How marketers grapple with shrinking budgets amid coronavirus pandemic
The planning process for marketers is being thrown into disarray. With uncertainty pervading all aspects of business, marketers are forced to pare down their plans and focus only on a month or two head. Annual plans are, for the most part, a relic of a different era.
“In many cases, we’re either in re-planning mode or ring-fencing budgets for certain brands,” said the chief media officer at global CPG manufacturer.
So much so that the company’s media plans are being revised weekly as the business responds to the impact of the pandemic. As the chief media officer said: “When you’ve gone from a €25 million ($27 million) media plan and it goes down to €12 million ($13 million) then that’s a different plan in the sense that a channel like TV is no longer affordable.”
Usually, the chief media officer is in control of those revisions or at least has more influence over the final outcome. But with so many unknowns on the horizon, the CEO and CFO are the ones in control of advertising and media dollars, said the chief media officer. Now, the chief media officer acts more like an advisor to those execs, similar to what agencies do for the company’s in-house media buyers.
From there, the chief media officer has to propose a certain amount of investment for a promised return, which is also known as zero-based budgeting. In normal circumstances, this approach is arduous but straightforward. The business decides how many media dollars should be allocated to each marketing plan based on the marketing team’s assessment. But the coronavirus is having an extreme effect on everything. And what little market data there is on how those effects influence media investments has a short half-life.
“Our strategic decisions right now come down to the trade-off between the immediate costs of lost time on-air for some brands versus the long-term gains of ring-fencing media dollars for others that we need to balance to protect bottom-line numbers,” said the chief media officer.
In reality, what happens is those brands that are doing moderately well for the business will get fewer media dollars in the second and third quarters of the year to ease the company’s cash flow on the basis that more will be eventually invested in the fourth quarter to ensure those targets are met, said the chief media officer.
The risk of this approach is that it can prioritize short-term gains over long-term growth. For some businesses, however, the tried-and-tested method of of setting media budgets on a pre-allocated percentage of expected annual sales is a non-starter when the sales figures are so hard to define amid the pandemic in the first place.
“There’s no legacy knowledge or rearview mirror that advertisers can look back to help get through this period and our members are talking a lot about adopting zero-based thinking” said Robert Dreblow, global head of marketing services at the World Federation of Advertisers. “When it comes to partnerships they’re going to have to renegotiate everything.”
It’s a similar setup for a senior marketer at a beverage manufacturer.
Digital media investments that were previously approved by its marketing managers in the U.S. now go through the region’s CEO, said the senior marketer on condition of anonymity.
“Every project goes to the finance team, which is understandable because everyone is conscious of leaking dollars and the impact that could have on the company’s cash flow,” said the senior marketer. “Prior to the pandemic, my team had a lot of autonomy when it came to spending budgets even the larger ones.”
Whereas those investment decisions are normally mapped out a year in advance, the impact of the coronavirus has forced them to be planned on a weekly basis. In 2020, the only certainty the company’s digital marketing team can plan for is uncertainty said the senior marketer.
“While we plan for the next 30 days at the start of each month, people make revisions as the situation changes,” said the marketer. “I spend most of my time now having to draw up media plans, revise those plans and then revise the revisions.”
Unless there’s a supporting business case, it will be challenging for senior marketers to justify compressing nearly a year’s worth of media dollars into a condensed period of time. When times are tough, the longer companies can hold on to cash, the safer they feel.
“Given the economic impact thus far, I fully expect that a portion of many brand budgets will inevitably be returned down to the bottom line to defer losses or fund other business needs and priorities,” said Brian Leder, president of media agency Ramp97.
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