With inflation rising, how can agencies persuade brands to keep spending?
Each week, The Drum asks agency experts from across the world and the ad business for their take on a tough question facing the industry, from topical concerns to perennial pain points.
How can agencies challenge client caution?
The Institute of Practitioners in Advertising’s (IPA) print ad in the Financial Times last week provoked some debate within the sector about how the advertising industry should go about promoting the good it does for clients.
It’s a critical issue, with recent data from Gartner suggesting that rising inflation and consumer responses to the cost-of-living crisis is already affecting CMOs of consumer retail brands. Its CMO Spend and Strategy Survey found that marketing budgets had risen to 9.1% of total revenue – higher than the depths of the pandemic but lower than 2019 levels, which Gartner says ”reflects growing economic uncertainty”.
So other than placing print ads in newspapers, what can agencies do to plug gaps in client confidence and caution against too-cautious budgeting? We asked our agency expert readers for their advice.
How do you solve a problem like... persuading clients to keep spending?
Beth Rolfs, chief data officer, Grey New York
When there are fears of an impending recession, it’s instinctual for brand leadership to think about contracting budgets and brand building. However, historical data from the great recession shows that brands that countered their instincts to contract and instead continued to spend on advertising and growth strategies saw decent to significant annual growth. Brand’s need to be strategic about targeting, messaging and positioning within their category. Increasing a brand’s cultural presence to a targeted audience while the rest of a competitive set cuts media budgets and runs dated campaigns poses a real opportunity to connect in a more valuable way with customers.
Pip Hulbert, chief executive officer, Wunderman Thompson
With a recession looming and the industry shouting about the benefits of long-term thinking over short-term reactivity, it’s time to go back to what’s most important for clients: their brand. It’s not all about spend in the next year – markets do recover eventually – it’s about making the right choices to ensure your brand is intact and stronger, ready to hit the ground running. To get to that position, we need to help our clients take a holistic view of everything their brand is doing, determine how valuable each element is and then make decisions about its relevance and importance. It’s only by seeing everything a brand does that we can make informed decisions about specifically what it should do to both survive and prosper.
Mark Singer, chief marketing officer, Deloitte Digital
Currently, customers value digital transformation projects that directly connect them to businesses through trusted interactions that feel personal and relevant to them. Unlike in 2008, technological advancements significantly allow highly targeted outreach. Consumers will go to brands they know and trust, so clients need to invest in their connection to customers and build brand trust and recognition to become the product consumers reach for first.
That mindset has led to increased client demand for digital transformation in the customer experience space in the past three years. Clients seeking high performance don’t need to be convinced to spend more money – that fact speaks for itself. Additionally, during times of economic uncertainty, clients appreciate projects which can deliver directly measurable ROI with the ability to increase and decrease budget on the fly.
Simon Gregory, joint chief strategy officer, BBH
We have all the data, so it should be easy, right? Sadly, advertising data is nothing without persuasion. So, in an argument full of science (hat-tip to the IPA), here’s how to add some magic. First, get to the root cause of the decision-making – often it’s not in the marketing clients’ hands. Focus on share, not consideration.
Second, position marketing as a ‘business lever’. Advertising is a comparatively easy tool to use in order to take advantage of an opportunity. And third, put some skin in the game. If you really believe it is the best way forward, treat the spend like it’s your own money and offer performance-related pay or similar.
Katy Wright, managing director, FCB Inferno
When we look at history we’re not learning about the past, we’re learning about what will happen in the future. In the last 100 years, most recessions have lasted around a year, so it’s not going away.
CFOs are staring down the impact of inflation, the Ukrainian war, supply chain and increasing costs… The marketing ‘pot’ is an obvious one to look to, but we’ve learned that the brands who win in a recession don’t cut.
Don’t lose your voice, keep advertising, people need reassurance. Don’t pretend nothing is happening, show empathy, be honest and direct and don’t ignore. But we’re human beings and we still, albeit hard, want to enjoy our lives.
ROI must be embedded in what we do, but when your brand is in the spotlight it’s an opportunity to revisit what your strongest value is.
Diego Chicharro, strategy director, Publicis.Poke
Some clients will look at the evidence and agree: advertising is vital to keep the business (and the economy) afloat. But many are operating in a fearful commercial climate that can be difficult to navigate, where supply chain inflation and budget squeezes will dominate more than effectiveness.
Our job is to help clients break down the problem into its rational components while acknowledging the broader nuances. That’s why an ad in the Financial Times outlining the facts is a great start, but it’s not the whole picture.
Isaac Mizrahi, co-president and chief executive officer, Alma
As a former client, I know the stress of advertising budget reduction, mainly during recessions. My first suggestion is to understand the client’s pressure, limitations and concerns. Clients need partners, not critics, at these times.
Second, I’d support the client by building a rationale demonstrating advertising is more critical during a recession, which is shown in studies by industry leaders like Les Binet and Peter Field. According to these studies, investing in advertising during a recession can help brands navigate economic headwinds while also creating competitive advantages and equity for sustainable growth in the future.
James Wigley, chief growth officer, Jungle Creations
Numerous studies support the long-term return on investment that’s gained through maintaining or increasing marketing spend during recessions. Marketing should always strive to deliver results and avoid wastage and during recession scrutiny on achieving this is rightly amplified.
So to spend on mediums like glossy (expensive) TV campaigns when the data indicates eyeballs are diverting elsewhere seems unwise – irresponsible, even – in the current climate.
Instead, marketers need to be focused on avenues that deliver targeted, measurable messaging to engaged audiences. Enter social, where creative can be quickly customized and optimized to audiences based on what messaging is resonating the most.
Ben Bunce, strategy director, Sine Digital
Attention spans are shorter, consideration time is lengthening, so we advise clients during challenging times to invest in storytelling that’s personalized, provocative and engaging. What drove action six months ago will need twice the effort today. Don’t worry about spending – worry about returning. Rethink your KPIs and measure investments against more meaningful metrics. The cost of advertising is rising, so be smarter with channel strategies and budget splits to make wiser decisions on what platforms to use. Use digital over traditional outlets to maximize efficiencies and rely on data-driven or automation platform features.
Amelia Markham, senior planner, Five by Five Global
When times get tough, advertising budgets are often the first to go, even though there’s bucket loads of data to suggest that sustaining spend is a more effective strategy in the long run. Still, persuading clients to do so when they’re already feeling the pressure can take more than just showing them the data. Clients need to feel confident that agencies are recommending what’s best for their business rather than simply suggesting a strategy that will put money into their own pockets. That takes trust as well as transparency and collaboration – critical components of any client relationship. So much so that we have them up on our walls at Five by Five.
Tom Bayliss, chief client officer, We Are Social
There’s an old saying: ’When the good times are good, you should advertise. When the times are bad, you must advertise.’ I’ve guided clients through past periods of recession and have seen first-hand the growth of those who held their nerve and continued their marketing investment throughout, only to emerge with greater market share when the country returned to growth. Working with their agency partner, most clients understand the importance of the long-term view. But with budgets under pressure, advising clients to refocus spend in cost-effective channels such as social offer them better ROI, targeting and the ability to engage with an audience or community.
James Bargent, music production director, MassiveMusic
In a recession, the gut reaction – which we saw early in the pandemic – is to slash budgets and dilute creativity down to a sad piano. Let’s learn. Instead, brands should invest wisely in areas that bring long-term value and let creativity do some heavy lifting. After all, creativity is problem-solving as much as anything else.
Music specifically hits this sweet spot between value and effectiveness; prop up a golden idea and the message will sing from the rooftops. Remember, people identify strongly with music in challenging times; it gives hope and universal catharsis and lingers long after an economic bounce back.
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