Sunday, November 15, 2020

More Evidence on How B2B Marketers Have Responded to COVID-19

Image Source:  Allocadia

Over the past six months, I've devoted several posts to reviewing research studies that have examined the impact of COVID-19 on B2B marketing and buying behaviors.

  • The first series of posts (available here, here, and here) discussed the findings of a special edition of The CMO Survey that was fielded in May.
  • In July, I published a post (Research Highlights How COVID-19 Has Changed B2B Buyer Behaviors) that described the results of an April survey conducted by Wunderman Thompson Commerce. The research focused primarily on the expanding role of e-commerce in B2B buying.
  • Most recently, I published a post (Mid-Summer Research Updates COVID's Impact on B2B Marketing) discussing a June survey by Edelman and LinkedIn. This survey asked B2B marketers about how buying behaviors had changed and what actions they need to take to respond to those changes.
COVID-19 has obviously been the issue of 2020, and these three surveys have provided important insights about how both marketers and buyers have responded to the pandemic. A recent report by Allocadia provides more valuable insights on this topic from a somewhat different perspective.
Allocadia provides marketing management and budgeting software, and the 2020 State of Spend report is based on aggregate data from Allocadia's customer base. The data was pulled in June. Allocadia's report is particularly useful because in describes actual spending decisions made by companies dealing with real-world circumstances.
Key Findings from Allocadia's Analysis
Marketing Spending - More than half (56%) of Allocadia's customers saw their marketing program spending reduced by more than 10% in the first half of 2020. Fifteen percent of the companies lost more than one-third of their marketing program budgets in that period.
Events - Spending on events fell by 46% in the second quarter of this year. However, Allocadia's customers were forecasting a 24% increase in spending on events in the third quarter. Allocadia believes that much of the forecasted increase is attributable to spending on virtual events, and I tend to agree with this hypothesis.
Digital Advertising - Overall spending on digital advertising increased by 2% in the second quarter, but spending varied significantly based on company size. The smaller companies in the study (those having less than $250 million in revenue) increased digital advertising spending by 9.3% in the second quarter, while the largest companies in the analysis (those having more than $5 billion in revenue) cut spending on digital advertising by 30.7% in that quarter. Companies of all sizes were forecasting higher levels of digital ad spending in the third quarter, with the over $5 billion companies projecting an increase of 183.6%.
Brand vs. Demand Spending - According to decades of research studies, companies that continue to market aggressively during a recession will recover faster and probably gain market share when the recession ends. This is particularly true when the marketing focuses on building brand awareness and brand preference. Most of Allocadia's customer did not follow this strategy.
Spending on brand marketing fell by 16% in the second quarter, and 45% of the companies in this study cut public relations budgets by more than 20% in that quarter. These companies did forecast a 17% increase in brand identity spending in the third quarter, which suggests that the cuts in brand marketing may only be temporary.
Meanwhile, spending on direct marketing increased by 23% in the second quarter, but was forecast to decrease by 1% in the third quarter. If this forecast was accurate, it means that direct marketing spending in the third quarter was 22% higher that in the first quarter of this year.
 Content Marketing - Overall spending on content marketing grew by 12% in the second quarter of this year, and nearly four in ten companies (39%) increased spending by more than 20%. Allocadia's customers were also forecasting an additional 8% increase in the third quarter. Allocadia believes that the second quarter increase in content marketing spending resulted from the increased use of direct marketing in that quarter.
My Take
The spending decisions made by Allocadia's customers are not surprising given the economic shock created by the pandemic. The more to reduce spending on brand marketing and increase investments in direct marketing is particularly understandable.
When faced with a sudden economic downturn that threatens revenues, marketing leaders have a strong tendency to favor those activities that seem most likely to produce a short-term impact on sales. The irony is, many marketers shift resources to short-term "performance" marketing programs exactly when the prevailing business and economic conditions are likely to make those short-term tactics largely ineffective.
Mark Ritson, the noted marketing expert and a regular columnist for MarketingWeek, stated his view of a better approach when he wrote:
"Confronted with a 50% cut in marketing budgets, the smarter play is to actually focus more of it on the longer-term brand-building mission. Performance marketing is going to under-perform in the current market conditions. But this virus, too, shall pass. At some point consumers will return to the streets, the cafes and the various other activities that they have been denied during the dark days ahead. Keep the brand light burning, because the cost of snuffing it out for the rest of 2020 and then trying to reignite it next year is gigantic."

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