Finance sector marketing budgets under pressure in 2024 amidst disruptions

Marketing expert tells three strategic approaches for turbulent times.

Technological disruptions and shifting customer expectations have made 2024 an uneasy year for the finance industry, placing significant pressure on marketing teams, where budgets are often the first to be cut when economic uncertainty strikes.

In 2023, marketing budgets within the financial sector experienced deeper cuts than other industries. Whilst slashing budgets may seem like a prudent, short-term solution—one that would certainly make CFOs happy—it is fraught with long-term consequences. "Cutting marketing budgets might seem like a quick fix," Jackie They from The Dubs Agency, explains.

"But it is in fact a short-term gain at the expense of long-term growth,” They told the delegates of the Asian Banking & Finance and Insurance Asia summit at Andaz Singapore last 3 September.

The cost of cutting marketing budgets

They highlighted the findings from an institute which revealed that brands reducing their marketing spend during economic downturns risk severe long-term consequences. 

The institute's research shows that a pause in advertising can lead to a 16% drop in sales after the first year and up to 25% after two years, particularly for brands that were struggling before the downturn. 

These findings stress the importance of maintaining a brand's presence, even in difficult times, as it positions the company for a stronger rebound once the economy recovers.

This decline in sales is not only problematic in the short term but presents a significant disadvantage when the economic environment normalises. As They elaborate, "Brands that cut their marketing budgets face significant risk. They struggle to reclaim pre-downturn sales and profitability."

The strategic decision to continue or increase marketing spend, even during economic hardships, could yield considerable benefits. Research cited by They shows that increasing the share of voice during a downturn can lead to an increase in market share, positioning companies for growth when the economy recovers.

Brand marketing vs. demand generation: A delicate balance

They also emphasised the critical distinction between brand marketing and demand generation, two components often misunderstood within the financial sector. 

Brand marketing, according to They, "is about building a strong brand that resonates with consumers," whilst demand generation focuses on immediate sales and conversions. The latter offers quick results but often lacks long-term impact.

The challenge for companies lies in finding the right balance between these two approaches. Whilst short-term sales activation tactics are important, their long-term value is minimal. 

"Whilst short-term tactics can generate immediate profit, the most significant and sustainable profitability comes from long-term brand building," she stated.

Leveraging brand marketing for long-term growth

Brand marketing does more than just drive sales; it also insulates companies during inflationary periods, allowing them to raise prices without significantly impacting customer loyalty. It also plays a critical role in shareholder value. 

"The long-term loss in sales, profits, and shareholder value from reduced marketing far outweighs any short-term savings," They stated. This is especially true in a sector where trust and reputation play pivotal roles in customer decision-making.

To stay competitive, companies need to build strong brand equity, which acts as a buffer during difficult times. Strong brands, as They pointed out, "gain affinity in the minds of consumers, increasing their perceived value and trustworthiness." 

This is particularly crucial in the financial sector, where customers tend to rely heavily on their perception of trust when selecting products and services.

3 strategic approaches for turbulent times

They also offered practical advice on how companies can optimise their marketing efforts in these uncertain times. 

One key recommendation is to maintain a "beginner's mindset" by staying open to new ideas and fostering curiosity amongst teams. "You need to encourage curiosity amongst your teams. Create a safe space for brainstorming where all ideas are welcome," she advised.

Second, They also emphasised the importance of cross-industry learning, suggesting that financial marketers look to sectors such as fast-moving consumer goods (FMCG) for inspiration. "There’s a lot of same-looking marketing in [the financial] space. So you want to learn from your counterparts in fast-moving consumer goods and see what you can adapt for your strategy," she said.

Finally, she stressed the importance of focusing on growth metrics beyond just return on investment (ROI). Whilst short-term returns are important, companies should also look at customer lifetime value, brand awareness, and market share to get a fuller picture of their brand’s health. 

"Shift focus from immediate ROI to metrics like customer lifetime value," They explained, "these give you a fuller picture of your brand's health."