROI than single media campaigns. Brands that increased investment during the last recession saw 63% stronger ROI and 60% ROI grew year-over-year.
- Invest in creativity and innovation. Marketers should come roaring back from any economic downturn with fresh thinking and new pathways to generate interest and intrigue from their consumers. That focus can often generate market and share growth – a winning combination for any marketer.
How should marketers prepare their marketing strategy for a recession?
Liodice: As with many things, planning helps. There are three things that smart marketers can invest in now to prepare. Plus, I’ll give you a bonus as no CMO can be successful without support.
First, invest in building people skills. Make sure your company provides training and offers opportunities for advancement for your employees. Experienced workers who understand marketers’ brands and business practices are critical in challenging times. It’s imperative that companies retain the talent they already have on board. Attracting and retaining top talent is difficult even during non-recessionary times and becomes even more so during a crisis.
Second, invest in your agencies. Agencies can play a key role in helping clients formulate and execute anti-recession strategies. They often have more creative firepower than clients and they can view a marketer’s challenges from the objective perspective of an outsider. This is critical during a time that calls for fresh thinking and unorthodox remedies.
Finally, invest in the future. Recession or not, technology marches on. It’s incumbent upon marketers to keep up with the changes. Just the past year or two has brought us the metaverse, incredible advancements in AI, the growth of the internet of things and other high-tech developments and innovations. The successful marketer of today must keep a keen eye on tomorrow.
And now for that bonus: Community support.
CMOs should work with the ANA Global CMO Growth Council. The Growth Council was established in 2018 as a way for the global community of chief marketers to come together in unified leadership to transform marketing into a force for growth and a force for good. Driven by the ANA Growth Agenda, the Council is committed to helping CMOs look much further ahead to envision what their brands, business and society require to grow in the coming months and years ahead.
How do you change the way we forecast marketing trends during a recession? (different tools, strategies, etc.)
Liodice: No one is an expert in making the right call on economic trends. Further, knowing the impact in a specific business category is a substantial challenge.
However, marketers have to become better business managers. This change requires leaders to go to non-traditional sources of knowledge and insight and includes ensuring an understanding of financial institutions, the international marketplace and tremendous, lean-forward consumer research.
Marketers must digest it all and have the courage to do “the right thing.”
How will AI play a bigger role in marketing?
Liodice: Dynamic creative optimization (DCO) is one of the most exciting ways artificial intelligence is revolutionizing the world of marketing. Powered by machine learning, DCO enables personalization at scale. Brands can take a base creative ad template and generate thousands of iterations in seconds, tailoring parts of the ad based on context, target audience and past campaign performance. Personalization has never been more important for marketers, and dynamic creative optimization by way of machine learning is one of the strongest tools at our disposal.
Marketers are also tapping into AI’s ability to process and analyze billions of points of data in a fraction of a second, delivering insights in real-time. When third-party cookies eventually disappear, marketers will need a way to immediately contextualize online consumer behavior and identify “micromoments” when consumers are poised to consider and purchase their products and services. AI will be foundational to this ability.
Finally, AI continues to help marketers tackle mundane, repetitive tasks at a rate exponential to that of a person, and that will remain one of its greatest values to the marketing function in the year to come.
How will marketing budgets change with recession fears? How will successful companies differ from what typical companies will do?
Liodice: We’re already bracing for a drop in 2023 ad spending as we start the new year. In December, GroupM predicted a 5.9% spending hike in 2023, down from a 6.4% increase the company predicted in June. Similarly, IPG’s Magna revised its 2023 forecast from a 6.3% global growth to 4.8%.
Successful companies will be the ones who stick to their guns when it comes to marketing investments, despite the urge to cut spending amid recessionary fears. Many studies have borne this out, like an Advertising Research Foundation study that revealed the following:
- Businesses that maintain or increase their ad spending may gain a lasting advantage over their competitors who decrease their ad expenditures during the same period. Reduced advertising by competitors provides a media environment with less ad clutter and potentially lower media costs.
- It is more challenging and costly to regain market share and brand equity once lost by “going dark” than it is to maintain them with even a modest investment.
Marketers can also gain new customers by targeting those who might be trading down from premium brands to save money. These are consumers who seek out and purchase less expensive brands than the ones they are usually loyal to. This requires tweaking their marketing messages to reach a target group that is different from the brand’s usual base.
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About Bob Liodice
Bob Liodice is CEO of the ANA. He previously served as executive vice president, responsible for member relations and business development with a primary focus on strengthening relationships with ANA member companies and broadening the membership base.
Prior to the ANA, Bob was vice president of global marketing and sales for Grupo Televisa, a major worldwide broadcaster. His previous experience includes more than 15 years in marketing and financial management at Kraft General Foods and tenure as category marketing manager for the Jell-O and Bakers brands.
Bob is a member of the boards of directors of The Advertising Council, Advertising Research Foundation, Advertising Self-Regulatory Council, Geopath, Advertising Educational Foundation, Digital Advertising Alliance, Trustworthy Accountability Group and World Federation of Advertisers.