What you need to know:

• Brand budgets will likely come under attack in the coming months. Per Mi3’s Cannes panel of marketers and publishers, headwinds are incoming.
• But it makes more sense to cut performance spending, per The B2B Institute execs Jon Lombardo and Pete Weinberg, because people won’t be in market to buy.
• Instead, brands should spend on brand to grow faster when the recovery inevitably comes.
• To avoid the axe, brand marketers should talk less about softer metrics such as brand purpose, and more hard financial growth – because brand spend equals future cash flows.
• CFOs should understand that 80 per cent of company valuation is based on future cash flow.

“In a recession, people are less likely to buy. So why would you run short-term lead generation trying to get people to buy when they are not going to buy – because they don’t have the money or the confidence? Why would you lean into a thing that is not going to happen? It makes no sense,” Lombardo told Mi3.

“You would be better off cutting short-term advertising and continuing to invest in long-term brand building, so when the economy does recover – and most recessions only last 12-18 months – you are going to win more of those customers.”

Pete Weinberg agreed.

“The research is very clear that you don’t cut your marketing budget in a downturn. It’s actually a great time to increase your budget, because you can get cheap cost per reach, greater share of voice and actually you will be the one that grows the fastest once there is an inevitable recovery.

Weinberg advised brand marketers to get sharper on commercial imperatives to avoid the axe.

“I think brand marketers, who are in the most precarious position, need to lean in to this idea of being more metrics and data-driven. It’s less about brand purpose and more about association with buying situations. If they position themselves as financial and commercial, I think they are much less likely to have their budget cut. So I think that is an opportunity.”

The two were in Cannes promoting Australian-originated research on brand building on the world stage. Primarily, the 95:5 rule, developed by the LinkedIn-funded B2B Institute with Professor John Dawes at the Ehrenberg-Bass Institute. The rule states that only five per cent of customers are in market at any one time. So brands should focus on the 95 per cent of future customers in order to grow.

[The 95:5 rule] explains that sales should focus on the five per cent of known customers, marketing should focus on the 95 per cent of unknown customers and how finance should think about it: here are your current cashflows, here are your future cashflows,” said Lombardo.

“It organises every part of how you need to think about marketing: how marketing should work with sales; how marketing works with finance; and how good marketing should work at the organisational level. It is a unifying theory.”

Recession or otherwise, Weinberg said businesses that fail to understand that brand investment directly correlates to future future revenue will ultimately miss out. But that creates an opportunity for early movers.

“For the long-term, it’s like gravity: You can’t defy gravity; you can’t not invest in brand and grow over the long-term. The sceptical clients I work with eventually hit a wall. Their cost per lead starts to go too high, their revenue starts to plateau – just funnelling more money into performance marketing isn’t going to do anything in that situation. And then they become more open-minded to other approaches,” said Weinberg.

“So scepticism is very good in the short-term, because it creative competitive advantage for others. I’m not worried about it in the long-term, because every company will be forced to invest in brand. It’s just a question of when. Do they do it now, when there is competitive advantage, or wait until everyone else is doing it?”