esm7i Today, businesses are tightening up. Companies are examining every line item on their budgets to ensure profitability, even though revenues are flat while costs are rising.
Marketing is often viewed as an optional expense, so it’s one of the most likely to be cut.
Recent surveys of marketing executives found that most large companies are cutting their marketing budgets or planning to do so in 2008. Only 16 percent of companies are planning to increase their budgets. Only 29 percent of mid-sized firms are looking at budget cuts.
In this type of situation, the trick is to make wise cuts and not to reduce investment. You may even want to increase your investments in certain areas to be stronger when recovery comes.
In fact, many of the most successful and long-lasting marketing campaigns were launched during difficult times. Wal-Mart launched “Everyday Low Prices” during the recession of 2000-01 and the “Intel Inside” program during the recession of 1990-91. Procter & Gamble launched a massive campaign for Ivory Soap in the 1930s when the Great Depression reached its height.
Senior management began to increase pressure on marketing investments even before the economy spiraled downward. They wanted to demonstrate marketing’s impact on results. It’s now imperative to accelerate the pace of the journey towards marketing effectiveness. Using more intelligent approaches, such as tests and learning, will make the trip much easier.
UnitedHealthcare began taking a more systematic approach to its marketing-effectiveness efforts to counter heavy competition and shrinking share in certain markets. It used test-and-learn (or in-market experiments) to evaluate changes in product, price, and distribution selectively.
Data showed that changing prices, for instance, had a significant impact on business growth. This was especially true when combined with promotions. The study also found that pricing and perceptions of products were just as important as pricing and options. The positive results of these winning combinations in many markets demonstrated marketing’s role.
UnitedHealthcare didn’t simply adopt a more systematized approach. It was far more strategic than past practices, and it was also a continual improvement process that occurred while running the business.
Change your mindset if you’re looking to convince others of the importance of marketing to their business.
The first step is to realize that advertising alone cannot guarantee the long-term and short-term success of a brand or business. A marketing budget optimized for maximum results requires a larger-picture approach. It must focus on the four Ps, both individually and in their interaction.
All these investments, regardless of whether they fall under the scope of marketing, should be identified and tracked. Marketers can then use their knowledge of the relative elasticities in their marketing investments across various components of the mix to reduce the impact of budget reductions.
In this context, test-and-learn is a practical way to maximize marketing investments. This approach allows marketers to learn from the software industry, who tend to test their products or services until they are 80 percent perfect before releasing them to the market. Then, the final refinements are tested with real customers in real-time to make sure that they meet their expectations and needs.
This approach allows for a quicker introduction of new ideas and faster justifications of yes or no decisions. It also expands the combinations of activities – again across all four Ps – that can be tested in a certain time frame to broaden growth options.
It is especially important at this time because it allows more expensive and risky investment options to be tested before they are introduced on a larger scale. Bank of America ran a 90-day test of its Express, Financial, and Traditional banking centers before rolling the concept out to broader customer audiences.
Consider it. Many marketers do the same thing to justify their existence. They create another campaign with a broad brush and wait until its end to fix any mistakes that may have been made in the design. Pilots that encourage flexibility and adaptability are a great way to ensure the business is still managed efficiently while exploring new strategies, tools, and tactics.
A greater focus on marketing efficiency cannot solve the challenges that marketers face. Data, analytics, processes, and systems capabilities must be developed and nurtured, and the mentality of marketers needs to change accordingly. Test-and-learn experiments can speed up the process and help marketers improve their program’s efficiencies and effectiveness. They will also be able to run their business more effectively and efficiently.
