Cutting marketing in a downturn is short-sighted – investment can be the key to growth

With the global economy sending mixed signals, it’s no surprise that companies are implementing cost-saving measures. Confidence remains lower than average, and that’s translating to lower spending. Consumers report altering their shopping habits to find better value, seeking lower costs and cheaper brands. Companies globally are asking marketing departments to make cuts in the face of pressures on sales and cost. At the same time, the cost of attracting those customers is going up: CMOs tell us that the average cost per click on a digital ad went up 20% between 2021 and 2022.

When this kind of perfect storm hits, it can be tempting to simply slash marketing budgets to address the drop in consumer confidence and rise in costs. In a downturn, belt-tightening can seem like a wise choice. And indeed, if it’s difficult to draw a direct line between some elements of marketing spend and specific ROI, then the case for cutbacks may make itself.

That’s certainly reflected in the data: We surveyed nearly three dozen CMOs from major North American consumer brands, who reported their boards had requested average cuts of 8% to marketing spend over the previous year, rising to more than 20% in more some cases.

Although business leaders have a responsibility to protect the longevity of their business in a downturn, this kind of rapid cutback may impact future growth potential. With the right priorities in place, investment in marketing can be a key to long-term growth, enabling companies to pull ahead of the competition. By finding and removing inefficient spend on the one hand and applying an investor mindset to encourage high-growth activities on the other, redoubling marketing efforts can in fact give businesses the edge in uncertain times.

Investing through the challenge

Put simply, continuing to pursue marketing success during a downturn can help establish a firm foundation for growth in the moment, and help organisations get off the blocks faster than rivals when confidence begins to flow back.

The data bears this out. During the 2008 recession, the organizations that continued to invest during the tough years saw above-average total shareholder returns (TSR) over the following decade. On average, the total TSR of these companies grew 150% more than that of their peers, and about 70% of those companies entered (and stayed in) the top quintile for performers in their industry.


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