Companies are like consumers. The first thing we tend to cut in a crisis is discretionary spend. And unfortunately, marketing investment often comes under this umbrella. The goal of marketers is to figure out what to cut without having a significant impact on business results. To find out how marketers can think about making smart cuts, I turned to Matt Voda, the CEO of Optimine, a marketing measurement and optimization software company. Having observed several crises (9/11, tech bust, financial collapse, the great recession, SARS, etc.), he has been through this exercise personally and helped a number of firms navigate cuts. Below are his suggestions.
Kimberly A. Whitler: What have you noticed regarding what marketers tend to cut first in a crisis?
Matt Voda: In many cases, the cuts are in areas where the brand may have difficulty measuring and proving value. In digital, this may be areas like paid social advertising where the clicks fail to tell the entire story. Facebook CPMs are down almost 50% and I suspect this is partially a reflection of this click-centric measurement mindset. We see the same in areas such as print or TV, both of which are also suffering. This is a classic mistake that is rooted in flawed measurement approaches. Smart brands that have advanced measurement and analytics see this and spot an efficiency opportunity to remain in front of their customers and spend less doing so.
Whitler: Is it the same in this crisis or do you notice anything happening in a different fashion?
Voda: The pandemic we’re in is clearly different given its global scope, severity and the incredibly rapid speed of the downturn. That said, the human fear – and our human reactions to that fear – is the same, and decision quality can suffer greatly during panic. Smart brands we work with are taking a step back and using data and analytics to guide making rational decisions and avoiding panic. Many brands have cut advertising to zero while some are just as active now during the pandemic. Why? Smart brands understand the value of these investments and what their goals are, and they are taking advantage of lower ad rates, and making courageous – and well informed – bets that will pay off in terms of increased market share, more durable brand awareness and are setting themselves up for a stronger rebound as we enter into a recovery. A panic-driven decision will always yield sub-standard results, and the key to move past the panic is to have an analytic advantage based on data, facts and courage.
Whitler: What suggestions do you have to reduce spend without damaging the business?
Voda: A lot depends on the brand’s current operating condition and whether they are “open” or have active areas or product lines of their business running during the pandemic. In the case where a portion of the business has shifted—retail is the best example here where physical stores may be closed but the e-commerce operation is at full til—then the question centers on how best to refocus spend to boost the operating portion of the business. Examples:
1) Media impacts on physical versus digital conversion points vary considerably. While some channels and campaigns may drive more traffic and sales to physical outlets, others may index more strongly to digital sales. Examples of this would include social and certain forms of search advertising. The goal then would be to fund these areas of strength by cutting dollars in areas such as print, and perhaps some portion of brand-oriented TV that index more strongly to offline effects.
2) Likewise, there is a hyper-local effect of the pandemic and brands that can adjust on a more precise geographic basis, helping ensure that they can find budget cuts in areas of high impact (New York, New Orleans, etc.) and use some of those savings to invest in geos relatively less affected. Local advertising opportunities abound with lower rates in things like radio and local TV (where viewership is up over 20%) and even in things like direct mail.
3) Taking the geo concept further, we believe that planning for more agile local advertising precision now will pay big benefits during the pandemic recovery. The certainty of the recovery will be its uncertainty, with fits and starts regionally based on virus flare-ups, re-closures, and uneven rates of recovery. Brands preparing now for this kind of agility can safely reserve dollars in instant impact areas like search and test spend in video and social where the carryover effects are longer—and can be started earlier in advance of the rebound.
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