How Marketers Can Start to Prepare for the Path Forward
Practical Advice for Marketing Leaders from McKinsey Partner Michael Betz
April 2, 2020
Leadership during the coronavirus pandemic for us as marketing professionals has created a unique set of challenges which many of us have never seen before. That's in addition to the profound impact we are all feeling and experiencing as human beings. With unprecedented uncertainty and risk facing our businesses and all the people connected to it, it’s hard to know what the right way forward may be. What is the appropriate response for us as marketers given the gravity of the situation, and how should we approach our roles as marketers, leaders, and colleagues?
As a think tank studying the future of marketing and decision making, The B2B Institute engaged our network of experts for strategic, yet very practical advice. We wanted to share the following conversation we had with McKinsey partner Michael Betz, who is one of our Institute’s Research Fellows. Having been a CMO of multiple companies and now advising many CEOs, CFOs and CMOs during this crisis, Michael has a unique perspective as a C-suite practitioner, a business strategist and a marketing effectiveness expert.
We hope this interview will be helpful to you as a marketing leader trying to navigate from “what now?” to “what next?” during this challenging time.
Jann Martin Schwarz: What role can I play as a senior marketer as the crisis unfolds?
Michael Betz: First of all, it’s important to stay focused on the key priority: The COVID-19 pandemic is a humanitarian crisis first and foremost. It’s crucial to focus on making sure your teams and employees are safe and supporting them as they navigate what is likely to be one of the most challenging periods of their life. In this context, the communications part of your role has likely never been as it important as it is now. This is the time for CMOs to serve as the voice of the customer (and all stakeholders) internally but also to be authentic and empathetic communicating externally — which includes any CSR initiatives to truly serve your customers and your community.
As part of this effort, the CMO must step up and provide real time insight to the organization. From shifting customer sentiment and demand patterns, to competitor responses, to the overall economic situation — the world is changing every hour and every region is impacted differently. (As an aside, we at McKinsey are publishing a series of consumer sentiment survey results to help provide guidance to organizations during these volatile times). Whether it is looking at daily search engine volumes, reviewing data out of China, or launching your own surveys – you need to be collecting data and showing its implications for your business.
Secondly, start to plan for the recovery. As hard as it is to think about now, the crisis will bottom out and people will start to spend again.
While a lot is uncertain, there is a good chance the recovery once it arrives could happen fast – which means you need to be planning for it now. Build out the campaigns and offers now that you will need to run when the crisis passes. Or use it to build a more agile organization. I’m hearing stories from CMOs who are looking to establish the dynamic fast-moving processes they stood up as part of the crisis response to build a more faster moving organizations going forward.
Third, look ahead. When the COVID-19 crisis passes, it won’t be business as usual. Markets and behaviors are fundamentally shifting. We’re likely going to see new business models, innovations, partnerships and ecosystems that will require not just agility but an effective marketing strategy to identify where the real opportunities will be and how to effectively shift your operations to go after them.
Jann: What immediate actions should I take to protect my business?
Michael: First of all, take off your marketing hat and put on your executive team member hat. Many organizations are facing or will soon face severe cash crunches. You need to be part of the team solving for survival. Immediately identify all uncommitted marketing dollars and assess where you can cut inefficient spend or reduce or defer spend. But also guard against knee jerk reductions that could result in immediate revenue loss — we know from our research during the last downturn that the companies that came out the best invested wisely as well. Lay out the options to your fellow execs and help make decisions that are in the best interest of the company, even if it means making hard choices related to marketing spend.
From there, immediately pivot to where you can continue to protect and drive revenue. As an example, for hard-hit membership and subscription businesses, a top priority should be to minimize customer loss and protect the associated revenue streams now (if possible) and post-recovery. How can you keep them engaged? What pricing and payment terms can you make to keep them from fully canceling? That said, be careful of the hard sell, now is not the time to come across as insensitive to the difficult financial situation.
Finally, remember that ‘product’ is one of the 4 Ps of marketing. If you look at China, many companies made rapid innovations to their products and services. Now is the time to innovate and with speed. Can you ‘virtualize’ your products or services? Where can your organization deliver solutions that help consumers and businesses deal with the new reality of working from home and increased social isolation?
Jann: How can I be a trusted advisor to my CFO/CEO?
Michael: Building that C-suite relationship is crucial for CMOs. Our research shows that “Unifier” CMOs, those who can collaborate with the C-suite, are much more effective. If you have that relationship, now is when it will pay off. Use that relationship to provide guidance on revenue forecasts, to strategize on the short-term business response, and to plan ahead for the recovery.
But if you do not have that relationship, now is a great time to build it. Don’t sit back and be asked for input – take the initiative to share your insights with the CFO and CEO. Become their trusted adviser on stakeholder communications, on forecasting revenue, on making rapid marketing, pricing and product changes, and on providing intel on the customer and the market overall. And build the revenue dashboard that shows them what is happening at each stage of the funnel – from macro trends to what you are seeing on the website, on conversion rates, on retention rates. Partner with your CFO to help him or her with their financial stress testing. A good CMO has a deep understanding of each and every revenue driver and can produce a ‘bottom up’ view of possible revenue scenarios that are so much more helpful than aggregate assumptions.
Organizations need business focused CMOs more than ever right now. A good CMO can bring together customer and market insights, internal business trends, changes in media consumption habits, and pricing and product insights to provide leadership in the now and to help grow in the recovery.
Jann: What strategic considerations should I apply to my marketing strategy and advertising spend?
Michael: We have never seen anything like this pandemic, and there is no playbook for how to adjust your marketing strategies and advertising budgets. Moreover, in today’s difficult times, the right answer for a grocer will be radically different than for a luxury goods player. So, I recommend that marketers go back to first principles. Let’s start with the empirical facts on how marketing drives revenue. Marketing works in two ways: First, it can generate demand by driving mental availability and consideration which drives sustainable revenue over time. This is brand building. Second, it can capture down funnel demand by quickly converting intent into sales over the short term. This is direct response.
So, where you can still capture demand, great, do it. But the reality is that paid search and paid social click search and click volumes for most segments and brands are down right now, as are conversion rates. So, many companies will see down funnel costs fall naturally, or should proactively reduce it if conversion rates collapse — driving up acquisition costs to uneconomical levels. Reallocate those budgets for another day or another messaging purpose, like strengthening your existing customer relationships.
On the brand building side, it all depends on your situation. If you are fighting for survival, now is not the time for long-term brand building spend. On the flip side though, this could be a perfect time for broad-targeted media spend for businesses where demand remains strong. Particularly with the right creative.
It can help generate even more demand and support the effectiveness of your down funnel performance marketing channels. Brand investments could even help companies that are hurt by the shutdown but are well capitalized so they can be ready when the recovery kicks in.
Finally, I would really encourage marketers to avoid simple solutions or following the herd. For example, the mantra of ‘go digital’ makes sense in many cases as consumers spend more time online. But guess what? TV viewership is also way up. Similarly, the decision on whether to spend up funnel or down funnel is a function of your specific business and cash situation. Yes, cutting long-term brand building is a good cash preservation strategy for struggling companies, but brand could be a great investment for others.
Jann: Once the recovery starts, how do I justify my advertising to the CFO?
Michael: COVID-19 has changed many things, but I do not believe it changes how a CMO should justify marketing investments. It’s about driving short and long-term revenue and margin. What has changed is the speed at which you need to – and the precision at which you can – show the relationship between marketing actions and revenue delivery. Adapting to this pace of change could actually help marketers moving forward. Let me share a few examples of what I mean.
Let’s start with performance marketing, aka, paid search, paid social, direct mail, etc. These teams are usually very data driven and act fast. But things like search volume, CTRs, and conversion rates usually move incrementally – now they are changing by orders of magnitude. Search volumes for some categories are exploding, while for others are collapsing. And conversion rates are in flux. It used to be good enough to monitor these trends and adjust spend levels on a weekly or monthly basis- now, it needs to happen hourly or daily.
And on the brand side, things are moving fast too. Media consumption habits are changing fast – digital video and TV viewership are way up, while terrestrial radio is down in certain time slots as commuting has stopped, but up in others as people listen more from home. Moving dollars across channels has to happen fast. Customer sentiment is also changing fast – meaning that you may need to develop entirely new creative in days instead of months. Finally, given today’s challenging economic times, CMOs need to look at leading indicators of demand generation like search volume and organic web traffic to see if and how their brand spend is moving metrics that matter. And how it will position them well when the recovery starts.
I hope that the lesson coming out of the recovery is not that we all need to focus only on the short-term – that is a real risk. We are already too focused on short-term marketing tactics. So, let’s learn from history. If we look back to past downturns, companies that took a long-term view and invested in growth did the best during the recovery. That said, I do hope it drives marketers to more clearly communicate the financial value of their spend, and to institutionalize faster, more agile ways of operating and of measuring impact.
Jann: What personal career advice do you have for marketers?
Michael: As marketers, this crisis should remind us of the importance of having a business mindset and providing leadership across all 4 Ps, and not just promotion. I rose through the ranks and got my first CMO job based on my business-minded perspective and my digital marketing and analytics expertise. But as an early tenure CMO, I frankly did not know enough about brand building, or pricing, or product innovation. And when the industry I was in hit a major disruption, it forced me to learn those skills and fast. By the way, thank goodness for the likes of Byron Sharp, Jennie Romaniuk, Les Binet and Peter Field, Mark Ritson and McKinsey’s customer decision journey research to help me get up to speed.
While it was a difficult time, it built skills and knowledge that I use to this day. So, use this opportunity to build your generalist business and marketing skills, and just as importantly, use the time to build the capabilities of your team and your broader organization.
But most of all, stay healthy and stay safe.
Michael Betz is a partner at McKinsey and a B2B Institute Research Fellow, a group of distinguished expert practitioners and academics undertaking research about the future of the marketing sector.
Jann Martin Schwarz is the Global Director of The B2B Institute, a think tank funded by LinkedIn studying the future of business-to-business marketing and decision making. For more information and to sign up for their newsletter and to download research reports visit www.b2binstitute.org.