Data-driven marketers’ path to growth in a recession: Strategic ad spend

Most marketers and advertisers are planning to increase budgets in 2023, with many making major increases, according to the latest survey by Sapio Research, commissioned by Lytics.

The 2023 survey shows that technology spending will increase as well, a reflection of the increasing synergy between IT and marketing teams. The end of some third-party data collection initiatives, continued economic uncertainty, and a shift to and from certain social media platforms are all likely drivers of the bullish approach to marketing and advertising this year.

• Overall, 85% of respondents to the Lytics ad budget survey expect to see an increase in their budgets.
• Fewer than 10% of respondents expect to decrease ad budgets.

The Lytics survey results are similar to those of others, that show a doubling down of commitments to marketing.

An R.R. Donnelly and Sons survey showed 54% planned to increase 2023 marketing budgets, with 29% planning flat budgets. A survey by Matter Communications indicated 89% of CMOs and marketing executives planned to increase budgets.

But why the increase in budgets for 2023 in the midst of an economic recession? There are several factors playing an outsized role in those decisions.

The factors impacting marketers’ budget shifts

1. Inflationary persistence

Brands need to be present, front of mind, and demonstrating value to customers — now more than ever. 

The dramatic inflationary pressures in 2022, which are easing but still present in early 2023, have made customers even more conscious of how they spend their money. Marketing is the most effective way for brands to maintain a presence in the hearts and minds of their existing customers while also attracting new business.

Brand-building initiatives will be critical for those wanting to stay relevant.

2. Lasting lessons from COVID-19

The COVID-19 pandemic was a precautionary tale for marketers. Many brands hit the pause button on marketing during the pandemic, only to realize when it was too late that they had overcorrected.

Those companies that continued to market aggressively, with appropriate pivots related to the pandemic, were stronger both during and after the worst days.

3. Lessons learned from past recessions

The outcomes of decisions to stall or increase marketing in challenging times are similar in the pandemic as to in previous recessions.

Companies that committed to marketing in a recession ended up stronger for it, while there are countless examples of major brands that retracted their marketing spend only to end up out of business as customers turned elsewhere.

There is no question that marketing budgets are under a larger microscope in challenging economic times, according to a survey of 43 multinational companies, among the world’s largest advertisers. In fact, the survey, conducted by the World Federation of Advertisers and Ebiquity, indicated that three quarters of respondents “agree” or “agree strongly” that budgets are facing increased scrutiny. Despite the rise in oversight, however, just 29% of respondents planned to reduce ad dollars in 2023.

4. Shift in data regulations and policies

Brands have had to face increased pressure from regulators and partners regarding access to and use of data. For example, both the General Data Protection Regulation (GDPR), which covers European Union residents, and the California Consumer Privacy Act (CCPA), provide strict restrictions on the use of data collected. The penalties for failing to comply are steep.

In addition, marketers now face a paradigm shift when it comes to data collection. Google Chrome and Mozilla Firefox have joined other major browsers in ending access to third-party cookies. Third-party cookies, also known as HTTP cookies or trackers, were a core way for marketers to gain data about website usage by customers.

The elimination of third-party cookies means marketers must increasingly rely on first-party data, which is information that customers provide willingly to your brand. Examples include newsletter sign-ups, registration information, and login data.

5. Data is a high priority.

As seen above, data is top of marketers’ minds for 2023. Nearly all marketers — 88% — plan to invest in their data strategies in 2023.

Among the key survey takeaways:

• 56% of marketers plan to update their data infrastructure in 2023
• Nearly 60% plan to invest in data software and tools
• 44% plan to increase privacy compliance
• 44% plan to hire data talent in 2023
• 31% expect to make investments in first-party data

A look at the upcoming shift in marketing spend

The Lytics survey indicates strategic shifts in where they will allocate marketing dollars. The biggest winner appears to be paid search. Sixty-five percent of marketers indicated an increase in spending for search platforms such as Google and Bing.

Owned channels are the other big winner, with 60% of respondents planning to increase their investment in these spaces.

• Instagram will see a considerable boost in ad revenue, with 51% of advertisers planning to increase spend on the platform, with 21% indicating the increase will be 11% or more.
• Meta will also see growth, with 51% of advertisers planning to increase their spend.
• TikTok will not see significant growth, despite 55% of marketers planning some increase in spending. That’s because 32% are planning an increased spend of less than 10%.
• Snapchat will struggle for marketing dollars in 2023 from Lytics survey respondents. Fifty-nine percent expect no change in their spend in Snapchat while 11% of marketers will lower their investments.
• Twitter is a complicated case. The change in ownership of the platform and loss of registered users is making decisions about the platform complex. According to the Lytics survey, 43% of respondents will increase their spend on Twitter, with the majority budgeting an increase of more than 10%. However, half of marketers said they will either not change their Twitter investments or reduce them.

2023 growth in marketing budgets: What to expect

Increasingly, marketers and IT teams need to be closely aligned. Technologies that collect, analyze and use data in real time to reach customers are essential. Marketers also need artificial intelligence (AI) and automation tools to integrate data from multiple channels and create reliable, accurate customer profiles.

The Lytics study showed that nearly 75% of marketers will increase their technology budgets in 2023. The growth is significant in many cases, with 24% planning to increase budgets by up to 30%. To address key IT cost centers, nearly 75% of respondents said they will renegotiate terms with their SaaS or martech vendors in 2023.

The growth in budgets is an encouraging sign of the value marketing plays in customer acquisition and retention. Given the many factors leading to economic uncertainty in 2023, investments in marketing will be even more important than ever.