Marketers Brace to Defend Their Ad Budgets in an Unsteady Economy

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ORLANDO, Fla.—An opening session of a major marketing conference this week included a quick mention of a conversation many industry executives expect to be having soon.

“In the next few months, if you have not already been asked, you’re going to be asked to cut your budgets, you’re going to be asked to find ways to save money,” said

Bob Liodice,

chief executive officer of the Association of National Advertisers, a trade association whose members include Coca-Cola, Walmart and McDonald’s. “This is not the time to do that.”

Mr. Liodice argued that brands will win, regardless of economic conditions, when they can differentiate themselves and defend the productivity of their investments.

As the ad industry braces for whatever broader macroeconomic troubles come its way, its executives expect history to repeat itself: When the economy sputters, companies frequently reduce their ad and marketing budgets.

After Mr. Liodice’s warning, the main-stage programming at the ANA’s “Masters of Marketing” conference largely focused on its usual case studies from marketers such as Procter & Gamble, United Airlines and Chipotle Mexican Grill, spotlighting brands’ attention to issues like sustainability and inclusion.

On the sidelines, however, marketers and their business partners were talking about what lies ahead.

Bob Liodice, chief executive of the Association of National Advertisers, at its conference this week in Orlando.



Photo:

Association of National Advertisers

“It’s definitely a part of conversations, with a focus on concerns around economic uncertainty over what the next several months to a year may bring,” said

Marla Kaplowitz,

president and chief executive of the 4A’s ad-agency trade organization.

Her organization has been advising its members on how to navigate uncertain times. The 4A’s has put together a paper on “recession-profing,” which argues that defending marketing budgets is synonymous with maintaining brand health long-term and keeping customer advocates.

The type of marketing that companies do in hard times also matters, Ms. Kaplowitz said. Companies should be wary of offering extensive price promotions to generate short-term sales as “it can have a negative long-term effect on both the brand and customer experience,” she said.

Some parts of the conference program took on the threat to budgets. The consulting firm Analytic Partners promised during a virtual-only workshop to help marketers defend their spending to the C-suite.

“All of us are trying to understand whether we should maintain, reduce or really increase our budgets and what the implications of those decisions will be,”

Fleur Sohtz,

chief marketing officer at Analytic Partners, said during the session. One-third of the firm’s customers, many of them Fortune 500 companies, have already been asked to cut their budgets for 2023, she said.

Pressure to re-examine budgets is coming from C-level executives, financial leaders and company boards, Ms. Sohtz added.

“There’s a way to use insights to show the board that cutting your budget will not only harm your business in the short term, the impact in the long term is really substantial,” she said. “If you cut your budget and your competitor doesn’t, you can lose 15% of your business.”

Raja Rajamannar,

Mastercard Inc.’s

chief marketing and communications officer, spoke at the conference on how his brand is using multisensory marketing—including a set of fragrances named for its marketing slogan “Priceless”—to reach consumers in new ways. But proving the return-on-investment is crucial to these efforts, he said. The company has invested in proprietary capabilities for measuring and proving that ROI, he said.

CMOs also need to build up clout internally, he added.

“A CMO needs to have earned credibility with the CEO and CFO [chief financial officer] and be in a position to impress upon them that turning down marketing investment during challenging economic times will adversely impact the business,” he said.

Marketers can lean on one another to make a case for their spending, Mr. Rajamannar added.

“To help make the case for why marketing is such a critical business driver, it can be valuable to bring in marketing leaders from other companies and industries to share their experiences,” he said. “This external validation can help drive up the comfort level of company leaders.”

Matt Prohaska,

chief executive and principal of Prohaska Consulting, said the moment can be a chance for marketers to prove their worth.

If CMOs can marshal elements such as loyalty programs, data and customer service to help brands grow without spending as much, it is an opportunity for them to gain more control or importance, Mr. Prohaska said.

“We are now in the times when defense can convert to offense,” he said.

Write to Megan Graham at [email protected]

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