2009 Marketing Budgets: Back in the Crosshairs
Even amateur financial pundits would observe that it doesn’t take an Einstein to realize this economy has all the certainty of a flight departing on time in bad weather. It was Einstein himself, however, who reminded us that in the middle of difficulty lies opportunity. Nonetheless, the steady stream of financial doom and gloom is testing even the most optimistic, forcing them to re-evaluate budgets that seemed secure just a few short months ago.
In order to better understand how recent economic changes have affected spending, we pulled recent benchmark data from 45 b-to-b companies. Overall, roughly 44% indicated their spend for 2009 would be reduced, while 31% indicated it would be increased (the final 25% will be roughly flat year over year). When breaking down proposed spend by organization size, we found that Band One organizations (0- $100 million in revenue) are planning on increasing spending as a group; Band Two and Band Four organizations ($101-$500 million and $1 billion and greater, respectively) will collectively decrease; and Band Three organizations ($501 million to $1 billion) will remain flat. These trends are not surprising, as those organizations in Band One must grow or die; those in Band Three must grow or they will quickly become prime takeover targets. When examining the Band Four organizations specifically, we discovered that 21% of those decreasing marketing spend for 2009 were overspent relative to their peers over the last three years; this revenue band is the most apt to become bloated when times are good. Also, while the majority plan to decrease their investment, the average spend changes for the entire group was actually slightly positive, increasing by 0.4%. Overall, it’s safe to say we see organizations “moving toward the middle,” carefully considering benchmark levels as a bellwether to guide their budgeting.
Where Are The Changes
The word that best sums up the general spending trend for b-to-b marketing for 2009 is caution. The biggest changes to the 2009 program budget, include:
• Events. The overall investment in events (trade shows, live events) is decreasing at a 12% rate versus 2008. On the chopping block most frequently are broad, horizontal trade shows and even generic local events that often perform poorly as demand creators in lieu of highly targeted, vertical events. Local events often aren’t going away without a fight, as evidence of their success is often anecdotal and defended by local salespeople.
• Advertising. Hit the hardest of all categories is advertising, down 17% year over year; discussions with senior marketing executives indicate a strategy shift from general market messaging to field enablement and tactical product positioning. There is a natural movement in a down economy to focus on the messaging the field needs most, often a change in positioning to display current products as a need to have. When you combine this with a customer-first sales focus as well, an organization experiences a reduced need for broad, mass market messages. This shift is often a minefield for marketing executives, as messages that worked en masse may not be easily translated, and specific markets might require more, not fewer, messages.
• Marketing Communications. This category that comprises analyst relations, public relations, public affairs, internal communications and often Web site management is down 6% as organizations are focusing less on public relations and more on client-level communications. We question, however, whether this investment should be reduced at all; for example, leveraging the value of public relations in international markets can be particularly cost-effective given time and travel considerations. Rather than across-the-board cuts, we would advocate for agency consolidation, more targeted public relations and leveraging social media as core marcom options as we move into 2009.
• Field Marketing. Although the overall investment in field marketing is rising 4%, this fact does not tell the whole story. More critical is the fact that marketers are changing the makeup of their programs to be closer to field activity; in specific, a reduction in lead generation spend (from 80% in 2008 to 60% in 2009) in lieu of pipeline acceleration (from 15% to 30%) and client retention (from 5% to 10%). Ironically, we have always believed that the amount of effort focused on the top of the demand waterfall was much too high; it has taken a major economic shift to move spend into better alignment.
Many marketing functions have made significant progress over the past five years in terms of better aligning their activities with those of sales; believe it or not, a down economy is actually a great opportunity to build on the momentum. This is accomplished through focus and careful consideration of program alignment for sales, and having marketing decide what they will not do as a result of budget constraints.
