3 Questions CMOs Should Ask Themselves When Navigating the Downturn
As businesses reevaluate their marketing investments during this economic downturn, learn about the key questions they should ask.
The current economic upheaval has forced many tech companies to reassess their marketing plans. Reevaluating their marketing investments is especially important for smaller companies as they want to succeed without much room for error. As they look to be successful, CMOs should ask themselves a few key questions, writes Daniel Raskin, co-founder and chief marketing officer, Mperativ.
Given the current state of the economy and the recent market downturn, even profitable and established companies have been forced to reassess their plans. Market volatility is nothing new, and many of us have seen the tech market go from mountains to valleys and back again over the last few decades. Nonetheless, the reality of a tech downturn can feel daunting.
As investors begin to tighten the purse strings and stock prices plummet, businesses must start refocusing their strategies to not only survive but potentially thrive. Now more than ever, it is crucial for businesses to assess the effects of their investments over time so they know what levers will allow them to navigate rough waters. This is especially relevant for younger companies and startups. With limited capital, startups do not have the luxury of making too many wrong calls, and yet they usually have lesser data to inform their decisions than larger enterprises. In this situation, startups need to take steps to increase their agility and flexibility to take more shots at the goal while deepening their understanding of the dynamics of their business.
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As the process of refocusing begins, here are three questions I believe CMOs should be asking to ensure success:
How can I pinpoint what most efficiently drives revenue?
If the past few years have taught us anything, it is that the ability to adapt is key to being resilient through unprecedented times. In the aftermath of the tech bubble bursting, business leaders should go deep in their analysis of the key drivers of revenue and focus on elements that are most integral to their business. This will allow them to eliminate unnecessary efforts that may only serve as distractions.
With venture funding winding down by the minute, many startups are looking to reduce spending to increase their runway as much as possible. But when funding resumes, it may not come at the same lofty valuations as the last few years, and investors will be looking at growth with a more critical eye. Startups will need to assess not only how they can maximize revenue and runway but also how they can pinpoint what makes their growth repeatable and demonstrate these dynamics to investors. To do so, leaders must question the cause and effect of their activities, especially those which drive the marketing pipeline, to get a clear picture of the factors affecting revenue.
Closely examining their activities will allow marketing teams to think strategically about where they are investing time and money and ensure nothing goes to waste. When it comes to cutting back on budgets, marketing teams must gain insight into what the most effective dollar spent is. However, this can only be accomplished by obtaining high-level trend data and trend data for varying market segments to fully highlight what dynamics differ across segments. Making the shift to observing trend data by segments can allow leaders to capitalize on the most valuable industries, personas, regions, and campaigns for their business.
What is really working and what is not?
When evaluating what is working most effectively within the marketing structure, leaders should analyze data-driven results rather than trusting their gut. In the scenario of a downturn, it is crucial not to be attached to initiatives that feel the most exciting but rather those that can be shown quantitatively to drive results. Because of its inherent objectivity, data can be our most reliable guide in a downturn. But it is vital that business leaders are specific about the insights they choose to analyze.
Insights about what is working and what is not need to be not just about past results but about actively forecasting, such as by predicting the pipeline coverage needed by different segments to hit revenue goals rather than assuming flat 3X-4X coverage across the business. This allows a team to work backward from a forecast to create an efficient marketing program mix that is more likely to hit the number. With the mix established by segment, it is also easier to determine where your assumptions about a segment may have been wrong. In addition, forecasting is essential for creating accurate and realistic expectations both within the business and with the board or investors.
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Should you be scaling your business?
For many tech companies over the last few years, the question of whether to scale the business has been a given — the sky is the limit. However, in times of difficulty, it is important to ask whether or not the company is actually ready to scale and if there are repeatable patterns that showcase its readiness for growth. A downturn does not necessarily mean that you should not scale, just that you need to develop some rigor in identifying the factors that will tell you you are ready. Before taking the measures to scale the business, leaders should ensure that they can clearly point to their product-market fit, that they are aligned internally on their best use cases, and that they pinpoint how their marketing dollars drive their company’s revenue.
Without a proper understanding of market fit and the right marketing mix, it can be easy for leaders to waste money and get ahead of themselves. When this happens, the natural reaction is to halt all plans to spend and scale. But depending on how the company is doing month-to-month, marketing can be easy to spin up and down, so the answer should not always be to give up on marketing spending entirely. Leaders should instead look to leverage key insights from predictive analytics that they can implement to build a scalable business.
Ultimately, the best way to gain crucial insights into these factors is through data. For many years, monumental decisions have been left to impulse. Now more than ever, it is time to trust your data — it will help you find your way.
What are your key considerations when reevaluating marketing investments during this economic downturn? Share with us on Facebook, Twitter, and LinkedIn.
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