Innovation will bear fruit despite budget squeeze
Advertisers can meet the challenge of producing champagne-style campaigns on beer money budgets by focusing on return on investment, rather than reducing marketing activity.
Britain has now entered the “sober” decade. After the intoxicating years of no inflation and constant expansion, Bank of England governor Mervyn King has created a new acronym: SOBER, which stands for savings, orderly budgets and equitable rebalancing.
Though many marketers seem to have recovered for now from the hangover of recession, they too will be expected to manage their money more responsibly. That will be particularly true in organisations dependent on government funding, but the whole industry must learn how to do more with less.
In the Spending Review on 20 October, Chancellor George Osborne sliced an average of 19% from the budgets of unprotected government departments. Yet uncertainty still remains, both about the consequences for organisations funded from the public purse and about any knock-on effect that might be felt by the private sector. Few economists forecast another recession, but many marketers remain cautious in their outlook.
In the same week as Osborne’s announcement, the Bellwether report – which tracks revisions in marketing budgets on a quarterly basis – revealed that they edged higher during the third quarter of 2010. However, Chris Williamson, chief economist at financial information firm Markit and principal author of the report, says that optimism among marketers about the prospects for their sector dipped over that period.
He says: “Anecdotal evidence from the survey indicates that looming public sector spending cuts have dented optimism. Combined with signs of slowing growth in the economy as a whole, this has encouraged a return to cost-cutting at many companies.”
Whether marketing budgets actually drop over coming months remains to be seen. The Advertising Association/Warc Expenditure Report, published on 14 October, forecasts year-on-year growth in advertising spending in each quarter of 2011, while the WPP advertising group has just reported its best quarterly growth for a decade. But, with retail sales stalling in recent months, an expected rise in public sector unemployment accompanied by a likely drop in consumer confidence may yet provide a sobering hit.
Williamson adds: “If this turns out to be the case, weakened sales and lower profits will hit private sector advertising and marketing budgets at the same time as the government advertising cuts come into full force.”
Even in the worst-case scenario, many marketers should at least be able to take heart from the lessons learned during the recession. Adam Smith, marketing director of parcel delivery firm Yodel, says the emphasis of any marketing activity should be return on investment, and a tight budget “focuses the mind”.
He continues: “You have to think about doing things differently. The way I challenge my team is to do that anyway, and budgets are just one of the drivers. I think it is all about how you keep the brand fresh in the minds of people you want to be selling to.”
For Yodel, this involves focusing more resources on supporting direct sales teams and generating new business leads, and less on media advertising. However, a substantial body of research, including a study by Harvard Business Review as well as received wisdom, suggests companies that maintain their marketing activity perform better during and after periods of economic difficulty. Marketers have support from some unlikely quarters in this view.
Sir Nicholas Montagu, who chaired the Inland Revenue between 1997 and 2004 before its merger with Customs and Excise, says that one of his first acts was to appoint a marketing director for the nation’s taxman. The purpose was to increase the profile of tax-paying, and Montagu argues that improved awareness of what income is taxable contributed to raising additional revenue. This was at a time of significant growth in the workforce, but he insists that for organisations to reduce their marketing for budgetary reasons is “a false economy” and “terribly short sighted”.
But cost-efficiency need not always mean reining in marketing activity, nor indeed must it entail a drop in the quality of a brand’s communications. Where advertising is concerned, for example, there is often scope for removing unnecessary costs and delays from buying and production processes.
You have to think about doing things differently. The way I challenge my team is to do that anyway, and budgets are just one of the drivers. I think it is all about how you keep the brand fresh in the minds of people you want to be selling to
Adam Smith, Yodel
Scott Jacobson, marketing director of first aid charity St John Ambulance, believes that marketers need to assess their processes and strip out any unnecessary and costly bureaucracy. He says of his own approach: “I always like to think about what I am trying to accomplish, and make sure I am not over-complicating things and doing more than I need to do to achieve my objectives.”
He points to convoluted processes of approval for advertising artwork and pointless proliferation of creative ideas as examples of over-complication in many businesses. In the charity’s “Life lost” campaign, which launched earlier this year, and aimed to educate the public about first aid, Jacobson says he was at pains to avoid becoming trapped under the weight of this extra paper.
“We did not have the usual creative by committee, with layers and layers of approval processes and constant changes, which meant our brand proposition and creative concept remained intact. We did in six months what in most places would have taken two years.”
Ford’s recent UK campaign for its S-Max car saw agency Wunderman take a similarly thrifty approach to the interactive website it was briefed to create. The sporty positioning of the S-Max required photography that placed it in rugged terrains, but rather than commissioning a photographer to shoot the car on location, Wunderman used computer-generated imagery from specialist supplier Moofe.
The backdrops incorporate photos shot from multiple angles to create a three-dimensional effect when the user of the website zooms in and out on the car. Tom Redican, art buyer at Wunderman, says the six backdrops provided by Moofe cost as much as one directly commissioned shoot, given the expense that would have been involved in transporting right- and left-hand drive cars to the site, as well as photographic equipment and labour.
He adds: “It is not so much ‘more for less’, it is just cost-effective. Everybody has limited budgets these days, so it is about working out the most efficient way we can give the best results.”
Marketers prepared to work with untried techniques to moderate their costs could easily achieve the savings they need to make. However, this also requires them to seek out new solutions from their agencies.
Richard Beard, communications manager at Ford, argues that marketers should always be pushing for constant improvement in their methods. “Marketers should always innovate and take risks, regardless of prevailing budgets. That is the essence of creating cut-through and standing out. Budget restraint forces us all to be more certain of the value of each and every activity, but this should not stop us from trying something new and different.”
One area where marketers do appear to be slowly embracing evolution is in their media spending. Although spending figures show traditional media rebounding from recession, a well-documented structural shift towards digital platforms has been under way in the advertising industry for some time.
With media owners constantly expanding online inventory, the cost of advertising space there remains low compared with more traditional media. Detailed web analytics also provide measurement that clearly demonstrates the level of return on any marketing investment.
This is coupled with the emergence of social media. Twitter and Facebook accounts, for example, offer brands a way of getting their messages out to consumers for very little cost.
Beard says that, as a consequence, brands such as his own have fundamentally reappraised the balance of media they use for their marketing. Ford maintains significant activity in traditional mass media, but has constantly increased its presence online and on social media sites. Beard adds: “Clearly this rebalancing in our media spend still has some way to run.”
Budget restraint forces us all to be more certain of the value of each and every activity, but this should not stop us from trying something new and different
Richard Beard, Ford
Yodel’s Smith comments too that as budget pressures increase, his brand is likely to focus on web advertising, despite the value that he recognises in channels such as the trade press. Click-throughs can be measured to provide greater accountability, he says, conceding that “we might feel we have to walk away from a particular channel” if it fails to provide the visible return on investment now required.
Yet he also expects the cost of media space to fall as demand falls, a prediction shared by Williamson at Markit. The freeze on spending by the government’s Central Office of Information – the biggest advertiser in the UK before the general election – should be enough to guarantee this alone. Some media advertising opportunities might therefore become more cost-efficient for marketers than in the recent past.
For charities and public sector organisations, partnerships with corporate backers are likely to become more important if funding is reduced – not necessarily because private sector investment will make up the shortfall, but because the marketing burden can be spread. New routes to engage with a target audience can be opened up, while organisations can share symbiotically in the benefits of their partners’ communications.
Norman Turner, chair of youth sports charity StreetGames (see case study, below), says: “The whole issue of joint working and sharing costs is going to become more and more evident over the next few months and years. That sort of partnership also helps us up our game because we have mutual expectations of that new arrangement, and we need to make sure that we are delivering our side of the partnership.”
Meanwhile charity Cache, which provides qualifications in children’s services and social care, is likely to focus its efforts on public relations, according to its marketing team (see case study, below). Contributing articles to relevant magazines and securing speaker slots at trade events helps the organisation stimulate word of mouth within its industry at minimal cost.
Planning and evaluation
It is apparent that the mix of media and marketing disciplines used by an organisation will continue to be determined by that organisation’s market, objectives and financial circumstances. Jacobson at St John Ambulance argues the best way for a brand to achieve cost-efficiency in its marketing is to ensure that campaigns are planned and evaluated in an integrated way.
He says: “If an organisation is smart, it looks at total budget across all disciplines – such as advertising, PR, direct and online – and crafts an integrated plan that gets the best bang for the overall buck. This should happen regardless of the economic environment and how big or small its marketing budget is likely to be.”
For marketers in this new age of sobriety, it is a matter of taking everything in moderation.
Case study: Cache
The nimble reaction to government cuts
Cache, which designs and assesses qualifications in the fields of children’s services and social care, derives about 85% of its income from public money. Although the departments that fund the charity’s activities fared better than most in the Spending Review, uncertainty remains over the funding it can expect to receive in future.
This creates further uncertainties for the marketing team, not least because the charity’s direction will be influenced in part by where government money is eventually allocated across its areas of business.
The market for adult social care qualifications is estimated to be twice the size of Cache’s core childcare market. According to sales and marketing director Guy Lane, this means the organisation must be nimble and adjust its offering to introduce new qualifications to market, as it is currently doing for health and social care.
Lane says the charity doesn’t have to throw lots of money at marketing to generate awareness. Public relations activity through the trade press and events has generally proved the most effective method of reaching Cache’s target audience. He says: “With the professional nature of the market that we cater for, articles [about our work that appear in the press] have far more impact than advertising.
“We are also seen as a lobbying group, so when we produce an article, relevant publications want it. Advertising is far more expensive and I do not think it carries a great deal of weight in the professional market we are in. It can be an expensive waste of money.”
Although the charity is shunning traditional advertising, Cache is exploring how the digital space could benefit the business. It has recently launched a Twitter account and a new website, Cachezone, which invites user participation. Marketing team manager Sarah Lee explains: “This is less social media and more of a secure website for our customers. We will be using forums and blogs to create a safe environment where our customers can talk to each other.”
Public relations manager Lobna Benllahssen adds that Cache is also exploring the possibility of using YouTube for training purposes. The idea would be to post videos of training sessions, where customers unable to attend live events could watch demonstrations online at any time.
While financial restraint clearly influences marketers to consider new low-cost options such as these, Lane does not believe budgets are the biggest factor in executing successful marketing plans. More important is “the character of the people in the department”, he says. “You can have as small a budget or as big a budget as you like but if those people are not by nature inclined towards innovation, they will just pursue the same old routes. If you are prepared to be innovative and imaginative, then you can be, irrespective of your budget.”
Lee adds that budgets will be used more wisely in the coming months. With this in mind, the charity has invested in a customer relationship management system to target customers and understand their habits better. The aim, she says, is to “make sure that we are using our marketing budget to invest in the right things that provide them with the right value”.
Case study: StreetGames
A charity changing its marketing focus in the face of cuts
One of the few large capital spending projects to emerge unscathed from the Coalition Government’s Spending Review was the 2012 Olympic Games in London. The budget for the Olympic Delivery Authority, responsible for constructing the venues, has been left intact. The organising committee (Locog), which is responsible for marketing the Games, is funded via its sponsors and so remains largely unaffected.
However, one of the primary focuses of London 2012’s marketing is ensuring a sustainable legacy for London and the UK after the event. This relies not merely
on centralised activities, but also on hundreds of individual community schemes, endorsed by Locog’s non-commercial Inspire campaign.
Many of these schemes are not protected from government cuts and one of the charities that will be assessing its budget is StreetGames, which brings opportunities to play sport to young people in disadvantaged communities. A three-year partnership between StreetGames and Olympic sponsor Coca-Cola was announced in October, with endorsement from the Inspire campaign.
And the charity will need the help of the soft drinks giant more than ever. Coke will fund community events and training courses for sports coaches. Coca-Cola Great Britain country manager Jon Woods says the tie-up is “a major step towards meeting our Olympic goals”.
He continues: “By drawing on the appeal of the Olympic Games and the popularity of our brands, our ambition is to encourage positive behaviour change among a traditionally hard-to-reach audience.”
Despite this high-profile backing, which will protect part of the charity’s activities, StreetGames’ individual local projects still depend on public money, which is now in doubt after the Spending Review. Chair Norman Turner says bodies such as Sport England that might fund the projects will be reassessing its budgets, while organisations that operate in partnership with the charity, such as local authorities, schools and community associations, will also be under pressure to cut their costs.
As a result, the resources used in all aspects of the charity’s operations, including marketing, will be reviewed. Turner adds, however: “To achieve our core objectives we must be able to promote our role and activities.” The money available to do this might be depleted, but he says that rather than scaling back marketing activity, StreetGames will instead concentrate its communications in different areas.
These include social media, where the charity already runs Twitter and Facebook accounts. Turner says that traditional communications networks – formed through trustees’ business links with government, sports governing bodies and corporate sponsors – will be even more important. In this way, StreetGames aims to take advantage of the chance to “piggy-back” on communications from the likes of Sport England, Locog and Coca-Cola, using the Olympics as a springboard.
He says: “In our area of activity, this really is a never-to-be-repeated opportunity. It is absolutely vital to maximise the catalyst of the Olympic Games.”
Doing more with less:
Adam Smith, marketing director, Yodel
The role of marketing is always to look for a return on investment. [Budget restraint] focuses the mind, although it also depends on which industry you work in. If you are a retailer, advertising and marketing is paramount to driving traffic.
What I am doing at the moment is becoming very much more focused on the return we are getting for our money.
Norman Turner, chair, StreetGames
The activity of promotion is essential to achieve your objectives. The challenge is doing that for less cash. That means exploring Twitter, and other means of delivery, which is appropriate for us because we have a young client group.
Our charity has a branch network with about 120 projects, so we have existing lines of communication and word of mouth is really important through that network.
Richard Beard, communications manager, Ford
Reduced budgets don’t necessarily drive efficiency: a base level budget and core team will always be required, and real inefficiency is generated by short-termism in the face of recessionary pressure, which highlights the need to remain focused on medium and long-term goals.
The emergence of the social media channel has prompted all marketers to reappraise the channel balance across an optimal media schedule, so regardless of budget restraint, we have looked to maintain strong above-the-line activity, while investing in significant online and social media generation activities.
Scott Jacobson, marketing director, St John Ambulance
I have lost count of how many times over the years I have tried to tell companies I have worked for – or provided counsel to – that even if you have ten good ideas, if doing five of them will get you where you need to be then why do all ten? It is just going to be more complicated and more expensive. Yet I still see this happen all the time.
Unfortunately, most organisations operate in silos and the budget is carved up with a slice going to each area and there is never an opportunity to collaborate on a truly integrated plan, though that would surely be more cost-effective. Trust a good idea once you have one and trust the people responsible for turning that idea into a reality.