CMOs battling to balance budget cuts & ROI before festive season

While the past few months have been a marketing extravaganza for a lot of brands, thanks to IPL, elections and the World Cup, CMOs have yet again found themselves in a soup.

The scrutiny on marketing expenditures is apparently on the rise across organisations, and CMOs are now being pushed to trim budgets while still delivering a robust ROI, reliable sources have told exchange4media. This comes right as the country is about to step into the festive season.

A senior marketer from the auto sector told e4m that while this category has been one of the key sectors to invest in mega events, some brands are now re-evaluating strategies around the same. A Salesforce report on the State of Marketing 2024 backs the point up too. It highlighted that in the last one year, B2B and B2C marketers saw a three percentage point decrease in event and sponsorship budget allocations. Experts suggest that teams are looking to improve visibility without the overhead of in-person activities.

This is also the reason why traditional advertising spend has jumped three percentage points for B2B marketers and four percentage points for B2C marketers since 2022. According to industry observers, brands are now chasing brand awareness and visibility, over performance.

In a recent interview with exchange4media, the CEO of Plum Goodness, Shankar Prasad, also highlighted that the brand is now focusing more on brand building. “Around 25-30% is now being allotted to building brand awareness. In an ideal scenario, I would like this to be 70%,” he had mentioned, highlighting how the focus was more on brand awareness now.

However, marketers agree that building brand awareness does come at a significant cost.

“Festive period is a nice season to build brand awareness and consumer loyalty, both. But the times are not the same anymore where brands can do both at the same time, and also live up to the ROI expectations of the top management,” an FMCG marketer shared on the condition of anonymity. He explained further that with the reduction in entry barriers, competition has increased in the market, which needs brands to invest more into brand awareness, but the pressure to cut down on spends is just on the rise.

Another point from the Salesforce report that highlights the pressure to cut down on spends is that while at least one-tenth of budgets is dedicated to agency support, both B2B and B2C marketers have pulled back on the use of external partners since 2022, signalling marketers have less support and more work to take on themselves.

This pressure is around traditional marketing, but not limited to it.

Exchange4media reported last year that marketers were under pressure to cut down on tech spends (coincidentally, around festive season back then too!), and the problem seems to have just increased since then. The dilemma CMOs are facing with regards to tech right now is around – siloed data, sentiment analysis, engaging consumers across more than one channel, lack of knowledge of which tools to invest in, etc.

The discussion around a cookieless world and the need to adopt first party data has been going on for more than 2 years now. However, even now, 61% marketers do not have a first party data strategy in place, and are relying on third party data. A digital expert from a leading agency shared that a lot of the agency’s clients do want to explore strategies to get first party data, but do not want to incur the expenditure that goes into the same.

The industry comes with varied opinions as to why this pressure is building on CMOs every day. While some experts say that the economy has not been favourable for a long time, some note that consumer behaviours have changed drastically today and brands have not been able to catch up. “It no longer works if you market the same way you marketed even 4 years ago, the Gen Alpha wants different communication, Gen Z wants different and so on. So, I think till the brands are clear about their new marketing plans, this pressure will be there because to the top management, what matters is just the ROI,” another CMO noted.

Be it investing on mega events or investing in tech tools, the brand world is pulling back its purse strings, figuring out better efficient ways to generate ROI. This is not just a start-up specific or a sector specific trend, according to marketing heads, but a universal trend that is spreading across organisations every day. Be it FMCG behemoths, or new age D2C brands, according to the industry, this festive season is probably set to witness a rather died-down marketer interest if the conditions do not change soon.