How Has 2020 Changed the Way Businesses Spend on Marketing?
How businesses spend on marketing in 2020 has been radically changed by the onset of the pandemic.
This will come as little surprise to most marketers. Events have been cancelled en-masse and organizations have had to focus their efforts more heavily on other methods to market their business.
It would be all too easy to answer the question posed today had SMBs decided to cut back entirely on their marketing in the wake of the lockdowns back in March.
The truth of the matter, however, is that marketing budgets have actually increased during 2020, as businesses look to take advantage and exploit gaps in the market left by others.
Today we’ll be taking a look at the effect that this year has had on marketing, how businesses adjusted, and what they’ve invested in as a result.
The Onset of Restrictions and Its Effect on Marketing
It will come as no great surprise that the pandemic has had a tremendous effect on marketing after states entered lockdown—with easing of restrictions varying wildly depending on which state you live in.
The first effect of course was the drastic impact that was had on in-person marketing (store visits, trade shows, other events).
97% of marketers noticed lower in-person engagement for their marketing after the onset of lockdown restrictions.
This may appear obvious, but what’s really interesting is the effect this had on marketing professionals in general.
The CMO Survey, from which much of this information has been made available, determined that optimism among professionals in marketing saw a quite dramatic fall when the pandemic hit.
On a range between 0–100, 100 being the most optimistic and the peak so far reaching 69.9 back in 2015, the period just prior to the pandemic was scored at 62.7—a significant way off the peak, but healthy, nonetheless. After COVID hit, optimism sank to 50.9, a dramatic decrease for such a short time period.
While marketers were always likely to get back on track once the initial shock was over, there is another aspect of this that should be considered, which is of consumers and their behavior.
Consumers shifted how they dealt with brands, becoming more receptive to digital offerings and putting more value on digital-only experiences. Of course, that is to be expected; after all, many stores closed down completely.
Nevertheless, the lesson from lockdown for marketers was that 84% of consumers felt an increased openness to digital offerings and other omnichannel customer experiences became more significant almost overnight.
Related Post: 25 Digital Marketing Stats SMBs Need to Know
How Did Marketers Respond?
One of the most notable trends observed in CMO’s survey was that of businesses increasing their marketing budgets as a percentage of overall budgeting.
In February 2020, respondents planned to spend 11.3% of their total budgets on marketing, on average. In June 2020, this had gone up to 12.6%, compared to only 8.1% back in February 2011.
The reason for this is primarily because marketers understand that the last time an economic downturn hit, the winners tended to be the ones who invested in marketing, and in doing so filling the vacuum left by others who reduced their budgets.
This is a strategy we’ve seen echoed in 2020, with businesses not just cutting back on events marketing and using that spend elsewhere, but additionally supplementing and increasing spend too.
The question for marketers was: what channel can we use now that events have dried up? The answer was digital channels.
28% of businesses had a more than 30% increase in ad spend in Q2 compared to Q1 2020.
Investing in the brand
One of the most interesting things to come out of the pandemic was a focus on brand identity.
In the wake of lockdowns, many organizations were simply not able to sell their product because either they weren’t physically able to; or consumers weren’t ready—consumer spending decreased 34% in Q2 2020.
This meant that brands instead had to refocus on positioning their image in such a way that consumers would be willing to buy once they were ready, whether that’s Q3, Q4, or 2021.
What’s most curious is the types of businesses that took this approach. Small businesses, typically under a lot of pressure, didn’t engage with this method at all, cutting spending on their brand on average by 37%. Enterprise organizations similarly cut back, likely because their brands were already in a good position, this time by 29%.
Medium-sized businesses, however, increased their brand spend significantly, by an average of 23%, in an effort to bolster their company perception among consumers and get them onside for when consumer spending returns to previous levels.
Utilizing an omnichannel approach
2020 has caused many companies to rethink and reassess their strategies, with a plethora of organizations across the country investing more heavily in multiple-channel, digital campaigns to communicate their message.
This means more social media output, and notably an increased preference for content marketing among SMBs.
For many marketing professionals, content marketing is nothing new, and its rise as something of a favorite in ROI terms has afforded it more goodwill and investment over the last few years—to the point that 60% of marketers produce at least one piece of content per day.
Content marketing costs 62% less than traditional marketing and generates about 3 times as many leads.
This year has turbo-charged content marketing, where spend on it increased by 12% between Q1 and Q2, and Q3 expected to see an additional rise of 8%.
39% of companies increased their spend on content marketing by 20%—a significant sum and an indication that it’s unlikely to slow down.
Looking after existing customers
Much spend on marketing has been directed toward fostering existing customer bases. One of the key questions for businesses in 2020 has been how much they should put into acquiring new customers versus providing ongoing support for existing customers.
Between Q1 and Q2, businesses decreased their loyalty spend by an average of 4%, likely at a time when organizations were unsure how much of an impact the pandemic would have on SMBs.
After that, we see a dramatic reversal in the way marketers are thinking, with predictions of a 12% increase for the rest of the year thereafter, and almost half of businesses predicting a more than 20% rise in their customer loyalty spend.
Reliance on core customers has always been a huge part of marketing—during 2020 it became even more important to cultivate that base and give them a reason to remain loyal.
If it’s one thing we’ve learned from economic downturns, it’s that businesses have a lot to gain from ramping up their marketing, which is indeed what many SMBs have done in 2020.
Where they focus that spending is the key question, and it’s clear that organizations frequently recognized the same areas as investment opportunities.
Namely, upping spend on marketing for improving brand image; utilizing a multichannel approach to take advantage of a consumer base that is more receptive than ever to digital channels; and keeping the existing customer base happy by investing in loyalty and reward programs.
As we near 2021, it’s important for companies to recognize how they will get the most from their spend on marketing. Trends this year appear to indicate that businesses are putting more value into digital, and have propelled already rising strategies (especially with regard to social media and website content) further than they otherwise would have.
For more information about marketing, head over to our Marketing & Branding page and see how we can help you develop a strong brand image and implement the necessary campaigns and tools to kickstart a digital marketing strategy, or improve and update an existing process.