Coronavirus pandemic drives record decline in marketing budgets
In the week’s least surprising but still shocking news, the IPA’s quarterly Bellwether report revealed the scale of the cuts hitting marketing.
Budgets were cuts by their highest levels in the more than 20-year history of the survey, with a net balance of 50.7% of companies reducing their spend in the second quarter. That is a worse result even than the last recession, when the net fall hit 41.7%, in Q4 2008.
The cuts were felt across the board, from market research to TV, direct marketing to events. The IPA might be expecting a bounceback next year (as long as there is no second wave), but it won’t be until 2024 that things begin to look more like normal.
Amid declining revenues and an ongoing lack of consumer and business confidence, companies were always going to look for ways to reduce expenditure. Pulling back on ad spend is one easy way to do so.
But marketers should still be reminding their CFOs and CEOs of the importance of not going dark, of retaining some sort of presence even in the face of a recession this year. Otherwise the route out will be all the harder.
PepsiCo simplifies marketing
One company that has cut its spend is PepsiCo. On a call with analysts this week, its CEO Ramon Laguarta said the company is simplifying its marketing as it looks to be more cost effective as a result of the pandemic.
Advertising does remain “critical” to its strategy, but PepsiCo has had to adjust activity as consumer habits change.
CEO Ramon Laguarta noted that: “Sometimes a crisis helps [a company] to be more selective and to be more impactful, to generate internal momentum against simplification and focus against fewer and bigger. That’s what we’re trying to do.”
The pandemic has also led PepsiCo to build more in-house capability in advertising and marketing, and has also made ecommerce more of a focus than ever before.
All this shows how Covid-19 has pushed consumer trends forward and forced companies to adapt more quickly than ever. PepsiCo is not the only company to see a spike in ecommerce and speed up its long-term plans as a result. The question is how will this intense focus on ROI impact creativity?
‘Check, change, go’: Government launches new Brexit strapline as deadline nears
Just in case you were starting to miss Brexit, it reared its ugly head again this week. With less than six months to go until the UK leaves the EU, the government is launching a marketing blitz to remind businesses and citizens that as well as ‘staying alert’ to the threat of coronavirus they must now take steps to be ready for Brexit as well.
The campaign, ‘The UK’s new start: Let’s get going’, sets out the actions people and companies need to take to prepare for the end of the transition period on 31 December. Ads will include the government’s latest three-word slogan ‘Check, Change, Go’ and direct people to a checker tool that aims to identify the steps they need to take.
The government will be hoping its new Brexit campaign is more successful than its widely criticised ‘Get ready for Brexit’ messaging last year. It had a budget of more than £100m, but around £46m went unspent after the government extended the date of Brexit to 31 January 2020.
Nevertheless, the National Audit Office said the campaign had “limited impact”, with budget wasted on above-the-line media when roadshows and events with key stakeholders would have been more effective. Here’s hoping this campaign proves a bit more successful.
Asos hopes ‘open and honest’ communications mean customers will stay
Asos had to take a number of difficult decisions at the height of the Covid-19 pandemic to mitigate the impact on its business. This included turning off its next day delivery service for seven weeks in the UK and increasing its standard delivery proposition by up to 11 days.
While these are what CFO Matthew Dunn describes as “cornerstones” of the Asos proposition, it had to make the changes in order to ensure it didn’t disappoint customers or force its supply chain to take undue risks. Key to ensuring there was little negative kickback from customers was being “open and transparent”.
Coronavirus has thrown up challenges for all businesses. But consumers mostly understand there might be issues and as long as those are explained upfront are sympathetic to them.
It certainly doesn’t seem to have done Asos any harm. Despite the shift in its product mix to lower margin items such as casualwear, its revenues were up in the four months over lockdown and it attracted new customers.
Profits will likely take a bit of a hit, but Asos is so convinced of its ability to weather the crisis it is handing back money it took from the government for the furlough scheme. Another move that is likely to do it’s a brand reputation a world of good amid the allegations about rival Boohoo and its supply chain.
Marketing employment levels set to slump
Not content with having record levels of budget cuts, the IPA Bellwether report also found bad news for marketing jobs.
Data shared exclusively with Marketing Week shows employment prospects falling to their worst level since the report began asking the question four years ago. A net balance of 50.3% of respondents signalled a substantial drop in employment levels over the next three months. Overall, more than half (55.5%) anticipate a decline, while just 5.2% plan to expand their workforce.
The end of the furlough scheme will no doubt bring a fresh wave of job losses. Here at Marketing Week, we’ve tried to offer some support and help to those who might find themselves without a job. Our This Much I Learned podcast series tackles issues including redundancy and mental health, while we’ve spoken to both senior leaders and the class of 2008 on getting through recession. All well worth exploring.