Businesses today are hunkering down. With consumers clutching their wallets more tightly, companies are scrutinizing every budget item in an effort to maintain profitability even as revenues are flat and costs rise.
And with marketing commonly viewed as a discretionary spend, it is one of the likeliest victims of the ax.
Indeed, recent surveys of marketing executives have found that cuts are underway at most large firms, with up to 60 percent of them cutting or planning marketing budget cuts in 2008. Only 16 percent are looking to increase budgets. And among midsize firms, 29 percent are considering budget cuts.
The trick in this kind of environment is to cut wisely, not wholesale—or possibly even increase investment in certain areas in order to emerge stronger when the recovery occurs.
Indeed, some of the most enduring and successful marketing initiatives were launched in tough times. Wal-Mart rolled out "Every Day Low Prices" during the 2000-01 recession, while the "Intel Inside" program was launched during the 1990-91 downturn. And when the Great Depression was at its worst in the 1930s, Procter & Gamble mounted a huge push for Ivory Soap.
Even before the economy started spiraling downward, senior management was increasing pressure for greater accountability around marketing investments, with an emphasis on demonstrating marketing's impact on business outcomes. Now, it's imperative to step up the pace on the marketing effectiveness journey. And by using smarter approaches like test and learn, the path will be considerably smoothed.
UnitedHealthcare began taking a more systematic approach to its marketing-effectiveness efforts to counter heavy competition and shrinking share in certain markets. It selectively used test-and-learn (or in-market experimentation) approaches to evaluate changes in price, product, and distribution, along with different combinations of print, radio, online, and outdoor advertising.
The resulting data showed how much changing price, for example, affected business growth, but particularly so when combined with promotional activities. It also discovered how pricing and product perceptions were as important to manage as actual pricing and product options. The winning combinations were rolled out in a widening expanse of markets, with positive business outcomes demonstrating marketing's role beyond merely "communications."