Two of the common effects of an economic downturn on marketing departments is that advertising and marketing spending is severely curtailed, and what there is to spend is directed towards “performance,” or direct marketing.
Airbnb threw the logic behind those moves into question last week, however, when it announced that cutting its budget and redirecting spend away from direct response activity helped propel it to record earnings.
In 2020, under financial pressure due to the effects of the pandemic, Airbnb cut its marketing and sales expenses by 28%, and – this is key – moved investments to “broad marketing campaigns and public relations”, while mostly eschewing performance marketing. The goal was to Airbnb is a targeted customer base that is educated on Airbnb’s products and services, trusts the company and will stick around.
After two years, the result was a record earnings period for the company. This is some evidence that even as marketing budgets get cut during hard times, companies are flying in the face of accepted wisdom and are redirecting those lowered budgets to “brand building” activities like publishing, content and PR.
As digital advertising becomes more expensive, there are some signs that the oncoming recession may actually make brand publishing and other “brand building” activities more popular as brands rethink their historical focus on performance advertising.
This is pretty different. What tends to happen during recessions is that so-called “performance marketing” (which used to be known as direct marketing) end up looking appealing for marketing professionals who are under pressure from the CEO, the CFO and procurement departments. The oft-held belief is that during tight times, nobody is in the mood for anything even remotely difficult to measure. This belief hasn’t fully gone away: As Martin Sorrell, former WPP chief and now S4 Capital’s executive chairman put it during a Web Summit appearance earlier this month: “There will be a move away from brand awareness to activation, performance, measurement and ROI.”
And yet the opposite seems to be happening.
There are examples like Airbnb, who have cut budgets, then redirected that lower budget towards brand building activities like content, publishing and PR in an effort to educate and entertain customers. At P&G, there seems to be a consensus that this time, marketing will be seen as an investment, not a cost. One way the CPG giant plans to tackle this is by passing cost increases on the customers, hope the most loyal ones stick around, and take the hit to its bottom line with the expectation that eventually, costs will come down.
At the 4A’s, a consortium of ad agencies, a paper on “recession-proofing” advises chief marketing officers to focus on marketing expenditures that maintain brand health and retain loyal customers, instead of advertising heavy discounts or promotions in an effort to shore up sales in the short term.
For a couple of marketing execs I spoke to about what was going on with Airbnb, the truth is somewhere in the middle, and maybe more of a realization that activities like PR and content are also cheaper than direct advertising. “Saying you’re ‘spending more on brand marketing’ is a convenient narrative,” said one longtime agency executive. What is actually happening, per this executive, is that Airbnb, like others, are deprioritizing digital acquisition entirely in favor of trust-building, something that can stand it in good stead during turbulent times.
There is an overall feeling, said a second executive, that brand marketers are overwhelmingly concerned with keeping their best customers, and are therefore spending on marketing tactics like content and publishing that can keep them coming back. One of the bigger changes is also a realization of how cheap content and brand publishing can be. Making content can be a relatively lean activity that, when done right, can have outsized influence. “I mean, how cheap is it to make great video?” asked this second executive.
Of course, as is the case with brand publishing in general, all of this only works for brands that have put in the work to create a brand publishing strategy that has the right audiences in mind and is aimed at delivering on audience wants and needs.
Speaking at Web Summit, Tracy-Ann Lim, chief media officer at JP Morgan Chase, said during a recession, marketers will have to “kill their hobbies” – focusing on what really matters versus the “nice-to-haves.” For many who dipped a toe into “media” last year, an impending recession is just as likely to expose weak editorial propositions as it is to shore up successful ones.