Monday, January 5, 2009

Marketing Budget Cuts of 15% for First Half 2009

Within the technology marketing sector, I predict budget cuts of 15% or so for the first half of 2009. And within the typical marketing mix, the events budget and traditional-media advertising will bear a dis-proportionate share of those cuts. Given the trend of accelerating spending on digital advertising, it is more likely then ever before that traditional media spend lost in the downturn of 2008-2009 will not - ever - be replaced.

In the tech industry we are now, over the past couple of months, just acknowledging the impact of the recessionary cycle; even while the macroeconomists are now saying we have been in an overall recession for a year. My sense of the marketing budget cuts in tech is that at the beginning of an acknowledged recessionary cycle (i.e. now), there is an over-reaction that brings budget cuts that go too deep on the first pass. It's the nature of management which is so often short-sighted. I have believed that good marketing investment policy has elements of a large inertial flywheel: let it stop spinning and the fuel to get it going again costs a lot more than if steady increments had been consistently applied. Vendors should have the wherewithal and courage to keep their investments basically steady.

Other guidance for senior marketers:

  • Use the downturn to permanently eliminate or re-shape entrenched silos of program costs: 1) Example: Isolated events not part of a broader campaign or important new launch; 2) Let the downturn play the role of "bad cop"; 3) Be most rigorous/suspicious of heavily guarded budgets
  • Given the forecasted short duration of the downturn: 1) limit staff reductions . . . Marketing headcount turnover has already exceeded 9% annually for the past two years; 2) Use the downturn to mandate/effect more aggressive Content Audits
  • Identify and create shared services: 1) Target is duplicate discretionary costs (e.g. across your 3 product lines, PM’s have purchased 3 separate on-line community platforms); 2) Target is duplicate activities executed within fixed costs (e.g. you oversee 3 product lines and each group spends 4 days per month on separate dashboard performance reporting compliance, which you are unable to normalize)

    By Rich Vancil, VP, IDC's Executive Advisory Group (rvancil@idc.com)