What Will Happen If You Turn This Off?

As businesses aim to cut costs, marketing leaders will do well to focus on performance measurement to budget more effectively for businesses. But can marketers afford to sacrifice long-term goals? Niall O'Malley, Director at Difference Engine, helps answer the question.


  • Actions that can be linked to revenue generation and show credible proof points will stay. Everything else must go.

    However, in this recession, something different is happening – traditional battlelines of which marketing tactics are linked to sales are moving.

    In the current scenario, where the economy seems to be on wobbly grounds, marketing budgets are an easy target to be cut to show immediate financial impact. Chief Marketing Officers need to make a case to justify their marketing budgets, and data is the simplest way to prove ROI. But there’s a catch.

    Analytics and research are often viewed as a business cost which also puts it on the list of investments to be axed. However, investing in brand diagnosis can reduce waste and increase effectiveness. This is an error on two counts; firstly, because it shows the analytics budget that company’s invested in previously was not used to the maximum impact, and secondly, because of the long-term repercussions of going dark or not measuring how actions today will impact the brand tomorrow. Unfortunately, companies may be trapped in a short-term survival mode.

    Instead, if brands invest more time into measurement, it can help budget more effectively for the business not just through this recession but for unlocking growth in the coming years.

    However, it’s not the same for every sector. Some brands are more affected by the possibility of a recession than others. “Consumer brands tend to cut their budgets first because they’re the ones that are more vulnerable to margins that are changing,” said Niall O’Malley, Director at Difference Engine, a revenue-led marketing agency.

    Differentiating Between Must-Have And Nice-To-Have

    In an economic downturn, not all marketing spend is perceived as of equal value. “Parts of the MarTech ecosystem which are closest to revenue generation and preservation, are the ones that will be cut last. CRM systems, any kind of automation tool, paid lead capture and such will be preserved,” he said.

    Unfortunately, everything else around it is likely to be perceived as a nice-to-have. This includes creative tools, social media or organic content, and ‘top of the funnel’ initiatives like PR, podcasts, and even video.

    The reason for this perceived difference lies in a failure in marketing attribution.

    Using measurement to track effectiveness circles back to an old-standing challenge in marketing attribution – harping on last-click attribution. For example, nearly always, paid media gets the credit for the conversion. In this case, TOFU activities like social media, public relations, etc., which contribute towards brand building, are in danger of being axed.

    “When the financial team says – what would be the detriment to the business if we cut your budget? No one can really make an argument about revenue in the marketing mix, apart from the performance marketing team. Companies need to take a holistic, multi-touch, multi-discipline approach, including unmeasurable touchpoints. It needs to combine marketing, attribution, measurement and revenue,” said O’Malley. Can we move past the last click?

    It’s just maths, says O’Malley. Marketing teams need to be able to answer the question – how does this particular piece of marketing generate revenue?

    He speaks about three key challenges along the road to answering the question — what would happen if I took a million dollars off the budget?

    • The tyranny of random facts: There is too much data available and marketing teams are unable to tell what is valuable. It leads to decision paralysis. Teams need to find a light and easy way to access data and generate insights that can be used to take action.
    • Subtracting baseline sales to reveal incrementality: The CFO asks you the question – wouldn’t we have got these Y dollars anyway without marketing? When we work with companies, we answer this question via field testing and try to create an equation that tells us – if you put X dollars in, you will get Y revenue. It’s not linear, it’s a curve calculated by looking at retrospective data.
    • Not conducting a quantitative weighting of intelligence: Sometimes, data will be presented as absolute facts, and that’s not a good representation. Any data that’s collected and analysed has a weighting of confidence that can be numerically represented. In marketing mix modelling, it’s something called an R-squared number that’s measured between 0 and 1. It’s a goodness-of-fit measure for linear regression models. If the number is closer to one, the regression line is a better fit. There are tests that can be done to innovate around the quantitative confidence levels of the business.

    Uncertain Outlook

    Global inflation hit a record 12.1% in October last year. According to the IMF, one-third of the global economy will slip into recession in 2023. The last quarter of 2022 saw more than two-thirds of the UK’s biggest advertisers cut back spending on traditional TV for 2023 to focus on digital media, where targeting and performance can be measured at a more granular level.

    Marketers need to work on measuring their efforts holistically and building models that can track back to how each piece contributes to revenue generation. The long-term repercussions of pausing portions of the martech stack or campaign efforts are unknown. For example, what will be the cost of putting a pause on brand building? Measurement feeds into the planning process. “If you’ve become too short-termist, your share of the market will go down, your share of voice will go down, your share of the search will go down—which will mean your cost per acquisition in the long-term will go up.”

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