Though inflation moderated somewhat in the most recent US Bureau of Labor Statistics report, the Federal Reserve is expected to continue to increase interest rates with the intention of slowing the economy.
A slowing economy could mean a recession, something many economists are predicting later this year or early next year. JPMorgan CEO Jamie Dimon has gone further than most economic experts, calling for a 20–30% chance of a hard recession “or something worse” in a Yahoo Finance report.
Whether the economic downturn is relatively light or hard, one thing is clear: marketers will be asked to reduce their martech stacks as part of companies’ expense reduction efforts. Below are four ways for them to do that without cutting into the meat of their marketing efforts.
1. Use Analytics to Determine Reductions
“Organizations will be looking closely at what budget is discretionary — and organizations need to be prepared to answer the question: Is marketing discretionary?” said Christian Wettre, SugarCRM senior vice president and general manager, Sugar Platform. “This heightens the need for the value of proof when every dollar is scrutinized.”
In this scenario, analytics is a marketer’s best friend, allowing them to prove ROI on marketing expenditures, according to Wettre.
“An analytics engine is a must-have in an era of austerity,” he said. “Having robust reporting capabilities across sales, marketing and service — to understand and demonstrate mastery of the full customer experience — is essential to surface issues and opportunities faster as time-to-value becomes more important.”
Even larger enterprises may want to look at midmarket offerings that are less complex and require fewer arms and legs to activate functionalities.
With limited resources, organizations will need to foster better, tighter collaboration. Many organizations will seek out efficiencies and discounts by consolidating vendors/platforms for sales, marketing and service while leveraging the benefits of a common user interface and less training.
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2. Cut Superficial Tools
“With current market dynamics squeezing budgets, B2B marketers are expected to do more with less while maintaining high-quality results,” said Natalie Cunningham, CMO of Terminus.
“In the past,” she added, “marketers have usually defaulted to their lead-focused funnel, which causes them to lose sight of the entire customer lifecycle and the strategies required to engage target accounts. It doesn't make sense for companies to invest millions of dollars on marketing technology yet only earn conversion rates of about 1%.”
Marketers need to cut any tool that doesn't connect with customers on a deeper level and integrate seamlessly across platforms, Cunningham said. They cannot afford to silo data to a single platform.
Marketers need an all-encompassing platform that connects accurate, targeted data across customer relationship management (CRM) platforms and other marketing automation or customer success tools. It should link and inform all engagement channels, like chatbots, digital, audio and CTV ads and email. It should also transform insights from these campaigns into easy-to-understand reports.
“Marketers should also be wary of buying or keeping software that only analyzes or aggregates data,” Cunningham cautioned. “Under increased budget scrutiny, marketers need tools biased toward targeted, in-market action. It's difficult to justify purchasing technology that only explains what the data says but doesn't enable marketers to act on it.”
3. Outsource to Gain a Variety of Skills
“Outsourcing your martech to a marketing agency can be a good decision compared to hiring an FTE (full-time equivalent) since you get to benefit from varied skills with added skill sets in CRM and sales, along with marketing automation,” said Brian David Crane, founder of Spread Great Ideas.
Hiring an outside agency might seem like it would be more expensive. However, if you get to the basics, a specialized expert may charge the same as an agency with multiple skills.
Crane added that an outsourced team can hit the ground running. There are no training costs, and most contracts are based on specific targets.
With modern technology and automation, companies can trim their marketing tech. It is preferable to follow a hybrid approach where key martech positions are kept in-house while supporting roles such as content, search engine optimization, advertising and social media roles are outsourced.
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4. Change to Variable Compensation
"In typical market cycles, recessionary times generally follow periods of strong sales growth,” said Tom Shea, Adgile Media Group CRO and co-founder. “Managing spend is of penultimate importance for managers during market downturns, as the company’s objectives turn towards maintaining profitability and retaining market share.”
An often overlooked but important lever in the management toolkit involves compensation management, Shea added. “Managers should explore what can be done to prioritize variable compensation over fixed compensation. Increasing the variable nature of one’s compensation, if done correctly, can be extremely powerful for managing through an economic downturn while minimizing the organization’s ‘hard costs.’”
Managers should design a system in which the introduction or expansion of the variable elements of compensation can lead to higher overall pay if the performance targets are met, Shea recommended.
“Furthermore,” he added, “increasing the variable nature of pay provides management aircover during extremely hard times. Numerous human psychology studies around suggest that the removal or incomplete payout of variable pay is much less damaging to an individual’s performance and morale than asking those same individuals to move downward on the fixed elements of their compensation.”
While there is plenty of debate about whether there will be a soft recession, a hard one or “something worse,” as Jamie Dimon put it — and the timing of any weakening of the economy is still the subject of much discussion — one thing that economists agree on is that a downturn of some type will happen at some time in the near future.
Higher prices and higher interest rates will eventually deter spending. When that occurs — or with the anticipation of an impending downturn — companies will be looking to reduce their martech stacks. Using the four suggestions above can help lessen any negative impact of such a reduction.