How agencies and brands can weather the prevailing economic climate.
Given an already weak economy, every time the rupee depreciates against the dollar, political unrest grows, food and fuel prices increase, or inflation rises, Pakistani wallets let out a scream. As a result, people are reducing electricity usage, making fewer impulse buys and implementing other cost-cutting measures.
In these circumstances, the response of the business sector is often to cut their costs, especially their marketing budgets. But is this the way forward? To determine how accurate this notion is and what other measures brands can take to stay relevant and ride the crisis, Aurora spoke to 10 agencies and companies. Unsurprisingly, while no one can say for sure what the near future holds, there is consensus over the fact that marketing budgets should not be cut and there are other short-term solutions agencies and clients can implement. These are:
1. Maintain Marketing Efforts: Increasingly, the received wisdom is that brands are better off maintaining, or even increasing, marketing efforts, if only to ensure they are strongly positioned once the crisis passes; otherwise, they may have to build momentum from zero. For instance, during the 1989-91 recession, two brands increased their ad spend – Jif Peanut Butter and Kraft Salad Dressing – and experienced a growth of 57% and 70% in sales, respectively (source: Crimtan).
Currently, all the local agencies and brands Aurora spoke to agree that cutting budgets will not bring any benefits. Companies should instead reshuffle spends towards actionable, ROI-focused marketing. For example, according to Zeeshan Sharfi, co-Founder, Digitz-Digitas, if previously 60% of a marketing budget went towards awareness promotion, that 60% should now be broken down to 40% conversion and 20% awareness. At a time when companies are focusing on maintaining steady revenues, generating fast-paced sales is more important than strategies that take longer to produce results. A fast-food company will be more likely to convert customers through a BOGO deal rather than by promoting a month-long online contest aimed at creating brand awareness.
2. Invest in OOH Advertising: Although a preference for digital channels is now a given, the majority of clients Aurora spoke to have attested to using more OOH recently because of the medium’s effectiveness (compared to TV) in generating better top-of-mind recall. This is supported by research published in the Ipsos Consumer Book ’22, whereby the monthly reach of OOH ads in the period 2010 to 2020 has increased by 30% in terms of the number of people who look at a billboard. The marketing manager of a local ice-cream brand concurs, stating that their aim is to push sales by focusing on OOH and digital advertising, compared to TV and print. “If a consumer sees an ad for an ice lolly on TV, the gap between watching the ad and going to buy it is wide. With a billboard, someone on the way home or already inside a store is more likely to become a buying customer.” He adds that this is not the time to spend a majority of the budget on long-term brand building and awareness; rather, brands should spend on marketing to cope with meeting sales targets.
3. Adaptable Marketing and Transparency: If the past has taught brands anything – especially since the pandemic – it is to adapt to change. During the pandemic, many brands, rather than taking a wait-and-see approach, responded with innovative pivots that helped them navigate through the unpredictability. Commercial airlines temporarily turned into cargo carriers, grocery shops began retailing via e-commerce and textile companies began producing PPE.
According to Azam Jalal Khan, CEO, Digitz-Digitas, regardless of the economic climate, brands that do not constantly strategise to have a strong approach to marketing will not survive. He cites a client who, during the pandemic, was faced with a significant decrease in in-store sales. “We suggested they change strategy by using e-commerce as the way to push sales. We promoted the idea, via TikTok and other online platforms, that buying the client’s products online ensured safety and authentic products. In 2021, the client ended up increasing their marketing budget and investing in influencer marketing.”
Along with re-strategising, agency heads emphasise that agencies and clients need to be transparent with each other. Brands need to tell their agency if they are not satisfied with the execution they are getting (if they feel that way), instead of seeking a new agency. The reality is that if one party is upset with the other, they often cannot, or will not, say so. Agencies too need to be more transparent when it comes to budgets – if they are spending $20 on a campaign, they need to clearly explain to their clients what those $20 have been spent on.
4. Avoid Changing Agencies: Again, a major and common complaint by agencies is that clients tend to look for alternative and cheaper agencies when budgets are squeezed. This does not work well in the long run because it takes time for a new agency to learn about the client, and although the client may save some money by approaching a cheaper agency, the quality of the service may not be up to their expectations. This having been said, if an agency does not think they have issues that need fixing, or have consistent performance issues, then a brand probably does need to think about a change.
5. Creativity and Media Spend: Often, advertising effectiveness is aligned with media spend rather than consumer sentiment. Sidra Salman, Creative Director, Synergy Group, makes a valid argument when she says that if a brand has to spend the majority of their marketing budget on media buying there is something wrong with the creative aspect of the message. “In a thriving economy, disposable incomes are higher and it is easier for brands to make their way into the consumer’s shopping basket. When the basket starts to shrink, brands find it difficult to stay relevant and that is when advertising is truly tested. Effective advertising is not always the result of big budgets. Creating effective communications is what we should be doing.”
6. Understanding Consumer Psyche: Although creativity is important, no business wants to offend their customers, especially in times of inflation, when emotions run high and customer perception is even more important. Case in point, during Covid-19,a US car dealership was in hot water after mailing an envelope labelled “Covid-19 Stimulus Assistance.” The people who received it thought it was their stimulus cheque from the government, when in fact it was a promotion for the dealership. Suffice to say, there was an enormous backlash from the community. Had the dealership conducted a low-budget, online contest with a small giveaway as a prize, they may have attracted positive attention from a few hundred people rather than attracting negativity from thousands.
7. Value for Money: Brands need to figure out not only how to survive in inflationary times, but also how to help their customers. If budgets permit, product prices can be reduced or special promotions introduced to enable companies to maintain a stable revenue stream. Instead of increasing product prices, brands could introduce new categories, diversify into new segments or attract a new consumer segment. For instance, a skincare brand previously catering to SEC A could introduce a more affordable range aimed at SEC B which is perhaps budgeting but can still afford to indulge in small luxuries. A global food brand comments that in their case, increasing product prices is a last resort and they have reduced costs by 10 to 15% by revamping their packaging and cutting down on raw material costs. They too emphasise the need for brands to invest in marketing in tough times because once things are back on track, the momentum is easier to pick up.
To summarise, although these are difficult times and no one knows when matters will ease, clients and agencies should consider implementing short-term marketing strategies that will enable them to be agile and keep up the sales momentum. More importantly, although it is easier said than done, businesses need to adopt a ‘give and take’ approach whereby they look after their interests as well as those of their customers.