As the number of COVID-19 cases in the U.S. began to spiral upward in March, most marketing and marketing procurement leaders quickly recognized that the growing pandemic would have a major impact on marketing activities and programs. What wasn’t clear back in March was how significant the impact would be or how long it would last.
The conventional view is that marketing is one of the first business functions to face budget cuts in tough economic times. There’s no doubt that the U.S. economy went into recession in March, and that will be confirmed when the U.S. Bureau of Economic Analysis releases its second-quarter GDP estimate at the end of July. On the other hand, most economists believe that an economic recovery will begin in the third quarter of this year.
So how has COVID-19 impacted marketing spending? Recent research indicates that the reality is more nuanced than we might expect.
Advertising Declines Sharply
It’s clear that the COVID-19 recession is having a major impact on advertising spending. Virtually all of the large media research firms are now forecasting that U.S. advertising spending will fall sharply this year. For example:
- IPG Mediabrands’ Magna unit is currently estimating that the U.S. ad economy will shrink 4.4% in 2020.
- GroupM (a unit of advertising agency WPP) is forecasting that U.S. advertising spending (including political) will fall 7.6% this year. Excluding political, GroupM estimates that U.S. ad spending will decline 13% in 2020.
Recent surveys have also shown that COVID-19 is having a major impact on advertising spending. For example, in an April survey of advertisers by Advertiser Perceptions, 42% of the survey respondents said they had stopped all new advertising until later in the year.
Marketing Spending Grows at Many Companies
The picture is very different for marketing spending. Recent research suggests that a majority of companies have actually increased marketing spending during the pandemic, at least temporarily.
The findings of a special edition of The CMO Survey were published in June. This survey is directed by Dr. Christine Moorman, a professor at Duke University’s Fuqua School of Business. The CMO Survey is conducted twice each year, and the results are usually published in February and August. Because of the COVID-19 pandemic, a special survey was fielded in May. The special survey produced 274 responses from senior marketers at for-profit U.S. companies.
The survey asked participants what percent of their marketing budget had been lost or gained due to COVID-19 in the two months preceding the survey (March and April). The average change in budget reported by the survey respondents was +5.2%. So, in other words, this survey panel saw their marketing budget increase during March and April. Forty-one percent of the respondents said their budget increased during those two months, while 30.3% reported no change, and 29.1% said their budget decreased.
It’s important to note that there was a wide variance in reported budget changes. About 28% of the respondents reported a budget increase of 20% or more, while 21.2% of the respondents reported a budget loss of 20% or more.
The CMO Survey isn’t the only recent research showing that marketers have increased spending during the pandemic. In June, Merkle surveyed 400 marketers at major U.S. and U.K. companies spanning a wide range of industry verticals. A majority of the survey respondents (52%) said they had increased marketing spend since the beginning of the COVID-19 outbreak.
There may be several possible reasons for the different trajectories of advertising and marketing spending. For one thing, the absence of live sporting events has taken a major bite out of advertising spending, especially spending by large national brands. In addition, many companies have recognized the importance of maintaining engagement with existing customers, and that may account for some of the increase in marketing spending.