Sophie Schneider In the world of business, economic uncertainty can leave companies on unstable ground. When cost-cutting measures become the norm, marketing budgets are often the first to be cut. This trend was highlighted in a December 2022 McKinsey survey of chief marketing officers from consumer companies, revealing that some downsize their marketing budget by as much as 10 to 20%. While this reaction is not uncommon, it raises an important question: Is it the wisest move?
The reaction of many companies in uncertain times is to target marketing costs, especially when an immediate and direct return on investment seems elusive; however, this cost-cutting mindset can have serious long-term consequences. Trimming marketing expenses in times of economic uncertainty is short-sighted. This viewpoint aligns with the findings of BCG’s 2023 research, which argues that reducing investments in brand marketing during downturns can backfire in many ways. Their study underscores the importance of a forward-looking approach. It encourages CMOs and CFOs to seize uncertain times as golden opportunities for marketing and sales to double down on the right customers, expand market share, enhance customer relationships and, in the process, build resilience.
We strongly advise companies to consider not just their short-term objectives but also their long-term objectives. Brand marketing budget cuts can erode a brand’s established presence and its potential for future growth. If competitors are cutting their marketing budgets, this could be an opportunity to gain a competitive advantage. In times of uncertainty, maintaining a strong connection with existing customers is crucial. A significant reduction in the marketing budget could lead to a loss of customer engagement and loyalty. Instead of retreating in the face of economic turbulence, investing in the brand can be the resilient move that sets a company on a path not just to survive but to sit in the driver’s seat. Companies that sustained their investments during economic downturns not only weather the recession more successfully but also experience accelerated growth post-recession.
A great example is our client Hugo Boss, where rebranding processes proved to be lucrative even in times of crisis. For 20 years we have spoken with clients across different industries and have been advising businesses on strategic and conceptual aspects of brand development and management. We understand the challenges our clients face and support them in times of permanent disruption, so that they can keep pace with the speed of innovation. We are convinced that retaining essential customer communication and engagement strategies is a fundamental step.
As the economy continues to evolve, companies viewing uncertainty as an opportunity are likely to emerge stronger and more resilient in the long run. The guidance is straightforward — avoid cutting down your brand marketing budget; rather, reconsider and reshape it.