How have SMEs adapted marketing in light of the current climate?

Measuring effectiveness can be a difficult task, even for marketers with piles of cash ready to pump into it. For those who don’t, well, it becomes even more imperative to spend money wisely.

Such has always been the way for SMEs, of course, but in difficult economic times how marketing spend should be allocated – and thereafter tracked – has never been harder to judge. It begs a simple question: what is important to SMEs right now?

We know that fewer SMEs – businesses with under 250 employees – are focusing on brand marketing alone this year (14.2%) compared with last year (17.8%), according to Marketing Week’s 2023 Language of Effectiveness survey. And 10.9% are focusing just on performance in 2023, compared with 8.8% in 2022.

Breaking this year’s data down further, 32.5% of SMEs are doing both with a focus on brand, compared with 27.7% in 2022. Meanwhile, 20.8% are doing both with a focus on performance, down from 22.5% last year.

The percentage of SMEs doing both equally has dipped slightly, but marginally – 20.8% this year compared with 21.3% last year.

How has economic uncertainty impacted marketing budgets?There’s a contrast between the narrative about “the importance of brand” and the data, suggests Kit Gammell, co-founder of cereal brand Surreal. “It looks a lot more short term, which I can understand looking at the macroeconomic environment, there’s a focus on immediate results,” he says.

Surreal is just over a year old. For a business in its infancy, it could be expected to be focusing on performance to boost initial sales. However, Gammell says that isn’t necessarily true in Surreal’s case as the company is homing in on brand instead.

“We’ve always wanted to invest in brand,” says Gammell. “We see it as our long-term advantage, and then we supplement it with performance.” He says the cereal challenger brand has noticed an impact on short-term sales and success in its performance challenges off the back of its brand work in the last six months. “That’s where the gold is, when both channels are running in parallel,” he adds.

Luna Daily is a female wellness brand that is also around a year old. Noting the difficulties of the past 12 months, its head of marketing Hannah Rowe tells Marketing Week that “everyone’s being a bit tighter” when it comes to marketing spend in the scale-up and startup space.

Rowe sees brand marketing as something to be “supported by performance marketing”.

“It’s an easier win, especially in a smaller organisation,” she says, noting how the metrics early stage businesses look at “first and foremost” tends to be the cost of customer acquisition.

“Once you’ve had investment, one of the key metrics investors look at is this cost and it’s a lot easier to attribute that through performance marketing,” she says.

The issue for SMEs is that when the budget is tighter, you have to get your performance marketing working well for you before you layer on brand, because it’s hard to get that investment.

Hannah Rowe, Luna Daily

Rowe believes brands need to get the cost of customer acquisition down before adding brand building into the mix: “Essentially, once we’re doing that and we’ve got steady growth, then it’s super important to be layering on brand.”

Doing this can create a “halo effect” where all channels and touch points are working together to reduce the cost of customer acquisition – but as Rowe says, “it’s a bit chicken and egg”.

“The issue for SMEs is that when the budget is tighter, you naturally have to get your performance marketing working well for you before you layer on brand, because it’s hard to get that investment,” she says. “However, without brand spend, it’s hard to keep performance working,” she adds.

Marketing momentum

Just 18.9% of SMEs have seen the need to communicate a consistent and desirable brand image increase in the last year as a result of the current economic climate, compared with 27% of large businesses.

“The shift makes sense based on the economic climate,” says Daniel Cray, founder of Phizz, the multivitamin and hydration tablets brand. “For us as a business focused on profitable momentum, yes, we have year-on-year growth, but it’s about making sure we stay on that profitable side.”

The funding landscape is having an impact on how brands are spending their marketing dollars. As Cray says: “A lot of businesses are changing their strategy in the last 12 months to get there [break-even] based on how well they’re funded, whether they’re going through new rounds of funding.”

For brands that have had to change tack to mitigate murky economic waters, it’s a “challenging time”, says Cray, who has seen peers in the tech space, for example, “trying to make huge sweeps and trim costs”.

“FMCG is not immune to that either,” he adds. “But for Phizz, we’ve always had the ambition of strong focus on performance as we continue to invest in brand.”

What does marketing best practice look like for SMEs?Shifting marketing spend isn’t always necessarily about the money either, says Cray. “It’s not just the budget, but as a startup it’s also team time.” Meaning, it’s important to focus intently on what activity the brand is going to do together as a team. “We’re big believers in investing in the brand, and that can come in a lot of ways that go beyond buying out-of-home space.”

As an example, Cray points to how Phizz recently redesigned its packaging in a drive to clearly demonstrate what the brand is about, what it offers and what it can do for consumers. The product is sold in supermarkets across the UK, such as Tesco and Sainsbury’s, and “revisiting” and investing in a change in packaging has allowed it to improve its messaging and retail position. Cray cites a 30-35% uplift in the brand’s rate of sale as a result.

“It’s about making sure you’re not looking for silver bullets with brand strategy,” he adds.

Marketers have long been told the importance of the 4Ps: price, product, promotion and place. Touching on the topic, Cray says of all the levers marketers can play with, product can often be “forgotten”.

It’s about making sure you’re not looking for silver bullets with brand strategy.

Daniel Cray, Phizz

As a founder, the product can be “like a child” to you, and while you might think it looks beautiful, “it’s worth scrutinising”.

“Ultimately, when it sits on a shelf, you need to be sure that it’s saying what it needs to be saying,” he says. “We’ve seen a good return on it so far.”

Metrics are “crucial” at Phizz, Cray tells Marketing Week. Measuring effectiveness is high up on the agenda. Recently, the brand began tracking via polling company YouGov.  “It’s an additional cost,” he says. “But with the activity we do, whether that’s TikTok or sampling or sponsorship activity, we’re able to actually see the impact of it.”

Test and learn is something all marketers are told to do, but for startups, it’s part of the journey. “You see what works, and you follow the response,” says Surreal’s Gammell, noting the flexibility that comes with being in the early stages of a brand.

The brand is focusing on brand awareness and optimising its marketing towards impressions. “You can keep testing [as a startup] because you don’t have such a big audience yet.”

Testing allows freedom for earlier stage businesses, suggests Gammell. As he tells Marketing Week: “It’s pretty liberating.”

Marketing Week has published a series of content based on the Language of Effectiveness data, including a report. In the coming weeks we will be looking further at the role of market share as a metric and creative effectiveness.

Click here to read all our Language of Effectiveness content