OPINION20 July 2022

Cold reality: Research in an economic crisis

Financials Opinion Trends UK

With a recession potentially on the cards, Ben Walton of Walr looks at three ways to consider research spend with a cold, hard dose of reality.

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The looming recessionary period has led to a number of impassioned pleas from industry commentators for budgets to be maintained. They have a point – the data is compelling. Figures from the early 1970s onward prove that in each recession the most successful firms post downturn have actually increased their marketing investment.

However, we also have to be realistic and recognise the current squeeze on global finances will have an impact on marketing and marketing services spend. In the aftermath of the last recession in 2008, ad spending in the US dropped by 13%. A similar decline has been seen in response to the Covid-19 pandemic. In the first half of 2020, TV ad spend dropped 15.3% in the US compared with the previous year. An even bigger decline was seen across France, Germany, Italy and the UK, when in April 2020 ad spend fell by an astonishing 31.8% in a year.

We find ourselves once again in between the figurative rock and a hard place; with our tighter purse strings the rock, and the hard place being the opportunity cost of not investing in marketing during the recessionary period.

To reconcile these antagonistic truths, we must look at research spend with a cold, hard dose of reality. While we must be prudent with how we allocate our budgets, it does not feel like hyperbole to state that it has never been more important to understand people’s attitudes and opinions – especially given the seismic generational and geopolitical events that are shaping them across the globe.

Therefore, if research budgets are to be placed under scrutiny, decision-making support is still required to mitigate the potential impact on financial return. As a starter, let’s tackle what I see as three key areas:

Prioritise spend on delivering the return you are after
If companies are going to spend money during these times on significant marketing, or new product development (NPD), activity – as the data suggests they should – let’s make sure we are advocating research spend, to maximise the chances of the investment paying off.

According to Professor Clayton Christensen of Harvard Business School, of the 30,000+ new consumer products launched each year, 80% go on to fail. Within advertising, as Orlando Wood said in his 2019 book Lemon, less than half of the TV ads analysed in the US and UK had the potential to achieve market share gains in the long term.

Therefore, as the cost of testing a campaign or screening your NPD ideas ahead of time pales into insignificance when you compare it with the money you will spend bringing them to market, let’s make sure we champion testing any such investments before launch.

Look at your continuous programmes through a value lens
While testing new marketing campaigns and retaining your ability to track return on investment (ROI) through business performance metrics remain important, let’s also be proactive in protecting this spend by taking a look at continuous programmes through a value lens.

Are the sample sizes requested necessary for the segments used on a day-to-day basis? Are the fieldwork periods aligned to the reporting cadence required by stakeholders? Are the reporting tools used delivering value for money?

This is a great opportunity to really kick the tyres on these significant areas of spend and optimise where possible to free up budget.

Challenge yourself across your planned research activities
One of the most formative moments of my research career was when I went to a senior member of staff for his view on how I should respond to a client. The client was querying whether it was worth commissioning a research project, given they did not have the money to deliver all the ‘bells and whistles’ they desired. While I did not relay his off-the-cuff response – “just tell them you can guarantee it will be better versus just having a guess” – it does neatly summarise why we are here and why it is always better to gain data and insight to support decision making.

Challenge your partners on whether there is an easier way to deliver on certain parts of your plan. Challenge yourself as a research professional to see if you can leverage new technologies, to provide guidance to stakeholders in a more cost-effective way.

While certain decisions will always need the support of subject matter experts and trusted partners, others might benefit from a simpler approach, allowing for the delivery of full plans on smaller budgets.

If the budget cuts coming our way are inevitable, so is the upturn as we hit the recovery period. Helping our stakeholders and clients navigate what lies ahead – even when it does not benefit our immediate position – is a key step in being the helpful partners we always strive to be.

Ben Walton is chief commercial officer at Walr