Could 2023 be worse than 2022 for Marketing?
Could 2023 be worse than 2022 for Marketing? What can you do to minimise the downward marketing spiral?
The Bad News:
The marketing industry in 2022 spent most of its time in a downward spiral mostly related to external factors no whiskey drinking Mad Men marketing genius could control. Rising interest rates, supply chain issues, increases in oil and energy prices and, of course, war have played their part in creating this current economic climate .
The S&P 500 is down 15.08% this year (as at 09/12/22) and while I’m no economist, that means companies have lost A LOT of money. To stem the loss, they naturally cut back on spending with marketing budgets often first in line.
This can already be seen in the stock price and financials of the two powerhouses of digital marketing.
Alphabet (Google) reported its weakest quarter of growth since 2013 (excluding the early Covid period). Revenue slowed to 6% from 41% a year earlier with the downward draft in online ad spending to blame.
The landscape is even worse for Mr Zuckerberg, who may want to spend less time in the metaverse and more time in the office. His company, Meta (Facebook & Instagram’s parent company), saw their average revenue per user drop from $9.83 to $9.42, translating into a 4% fall in revenue in the 3rd quarter.
While other more ‘industry threatening factors’ play some part – such as Apple’s IOS Privacy – Alphabet’s chief financial officer, Ruth Porat, said the decline “primarily reflects further pullbacks in advertiser spends.” These pullbacks can be attributed to the significant slowdown in consumer spending which increased only 1.5% compared to 12% last year.
Why Digital Presents an Opportunity in these times:
1. Consumer spending is tipped to bounce back.
According to both Goldman Sachs & Moody’s Analytics, after a year-long dip, household cash flow (in the USA) will begin growing again right after Christmas & accelerate through the new year. These gains will reverse a year of negative growth of about $600 – or 4.2% – in household discretionary cash flow (i.e. disposable income). While the UK & Europe may be lagging behind, there is hope for a bounce back in retail sales as the inflationary period and looming global recession appear to be nearing an end.
2. Less overall spending means less competition & cheaper ads in the digital ad space
Typically Digital Ads work on an auction basis, which means the more advertisers in any given channel, the higher the competition, leading to higher bids for fewer clicks per advertiser. Given that PPC yields an average ‘Return of Ad Spend’ of £2 -meaning for every £1 spent, you can expect £2 back in revenue – digital ad costs have skyrocketed in the last couple of years.
However, considering that companies are now rolling back the ad spending, we may be able to see a slowdown in this trend. This presents a great opportunity to divert marketing budget towards digital. This sentiment is backed up by world renowned PPC expert, Neil Patel, who has seen a 4% average decrease in his clients’ cost per click.
3. Divert budget based on numbers:
As companies pull back on marketing budgets because they are fearful of the unknown road ahead, they should also be shifting their budget away from ‘traditional’ marketing, TV, radio and billboards to Digital Marketing because it is easier to track.
Digital Marketing’s ability to accurately track Reach, Impressions, Clicks, Cost Per Click & Conversions means it presents a much more calculated way to optimise budget by efficiently reducing spend on what is not providing results and doubling down on what is. In times of smaller marketing budgets, reducing wasted cost is more important than ever.
Where else should you focus in 2023?
Investing in Digital Ads is one thing, but companies can and should be doing much more to take advantage of the current economic climate. 2023 presents an opportunity for them to double down and refine not just their marketing but their whole business, in order to optimise the entire customer journey.
1. Conversion Rate Optimisation
If you can get more of your website visitors to convert to customers by optimising your copy, images, call to action buttons, layout, website speed etc then you can generate more sales without spending a dime more on marketing.
The power of this optimisation is most evident when looking at the numbers:
Say your Digital Ads provide you with 1000 visitors a day and your website conversion rate is 1%. If your average order value is £100, you will make £1000 in revenue per day and £30 000 per month.
Now if you can optimise your website, so that you convince just 0.5% more of visitors to take your desired action, such that your conversion rate becomes 1.5%, your average order value translates into £1500 in daily revenue, £45000 per month and £15000 more than before.
This results in a 66% increase in revenue over the course of a year without any extra marketing spend or reduction in your margin.
2. Invest in Quality Content for Digital Ads – It’s not all about spend
Facebook & Google’s auction rewards those who create quality ads with high ad positions & lower costs. Facebook uses 3 Metrics called ‘ad relevance diagnostics’ which include a quality ranking, engagement rate ranking and conversion rate ranking.
In short, Facebook (& Google) want good quality content on their platform, and they reward the companies who provide it.
While hiring an expert, graphic designer or agency to run your ads in 2023 may seem counterintuitive to running a lean marketing budget ship, the right experts will undoubtedly improve your ads performance and engagement, saving you money in the long run.
3. Email Marketing
Most of our clients tell us that they already collect emails and engage in some form of email marketing. However sending out promotional or educational emails every once in a while does not constitute proper email marketing.
There needs to be a segmented customer journey that walks your lead through a series of specially designed and optimised emails that eventually gets your lead to take the desired action you want.
An optimised Email or SMS led customer journey is more important than ever in the post IOS 14 era, where Facebook and Google retargeting ads are proving less and less effective.
This can be done by investing in a full service email system such as Klaviyo or Omnisend, which allow for detailed & segmented customer journeys whilst also providing you with the first party customer data that Facebook & digital ad platforms in the post IOS 14 era struggle to collect.
Conclusion:
Just because the economy isn’t expected to grow much in 2023 doesn’t mean that your company can’t. Obviously if your specific industry is facing larger headwinds, it would be wise to stay cautious.
However, by taking a data driven approach and optimising your entre user journey, you can not only out perform a sluggish 2023, but build the foundations for serious growth when the economy recovers once again.
