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Marketers to Spend Despite Tumultuous August: Smart, Crazy, Saviors?

While the general public can be accused of having short memories, it doesn’t take much for us to remember the volatility the financial markets experienced in the month of August. Standard & Poors’ downgrade of US credit and a tumultuous battle in the US Congress left many frazzled as their stocks moved in various directions. The words “double-dip recession” inundated the headlines and prognosticators’ outlooks.

One would think that marketers would follow the trend, right? Not so fast. New results from The CMO Survey indicate that in the next 12 months, companies are planning to increase marketing budgets by 9.1% and increase marketing hires by 7.2%. The survey was conducted between August 1-23—a time frame marred by a great deal of volatility.

But here’s the tricky part: At the same time, optimism for the overall U.S. economy has reached its lowest point in two years among the same marketing executives. When asked “How optimistic are you about the overall US economy on a 1-100 scale with 0 being the least optimistic and 100 the most optimistic” the same executives reported an average score of 52.2. Before this time, the lowest optimism levels were observed in February 2009, when the average was 47.6!

However, why are these executives still spending? We can hypothesize that (1) they are not very smart; (2) they are too optimistic about their companies; (3) they have good private information about their own companies; (4) they are engaging in counter-cyclical spending to gain a competitive advantage; or (5) the doomsayers are exaggerating what’s out there.

How to sort this out? Central is the fact that performance indicators from the survey show that companies are holding on to profit, revenue and ROI gains over the last six months. Combining these facts with the reported intentions to spend and hire, one can conclude that these executives may have good private information about their companies. Harder to diagnose is whether their motives are to spend counter-cyclically. If so, there are a number of studies that show these executives may well be on their way to gain an advantage. I reported on one such study in a previous blog (www.cmosurvey.org/blog/how-does-your-company-grow/).

Are we facing a double-dip recession? The doomsayers operating in financial markets may well be right. However, paying closer attention to executives especially in revenue and demand-generating activities such as marketing, we could also conclude that market reactions over the past month are grossly exaggerated.

If these executives are right, this type of investment spending should improve company performance further. More importantly, this spending may also help reignite customer interest to open their wallets and thereby stimulate growth and pave way for a better economy for all of us.

The performance of financial markets will continue to drive popular opinion. It is important to not let the voices of marketing executives get lost in all the noise.

  1. As a Branding and Marketing Strategist, I believe that the astute marketing executives comprehend that we are in an unprecedented marketspace. This quarter is the lowest-cost period to buy marketshare. The new marketshare is not of great value today. However, with a solid CRM program in place, they will remain to be your customers when the sun comes out.

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