Scenario planning: A silver bullet for adaptable marketing

As the sun starts to set on the end of 2022, under-pressure marketers looking for good times on the horizon are set to be disappointed. With markets in freefall and the cost-of-living crisis really taking hold, budgets are under unprecedented pressure with up to a third of businesses considering cutting back.

It doesn’t matter which sector you’re in – retail, food, finance, technology or healthcare –  marketing budgets are expected to shrink. And, according to the IPA, the outlook for the next four years is bleak, with predictions of further cuts to account for stalling consumer spend.

Marketing budgets are notoriously low-hanging fruit when times are tough and CFOs are looking for savings. But before the financial scythe falls, companies should stand firm and look at the data to ensure they don’t act in haste and repent at leisure.

According to our recent ‘ROI Genome Report: Rules of Recession Proofing’, which draws on more than two decades’ worth of data drawn from 750 brands, 45 countries and hundreds of billions in spend across industries, using data-driven simulations and incorporating them into planning processes drives at least five times more growth ahead of competitors who don’t.

In other words, no business is an island, and the savvy marketer looks at all the factors that have had an impact in the past, to be able to make a prediction about what’s the best course of action both now and in the future. With apologies to Coleridge, there’s data, data everywhere, so do just stop and think.

To protect their budgets and get maximum bang for their buck, marketers have to scratch beneath the surface, and the key way of doing this is through data-driven scenario planning.

So, what key steps should brands consider now when planning for the rest of this year and into 2023 and beyond?

See marketing as a business driver

The first golden rule is to avoid treating marketing purely as a cost – it is a business and growth driver.

According to our ‘ROI Genome Report’, reducing marketing investments might save money in the short term, but it will lead to a fall in sales in the long term by diminishing brand equity and damaging future revenue.

It’s useful to look back to the last major recession in 2008. Our data shows that maintaining or increasing marketing investment also increased ROI and business impact well past the recession.

Beware results in isolation

When something seems to work, it can be tempting to stop there and not look beyond the initial results. But do this at your peril.

One of our financial customers was eager to plan for 2023, and once we started feeding their data into our commercial mix models, we found that upper-funnel tactics such as TV, PR, online video (OLV), and brand marketing came out best. The customer could have stopped at these insights and shifted all its budget into those channels. But no business is an island and marketing budgets are only one part of the scenario.

Fluctuations in the stock market; other economic, political and social factors; and the competitive landscape also need to be considered. Decisions around your marketing budgets are also impacted by what your competitors choose to do.

Our research shows that brands that increased paid advertising during a recession saw a 17% rise in incremental sales, while those that slashed spend risked losing 15% of their business to competitors that boosted theirs. As such, we built a plan for best- and worst-case scenarios, which ensured our client was ready to weather the storms of Q4 and the recession for the years ahead.

A comprehensive measurement programme including scenario-planning capabilities can mitigate the impact of external factors, such as competition or macroeconomic trends, and provide recommendations on where to redirect funds if necessary. And it can even quantify the impact of reducing, maintaining or even increasing budgets.

Invest in brand to drive performance

It’s typical to see businesses abandoning brand marketing in favour of performance marketing during uncertain times. We’ve seen many retail companies issue discounts and coupons during the pandemic, which made sense at the time. But brand marketing typically outperforms performance in the long run, as was the case with our financial customer.

Performance marketing doesn’t have to be abandoned altogether, but it is important to be clear on which activities are driving outcomes – and performance often relies on brand to work well.

For example, 30% of paid search clicks are actually driven by other forms of marketing. This is why we recommend brands avoid using simplistic measurements such as last-click attribution to make budgeting decisions. A mix of performance and brand is invariably the best strategy, bearing in mind that you can only find the right balance with a clear view of what is driving successful outcomes.

Use data to speak the language of the board

Looking to the past to plan for the future helps marketers demonstrate to management, the board and other stakeholders that marketing budgets should be protected.

By providing insight into actual sales, potential business impact of decisions like budget cuts, and taking all other factors into consideration as well, it is an invaluable tool for any CMO who wants to plan ahead and future-proof their strategy.

No-one has a crystal ball to predict exactly what will happen next, but, if used wisely, scenario planning can give you the elusive silver bullet needed for successful marketing in a recession.