How to set a marketing budget in uncertain times
Marketers have a unique mix of elements to keep in mind as they set their budgets for 2020. Next year brings the double whammy of a presidential election and the Summer Olympic Games, which means media rates could be higher than usual in certain months. President Donald Trump can make the stock market rise or fall with a single tweet, especially one that mentions China and tariffs.
Not enough? How about an impeachment inquiry, which could subject a divided nation to an election-year clash between Congress and the president.
And then there’s that looming r-word: the potential for a recession. The Federal Reserve cut interest rates on Sept. 18 for the second time in less than two months to help keep the economy chugging along. Six days later, the Conference Board said consumer confidence fell 9.1 points in September, the steepest drop so far this year. “While confidence could continue hovering around current levels for months to come, at some point this continued uncertainty will begin to diminish consumers’ confidence in the expansion,” Lynn Franco, senior director of economic indicators at the Conference Board, said in the group’s Sept. 24 statement.
It’s a lot to juggle. Marketers at companies where the economy plays a significant role in consumer spending have tips to share as you finalize—or begin, for the procrastinators—budgeting for 2020.
Prepare—and prepare to pivot
Andrea Brimmer, chief marketing and public relations officer at online bank Ally, says she isn’t planning anything significantly different for 2020 as a result of the talk about interest rate cuts and the economy.
“For a year like next year, we’ll probably set aside a little bit more of a reserve that we would dip into if we saw that we needed to accelerate spending based on the marketplace starting to get sleepy,” says Brimmer.
Ally had success with that approach before.
“In 2018, we actually did see some lag in terms of deposits activity,” Brimmer recalls.
Some banks were raising rates and the competitive marketplace was getting fierce. So Ally upped its spending by a “significant” amount in the fourth quarter behind a promotional offer pointing out that online banking interest rates are often higher than those at traditional banks. Ally offered an extra 1 percent to people who brought their money to Ally for 90 days. In two weeks, 74,000 new accounts were opened, compared with a total of about 58,000 accounts in the prior quarter.
“You’ve got to be prepared to adjust,” says Brimmer.
The momentum carried over into 2019. “This will be our best year in the 10-year history of our company in terms of customer growth,” Brimmer adds.
If there is a downturn, value brands could benefit, so prepare accordingly.
“Look for the opportunities that consumer or economic sentiment create to further your brand message, your brand affinity, and ultimately your brand growth,” says John Dillon, chief brand officer at Denny’s, the diner chain that often advertises value-priced meals. “What I’ve learned over the years is don’t get caught up in what the ‘experts’ are saying. Be aware, but be nimble.”
Planning takes time, but it can save time in the long run. “Build in flexibility to respond to different circumstances that unfold throughout the year,” Dillon says.
Look outside the marketing department
Brimmer keeps in touch with other executives at Ally, including the chief financial officer and the head of the consumer bank, so they are all aligned if and when a backup plan needs to be implemented.
“It’s always really important to partner with your CFO,” says Brimmer. “You have to understand the economics of the company.”
At Denny’s, where upward of 90 percent of restaurants are run by franchisees, Dillon and the marketing team can’t work in a so-called silo.
“We stay very close to our franchisees in all of our thinking and all of our planning, which adds conversation time up front, but saves exponential time on the back end when you are actually in the mode of making real-time fluid adjustments,” he says.
How to get the budget you want
Come in armed with data that backs up the amount you’re asking for and put your marketing skills to use.
“Don’t focus on just securing dollars, focus on securing additional growth and business from your brand—that’s the argument that’s easier to result in success,” Dillon says. “Focus on the guest and the business, and always be a storyteller.”
And, if you can, steer clear of starting from scratch each year, or zero-based budgeting.
“I’m not a big believer in zero-based budgeting because I just don’t think you can ignore all the history that you’ve built up,” says Brimmer. “I just feel like you’ve got to have a base that you’re building off of.”