It’s a truth many of us assumed would keep playing out whenever times get tough: marketing spend falls during downturns.

Except that’s not quite what’s happening. The latest IPA Bellwether Report shows UK marketing budgets have just posted their strongest quarter in almost two years, with a net balance of +7.3% of companies increasing total spend. Events budgets are up. PR is up. Even main media, flat for the best part of two years, is growing again.

Look closer, though, and one category is moving in the opposite direction. Market research budgets have now been cut for four quarters running, falling to their lowest point yet – a net balance of -8.5%, worse than the quarter before. Brands are spending more than ever on reaching customers, and less than ever on understanding them.

So what happens when a business keeps its foot on the accelerator everywhere except the one place that tells it whether any of that spend is actually working?

Jim Bulmer, former Head of Market & Customer Insight at Royal Mail, and Non-Executive Director at Mindlab, believes that however your budget is moving, it pays to be deliberate about where the cuts – or the extra investment – land. And it’s about focus.

Don’t make insight the exception 

Many businesses are treating research as the easy place to cut, even as they reinvest in events, PR and activation elsewhere. I’m seeing budgets withheld, teams centralised, headcount reduced – for the one function that tells you whether all that other spend is landing with customers. We will come out of this cycle. Of course, you’ve got to get the balance right along the way, but you need to make sure your customers are still with you.

When the pandemic hit, most businesses stopped spending money on marketing and experienced a lull in sales. Meanwhile, those that invested came out better from the downturn (Kantar).

“Pulling back from insight, from research, from marketing, from understanding your consumers might save money but there will be a mid- and long-term impact.”

Change wisely 

The reality is that in the kind of climate we find ourselves in, every pound spent is being questioned – including, or perhaps especially, the pounds now flowing into events, activation and PR. The best brands aren’t taking a hacksaw approach to cost cutting: they’re exploring whole new ways of doing things.

Some are reinvesting in cheaper tools like AI instead of research. I hate to be negative about such a fundamental trend, but making customer decisions based on AI is fraught with risk. We’re a long way off it being useful in understanding the intricacies of the human brain. I have my doubts as to whether it ever will: it can’t tell how people react, their unconscious decision-making – or how they truly feel! And using synthetic data to make assumptions? Don’t get me started.

Other businesses are thinking about how to survive and emerge stronger. They’re considering what’s going to be different going forward: what are the opportunities, who is their future customer and what do they care about? That’s what a good board will be doing: assessing today while keeping an eye on the horizon to make decisions on how to change and innovate.

Why?

Because this is the wrong time to be guessing what customers care about. In the same way businesses are reevaluating everything, so are consumers.

Imagine a premium brand like a gin. In a cost of living crisis, how can you ensure customers don’t switch to a cheaper option? Or what if you need to appeal to a new audience because your customers are still choosing you but are reducing their drinking levels?

Because habits are changing. You don’t see pubs thriving in the same way that they were even two years ago. People are drinking at home or just cutting back.

How can brands choose the right approach? How can they know what customers are passionate about and what layering of messaging is needed, where and when, to lead to a sale?

Invest in your customer

All those choices come back to understanding consumers, whatever your budget is doing. I really believe the heart of marketing is really knowing your customer and what they care about. Are you giving them a solution to what they’re looking for? Because they’re voting with their money, switching if brands don’t understand them.

If you want a fighting chance of maintaining market share, let alone attracting new customers, you need to keep connecting through advertising, offers and packaging that resonates – and stands out in all the right ways.

This is a hyper-competitive market. People are really thinking about how and where they spend their money. It’s a challenge we’re all facing, in business and life. But ignore your customers at your peril because they haven’t stopped caring. In fact, they’re getting even more considered, even more passionate about pricing, sustainability, lifestyle, aesthetics and so much more.

As ever, the key to everything is consumer understanding. Budgets will keep moving up and down. What customers care about is the one thing worth never taking your eye off. The brands that continue to understand those changing priorities will be the ones best placed to grow, whatever the economic climate.

If these are questions your business is wrestling with, we’d be interested to hear how you’re approaching them. Every organisation is making difficult decisions at the moment, and we’d always welcome a conversation about how consumer understanding can help make those decisions with greater confidence.