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Demand vs Awareness: Where Marketers Should Invest in 2021

Short-term vs long-term.

Demand vs awareness.

Where did you invest?

Marketers had expectations for 2020, and by March the reality of how this year would go was already very different. Facing an unknown future, everyone was asking the same question: Where do I pivot my marketing budget and strategy for the rest of the year?

Cheri Keith, Head of Strategy at ON24, said it best when she referred to now as “the first time [marketers are] attempting to be in the driver’s seat with so much uncertainty ahead for 2021.” What can we learn from our spend strategy over the last 6 months?

As B2B buying cycles screeched to a halt, analysts and industry pundits called for marketing organizations to double-down on brand identity programs and establish positive associations. The new expectation was that no one is buying, so what do you do when people aren’t ready to buy? Cement your brand firmly in their mind with awareness and brand identity programs, so your product is the first one they think of when buying cycles kick back up.  

But again, expectations and reality didn’t align. The expectations of what we should do were very different from the reality of what marketing organizations did do. 

PR Budgets Were Slashed

In direct conflict with literally every piece of advice marketers read this spring around ramping up brand awareness, 45% of companies cut public relations budgets by more than 20% from Q1 to Q2. That’s a significant amount of budget that was pulled back from PR, and it doesn’t appear to be returning any time soon. According to new research in our State of Spend report, marketing organizations aren’t forecasting any new change in PR spend for the rest of 2020. 

Why were nearly half of B2B marketers so quick to dismiss industry advice? 

The impact of missed revenue can answer that question. Precisely because deal cycles were drying up, companies were scrambling to understand what their new – realistic – revenue targets could be, and most importantly what was at stake if they missed them. Demand programs are so tightly tied to short-term sales impact, that it’s hard to make the argument to keep budget for public relations when your organization is concerned about potential revenue. 

Allocadia’s Advice

Back in May, our CMO Julia Stead advised marketing leaders not to forget about long-term strategy, particularly brand awareness. Short-term mitigation of risk and protecting potential revenue comes first, but marketers can’t afford to create a strategy that doesn’t also support long-term goals.

Look at your current business modelling to determine whether you need heavier investments in brand or demand. Some companies need short-term growth gains immediately in order to survive, while others may have the flexibility to just maintain a current customer base and invest in brand programs to ensure long-term growth.

Are Brand Initiatives Making a Come-Back?

From Q1 to Q2, we saw an immediate 16% decrease in brand identity spend. But in Q3 there is a forecasted increase of 17% which would bring overall spend back up to pre-COVID level. Why has this changed and why now?

Brand spend is actually much more elastic in relation to the size of the company (see the table to the right), compared to other categories of spend. In the State of Spend, when we compared companies based on their revenue we saw a wide variation in how much they invested in brand spend. 

Companies on the high end of the revenue spectrum (greater than $5 billion) and those on the low end (less than $250 million) significantly slashed their budgets for brand initiatives. Companies with middling revenue (between $250 million to $5 billion) gave their brand budgets a sizable injection of extra funds. Obviously the needs of an enterprise organization are not the same as those of a small business – so why do we see them spending similarly?

Although they both drastically reduced spend, it was for very different reasons. Bigger, well-known companies were comfortable to reallocate spend from brand initiatives to focus on short-term gains. Unfortunately, smaller companies were forced to pick between short-term demand programs and long-term brand awareness. And as we know from looking at PR budgets, impact on potential revenue is too important for some organizations to wait on. Mid-sized companies needed to focus on building positive long-terms brand perception, which is why we see their investments significantly increase.  

Allocadia’s Advice

In our State of Spend report we found a 72% correlation between spending on brand and overall program spend. Because of this strong connection, the drop in Q2 brand spend makes a lot more sense in the context of the overall 10% dip in total marketing spend. 

While the initial reaction was to eliminate costs that didn’t contribute to short-term impact, we’re seeing companies planning for the rest of 2020 in more of a recovery-mode and less in crisis-mode. Although we’re still very much in the midst of this pandemic, marketing organizations are beginning to see their paths forward. Increasing spend to pre-COVID levels shows that brand initiatives are clearly still top of mind for marketers. Now is the time to really put into effect our CMO Julia Stead’s advice.

If you’re aiming to grow your organization post-COVID (and you should), then you can’t afford to cut back too much on branding. You need to maintain your awareness in the market and solidify your foundation for future growth. Plus, as others chose to go quiet, you have even more opportunity to be a thought leader in your space.

Julia Stead, CMO, Allocadia

What Happened to Demand Programs?

We might assume the drop in brand spend means there’s a tightly correlated increase in direct marketing but that wasn’t the case…

Find out how marketing organizations invested in demand programs so far in 2020, and where they’re forecasting deeper investments in our State of Spend Marketing Investment Benchmark Report.

This report is based on aggregate data from the more than $25 billion dollars that global marketing organizations are managing in Allocadia’s platform. We analyzed what happened, identified trends, and are sharing them so all teams can learn from it. Marketers need a roadmap for investing as we look ahead to 2021 – this is a guide to help inform those next steps.