Marketing Budget Cuts and Boosts: A Silver Linings Playbook
By: Joshua Reynolds
Due to several unforeseen economic challenges, marketers are facing a near-term shortfall in budget, with the promise of bigger budgets heading into next year. Unless expectations are carefully managed, the gap between what’s possible for marketing and what’s expected from marketing could create problems. The time is now to get on the same page with your execs around priorities, pressures, and a workable definition of success.
This article offers recent insights into what CEOs expect, what CMOs are planning, and practical guidance for how marketers can ensure that sanity prevails.
The Forecast—Dark Clouds with a Silver Lining It’s a tough time to be in marketing or public relations (PR). With a looming recession and massive layoffs, many marketing budgets have been cut or put on hold, and the expectations executives have on marketing don’t seem to be diminishing proportionately.
Still, glimmers of hope remain. A KPMG survey of more than 1,300 global CEOs conducted in July and August 2022 found that while 86% of them anticipated a recession to hit, more than half were confident it would be relatively short and mild. About 7 out of 10 expected their earnings to be impacted by about 10%, which is consistent with recent high-profile layoffs targeting 10% - 13% of the workforce. So as of August last year, most CEOs remained confident in their long-term success and the economy, overall.
Further, a Deloitte survey of a much smaller group of 121 CEOs from last October validates this view. In that survey, 76% of CEOs were pessimistic about the economic outlook because they saw growth slowing. But overall, CEOs remained cautiously optimistic about their companies’ performance. In fact, 85% said they expect modest, strong or even very strong growth heading into 2023.
That’s good news … right?
The Downside of Optimism—Higher Expectations That cautious optimism—and the pressure on CEOs to continue growing, despite significant headwinds—puts enormous pressure on marketers. Many CEOs and their investors believe that though times are tough, there are still growth opportunities to pursue.
So, while many marketing budgets were reduced or paused in 2021 and 2022, many CEOs plan to fund at least a modest increase in marketing in 2023. A recent poll of 200+ CMOs across multiple sectors found that 89% of CMOs and senior marketing executives plan to increase their marketing investments at least somewhat in 2023, with 44% planning to substantially increase investments.
That may seem counterintuitive, given all the news around companies cutting their ad spend with Google, Twitter, Facebook, and other digital platforms. But just because those bets aren’t paying off doesn’t mean other bets aren’t worth making. According to that same study, the top three areas CMOs have seen the greatest ROI over the past year include PR and social media, content marketing and video marketing. And the areas they plan to allocate the most budget to include PR and social media, marketing operations / analytics / martech, and content marketing. These are smart, time-tested tools for generating measurable revenue results.
But exactly what kind of revenue results will your execs expect after they give you more money? Aye—there’s the rub.
The Trap—Warping Expectations with Your Own Awesomeness One of the worst things that can happen to a marketer is getting their budgets cut. One of the next worst things that can happen is getting more budget—with a disproportionate increase in expectations. And with CEOs and boards of directors under so much pressure from investors to grow, they in turn often expect an increasingly high ROI from marketing.
The old rule of thumb was that for every dollar spent, marketing should generate five dollars in revenue. A 10:1 ratio is typically considered to be amazing. From personal experience, I can tell you some Silicon Valley leaders expect an ROI of 12:1 or better. In a down economy, those are tough numbers to hit.
So, much like a credit card application, it’s critical to read the fine print and find out how much that extra marketing money is going to cost you. Most seasoned marketers already know how to negotiate reasonable metrics based on what budgets they get.
The challenge is, what happens in the interim when you’re asked to maintain marketing excellence with less budget, fewer people, and tougher conditions? With so many layoffs going on, it’s easy to feel worried about pushing back.
But we teach people how to treat us. If you condition execs to expect the same level of success with less to work with, what happens when you do finally get what you need? Unless you have an explicit conversation to spell out how expectations need to shift, you run the risk of always having the definition of success that remains just beyond your reach—and your resources.
That’s why it helps to have the following playbook for preventing expectations from warping out of control.
The Silver Lining Playbook for Marketers Step 1: Breathe Fear is a natural first response when a vital resource is diminished. Don’t fight it. Feel it. Breathe. And don’t make any big decisions while you’re dealing with shock. Talk it out with friends and fellow marketers who “get it.” Vent. Let your fear teach you what’s most important to you.
Then, and only then, move on to Step 2 …
Step 2: Empathize Remember that when a company lays people off and cuts budgets, usually it’s not a reflection of the value or skill of the people who’ve been let go. If anything, it’s a reflection of mistakes made by senior leadership. It may help you shift your mindset from victim to hero to remember--your CEO is under enormous pressure, too—and your company needs you just as much as you need them. That sense of empathy can lead to more calm, creative and collaborative problem-solving.
Step 3: Align Take a good long look at what your leadership is under pressure to deliver, and figure out what you can do to help them to deliver it. Is it about lead-gen? Customer retention? Driving efficiency? Bolstering reputation? Accelerating sales cycles? Figure out what you and your team do to demonstrably drive value, and make sure you and your leadership have the same definition of value in mind.
That’s the only way you can focus on what matters most … which is the next step.
Step 4: Prioritize + Purge While prioritization may seem like a no-brainer, it’s really hard to identify what’s most important to do, because let’s face it, it all feels important—otherwise it wouldn’t have been on the list in the first place! So start by purging your list of all the things you’ll either stop doing or do less of. Remember—a strategy is not a strategy until it tells you what you’re not going to do!
Step 5: Frame Choices It’s hard to tell a boss what to do. But once you’re aligned on what they need to deliver, you can lead them as a trusted advisor and frame their choices. Ask them which business outcomes are most important to achieve, and by when. Then assert, based on your experience and data, what’s possible, what’s not, and what’s a stretch, given the resources you have. Most importantly, agree to what outcomes you’re not going to deliver based on your momentary reduction in resources. Then tell them what more you could accomplish with an additional investment.
Step 6: Maintain Your Humanity Find the courage to accept your limitations and to set healthy boundaries. (For me, this has always been much easier said than done!) Just because you can’t accomplish the same goals with fewer resources, that doesn’t mean you’re not awesome and worthy of employment. Be compassionate and humane with yourself. And when teammates suffer from the anxiety of unreasonable expectations, remind them—they can do anything, they just can’t do everything.
There may be a silver lining behind the storm clouds ahead, but we’re not through the rough weather just yet. Now is the time to decide what kind of expectations you want to set—and what kind of culture you want to create—for when things do get better.
And they will. They always do.
Joshua Reynolds is the Founder and CEO of Rob Roy Consulting, Inc.