Uncomfortable truths and trust in the age of coronavirus
To simply tell advertisers to ‘keep on spending’ through a downturn is not necessarily the right option, writes Simon Taylor
Coronavirus has put marketing budgets and CMOs into a spin and ratcheted up the pressure on their departments. What do we say? Should we say anything? How can we ensure what we say doesn’t lead to a public backlash?
Advertisers don’t like to take unnecessary risks and it’s only understandable that the safer option is often to hold on to budgets. However, this puts media agencies in a difficult position. Revenues from fees and commissions are under greater threat than at any time in years, if not decades.
It’s no great surprise we’ve seen umpteen LinkedIn thought pieces from agency heads reminding clients of the virtues of ‘keeping the lights on’. It’s not that I disagree with the econometric arguments, but academic arguments need to be balanced by business realities.
When agencies are announcing promotion and hiring freezes and looking to cut costs, it’s only natural to want to reassure clients to keep on spending. After all, if revenues are heading in the wrong direction, the impulse for self-interest may feel overwhelming.
But to simply say ‘keep on spending’ is not necessarily the right option.
The economy and the advertising industry will recover. It’s likely this will take some time, but people have long memories. They will remember suppliers that gave them the wrong – or worse, self-serving – advice. [advert position=”left”]
Now, more than ever, advertisers need trusted media partners to guide them, ones that will set aside short-term gains in favour of candid, rational and sometimes uncomfortable advice. And that means more than just rolling out the strategists to client meetings to recycle those increasingly desperate ‘Advertising Through a Downturn’ speeches.
There is a lot of sound evidence to suggest that at a brand level, it is critical to maintain salience through continuing to spend on advertising. But if revenue is heading through the floor, is marketing the best place to spend what little money is available to a business?
Talk is cheap, and often irresponsible
Yes, the marketing gurus of old are right about protecting the value of the brand over the long term. It’s always important for brands to remain valuable, salient and relevant among consumers.
However, it would be entirely irresponsible to overlook or underestimate the ramifications of COVID-19 on the economy and the impact of the impending recession on clients’ businesses. To talk only of maintaining spend until a recovery is but one facet of a much broader picture.
Marketing is a powerful lever to drive demand. We wouldn’t be in the business if we believed otherwise. It still makes sense to keep the engine running so your brand is front of mind when consumers emerge from their isolation caves, but it makes next to none for most brands to maintain performance marketing at the same levels.
Is performance performing?
A large number of advertisers, wooed by the immediate measurability of digital marketing, have inverted the 60:40 brand-to-response ratio advocated in the IPA’s famous The Long and The Short of It study. Some have gone a step further and overwhelmingly weighted their spend towards ‘performance’ channels.
Therefore, it’s a big ask to just switch off their lower-funnel activity. But for many advertisers it is the right thing to do. Why invest marketing money to stimulate demand that just isn’t there or attracting the wrong kind of prospect customer?
Right now, we’re posing this question to our clients and having frank conversations about their activity. We aren’t fighting the tide. We are actively advising clients in a number of places to preserve their cash.
Yes, telling clients the truth without the sugar-coating may cause short-term pressure on agency revenues. But the bigger gain is not only business reward for clients that are properly counselled, but also trust that lasts for the long term.
So, fellow agency leads, don’t be afraid to counsel pulling or postponing campaigns. Your bottom line may be under enormous pressure, but the right thing for your clients may well be to conserve budget and even shut off their performance-led activations.
We can’t expect it to be business as usual post-lockdown, and agencies need to make sure they’re viewed as trusted partners and allies, not just suppliers keen to make a quick buck. The fact is that no-one’s life will be immediately going back to normal as soon as the lockdown ends. Agencies will need to find other ways to stay solvent – and trust will be a defining factor in whatever that may be.
Simon Taylor is managing partner at media agency UM