Significant shift in budget since the onset of the pandemic

Late last year Gartner published their 2019-2020 CMO Spend Survey, and while budgets had declined a little in 2019, confidence was very high regarding the outlook for 2020.

Of course, the onset of the pandemic changed that, and it changed it fast. The latest Gartner data shows that 65 percent of marketers face moderate to significant budget cuts due to coronavirus disruption. In this poll a “significant” cut is defined as being greater than 15 percent. And, while many marketers have faced cuts in the order of 10-20 per cent, some have reported much deeper cuts, especially in industries where demand has fallen away due to social distancing measures.

Air BnB

However, large scale budget cuts aren’t always the answer as you can see from this analysis of Air BnB’s response to the COVID-19 crisis. To save money, Airbnb halted all its marketing activities at the end of March in order to save an estimated $800 million in 2020. Of course, it’s not alone. When a crisis hits, a company’s marketing budget is usually the first to go. It’s pure economics: If consumers are not spending money on products and services, there is little point to invest in marketing them. In this article, the conclusion is Air BnB made a mistake, arguing how much a brand invests in maintaining the relationship with its customers during a crisis defines its long-term success.

Marketing cost optimization

So if total marketing budget cuts aren’t the right way forward, but revenue has halted or dropped, how should you be managing your budget to navigate the crisis? Especially at a point where it’s still unclear how the crisis will evolve; exactly what the impact on local and global economies is going to be and where we’re going to find ourselves over the next 6-12 months.

Gartner has long advised its clients the importance of a marketing cost optimization strategy, global pandemic or no global pandemic, it is their view that this is simply a sensible approach to budget management. See diagram below:

General advice when reviewing budgets

Rethinking your strategy in accordance with the current market conditions, and reframing your goals to be more realistic is a good starting point. Undertake an honest assessment of the situation, if you’re operating in a sector that looks to benefit from the macroeconomic environment then identify the quick wins and action them quickly. If not, be realistic about what you can achieve and aim for that.

The other critical consideration is to look at what’s currently working well and what’s not. An immediate quick win is cutting anything that’s not working optimally, and try to maintain the investment that is effective.

Generally, a good rule of thumb when managing your budget through a crisis is to acknowledge you don’t know what the future looks like. So planning for multiple outcomes, with a budget to match is a sensible approach.

If it’s possible, try to be proactive when it comes to budget planning. Don’t wait for budget cuts to come to you, react quickly, plan accordingly and present your recommendations back to the board as soon as you can.