According to a new survey by the Association of National Advertisers (ANA), 77 percent of marketers will reduce their advertising campaign media budgets.
The ANA isn’t the only organization forecasting bad news for the marketing industry. Forrester Research recently predicted that marketing budgets will see typical decreases of 15-to-25 percent as enterprises decrease their spend on information technology goods and services. Basically the message to marketers and their agency partners (like my employer Razorfish) is this: we’re in a recession — deal with it. In this blog post, I’m going to answer three crucial questions on the minds of marketers and agencies as we deal with the recession.
1. Are we witnessing an industry implosion a la 2001-02?
Times are tough, to be sure. But we’re not experiencing the digital marketing sector meltdown of 2001-02. Back then, the industry was bloated with digital services firms, and, what’s more, they concentrated too much client work on risky dot-coms. When the dot-coms imploded, we saw a natural winnowing out. Today, the players are more stable, and so are their clients. I don’t think we’re going to see a wave of business collapses as we did during the dot-com implosion. Rather, as Razorfish Chief Strategy Officer Jeff Lanctot recently stated, we can expect big players like Razorfish to continue to grow via targeted, smallish acquisitions around the world.
2. What happens to social media during a recession?
Social media used to be perceived as the marketer’s nemesis. Now suddenly social media is the marketer’s best friend. Why? Because marketers realize that amid an economic downturn, it’s a lot more cost-effective to use social media channels like Twitter to build awareness among influencers.
But that doesn’t mean marketers will take a smart approach to social media. In fact, I believe that social media will separate the savvy marketers from the followers during the recession. The followers will settle for remedial, poorly formulated applications of social media in the name of saving money (“Let’s just post a video of our new product on YouTube, link our company announcement on Twitter, and call it a day”). But savvy marketers will take a more systematic approach to employing social influencers and media to achieve their marketing and business objectives — a strategy that my colleague Shiv Singh identified as Social Influence Marketing in 2007.
Savvy marketers will emerge from the recession more effective for having embraced Social Influence Marketing. They will move beyond the role of strategic counselor to the enterprise (although that role is important) and become active participants in Social Influence Marketing (e.g., by blogging and joining communities that matter to their clients). Savvy marketers will figure out how to make their company brands more authentic and true to their cultural values by listening to their own employees’ blogs and Twitter posts. They will stop worrying about employees “subverting their brand” through the proliferation of blogs and instead learn from their own brand ambassadors.
This journey is starting now as the recession forces marketers to take a closer look at deploying social media as a cost-effective way to build their brands.
3. What’s the best way to market ourselves in a recession?
Conventional wisdom says that during down times, you place more focus on ways you can help marketers achieve efficencies and measure ROI — like the Razorfish RIAx offering, which tracks the performance of rich media. But a recession is also a time to innovate (especially if your competitors are not) so that you’re ready to flourish when a turnaround arrives. In the December 2008 Wired, Daniel Roth asserts, “When the economy is in turmoil, the time is ripe for ambitious innovation.” He cites numerous examples of companies like Siebel that took advantage of slack times to generate new ideas that helped them leapfrog competitors who were wallowing in cost cutting.
Moreover, when Intel announced its new Core i7 chip as the recession became more evident last year, Don Clark of The Wall Street Journal noted that the new product roll-out was “the latest sign that development cycles run counter to business cycles at high-tech companies.” (Razorfish helped Intel with the effort through our involvement in the Intel Digital Drag Race, which generated buzz for the Core i7 among creative designers and games.)
So why innovate during slack times? As Sean Maloney of Intel said in The Wall Street Journal, “You recover from a recession with tomorrow’s products, not today’s.” And according to Daniel Roth during lean times, materials and labor required to experiment can be found for less money than during boom times.
At Razorfish, we’re using the down time to experiment with new ideas, too, like the Generational Tags we developed to measure consumer behavior on social media sites. At our 9th Annual Client Summit April 21-23 in Las Vegas, “Art of the Idea,” we’ll examine the relationship between innovation and ROI.
How are you dealing with the recession?