What had been forecast for some time was confirmed last month. The UK is in recession. And according to estimates from the Bank of England and the Office for Budget Responsibility, it’s going to be deep. The hangover from Covid has combined with the energy crisis and rocketing inflation. Self-inflicted wounds such as the disastrous mini-budget have created a toxic brew. All this adds up lower levels of investment and depressed confidence. For companies and customers.
Rising costs and uncertainty over demand makes companies nervous, and pressure on margins and profitability means fixed and variable costs are cut. For many, marketing is seen as discretionary. And discretionary spend is vulnerable to being cut. Media spend, innovation and unfortunately jobs are at risk in 2023.
We have already seen evidence this year of what might happen next. The latest Bellwether Report, a quarterly barometer of confidence, optimism and spending intent among the UK’s top advertisers, found all three at their lowest levels since the second quarter of 2020 – the beginning of the Covid pandemic. Meanwhile, data from the IPA shared exclusively with Marketing Week found that although brands were still hiring, a growing number anticipate job cuts in the new year.
Price will continue to be the most important lever in the marketing mix. As Adam&EveDDB’s head of effectiveness Les Binet said recently when offering his thoughts on navigating the year ahead, optimising price should be the “number one” priority for brands.
Marketing communications dominates the thoughts of many marketers, and much of the conversation on how to tackle 2023. Price, however, in a period of high inflation, trumps all other Ps. It is key to maintaining margin, and the favour of the investment community. Marketers, who have spent many years pulling hard, and in some cases exclusively, on the promotions lever, will have to become wise to price. Influence, in lieu of control essential. What level you price, how you position any increase and how it’s maintained all have a huge influence on the success of brand and business. It’s increasingly necessary marketers play their part.
Successful mitigation will also come from being attuned to internal needs. The demands on marketers from stakeholders are already changing. A recent LinkedIn survey found 77% of the CMOs polled reported an increased pressure to demonstrate return on investment. Meanwhile, almost half (48%) in a Marketing Week poll of marketers reported ROI was the most important metric to their boss.
ROI is a contentious measure of success. It is also ill-defined. In marketing it is often used as shorthand for success. Taken literally, it is an accounting method to determine the cost of something, not the return. Detractors argue it favours spending less to deliver the same or more return.
In the same Marketing Week poll, almost half the respondents (46%) thought their business was too focused on ROI. For many, it is illustration of the opinion many non-marketers in businesses have, that marketing is cost not investment.
There is a need to reframe the conversation on ROI, as was stated recently by Premier Foods’ CMO Yilmaz Erceyes in an interview with Marketing Week. Every meeting with a finance colleague should not be a one-sided exercise of cost cutting. But in the deeper recessionary environment, ROI as non-marketers will become a more important measure of success, and also a condition of investment. Success determined by efficiency, as much as effectiveness.
Marketers have a huge part to play in what will be a challenging year. The voice of the customer, as always, but also as leaders in their business. As Binet said, marketers will need to “think like economists” and consider margins, capital costs and investment efficiency. In other words, be as attuned to company concerns as those of customers.
The mantra that marketers must speak the language of the boardroom is one that is approaching cliché. The language has and is changing. And will again in 2023. Marketers must continue to set the narrative on meaningful effectiveness, but they can’t be cloth-eared to the demands of their company. If the language of the boardroom is margins and finding a balance between efficiency and effectiveness, that’s the language to use.
How much impact depends on your exposure to the worst of the downturn and what will remain high inflation rates. But all marketers everywhere must be prepared to be choiceful. Asking themselves what they must stop doing to start doing something else. They will also be likely to have to deliver with fewer resources.