Distinguishing macro and micro economic marketing challenges
For most marketers, macro conditions have been relatively stable throughout their careers. Interest rates have been low since the 2008 financial crisis, incentivising investment and powering the growth of ad-supported tech businesses such as Meta and Google.
That changed dramatically with financial consequences of the pandemic, including the disruption of global supply chains and quantitative easing. It was then heightened by a cost of living and energy crisis. This has left businesses scrambling to decide whether the marketing challenges they are facing result from macro or microeconomic factors.
In this blog, we explain the differences between the two to help you better understand how to make that judgement.
A crucial decision in today’s market conditions
Marketing is a challenging discipline. Creating the most effective marketing campaign requires many aspects coming together; identifying the target market correctly, understanding their needs, finding the best way to reach them, allocating resources most effectively, deciding on the most appropriate creative assets and measuring the success to continually improve.
Any inefficiencies can lead to a major decline in marketing performance. For example, if budgets are not large enough, then a business may never be able to create sufficient noise to capture the market. Alternatively, if budgets are too large, then a business will be wasteful by pursuing frivolous routes to market in an effort to grow.
The majority of marketing challenges are difficult for senior leadership teams to understand because of their accountancy backgrounds. Accountants look to establish straightforward cause and effect relationships. However, creativity's value is exceptionally difficult to measure through this lens.
Where marketers and other senior stakeholders share outlook is in their desire to maximise outcomes for the business. This makes defining whether a marketing challenge is a macroeconomic one or a micro economic one perhaps the most important questions for them to work together on.
Defining a macroeconomic marketing challenge
A macro problem is defined as a marketing challenge that is caused by the market conditions at a societal level. The market opportunity may change due to reasons beyond a business’ control. There may be a rise in interest rates, a decline in disposable income or high inflation. The impact of these changes may be to either dramatically reduce the market opportunity for a business or to remove it entirely.
When macroeconomic conditions change for the worse, they can have serious consequences for marketing teams. Marketing budgets are cut, teams are reduced in size and agency support is withdrawn. This often results in the stagnation of marketing ideas, with teams forced to focus on increasing efficiency at the expense of innovation or creativity. In doing so, campaigns can become data-driven based on past performance at the expense of predicting future trends.
Reacting quickly to macro challenges may define a business’ long-term success. However, it may also destroy a business’ long-term success if the measures taken aren’t appropriate to the situation at hand. A senior management team must therefore assess the macro environment more closely. This requires verifying different economic measures to ascertain consistency in outlook.
Marketers are unlikely to be involved in analysing macroeconomic conditions unless they have skills in behavioural economics. These skills can be extremely valuable in matching the macroeconomic conditions to the marketing outlook. This process can also be easily overlooked by macroeconomists and finance personnel.
Defining a microeconomic marketing challenge
A microeconomic marketing challenge is one that resides with a marketer and marketing team because it results from changes within the market. Examples include reacting to competitive threats, deciding on a creative route for a campaign, or repositioning a brand identity.
By defining a marketing challenge at a micro level, a marketing team can work more efficiently. They can diagnose a challenge, decide on an appropriate action plan and monitor its success without the need for outside intervention. They can also then work on multiple challenges concurrently, and decide how best to tackle them, often benefiting from the creative ideas of agencies and outside advisors.
This categorisation of microeconomic marketing challenges means that marketing teams need to present plans, and report successes at regular intervals, in the same way other business functions do. And by doing so, marketers avoid the input of non-marketers on key marketing decisions, such as the selection of an influencer for a campaign or a campaign strapline. In effect, this results in greater creativity, and greater market alignment.
Despite this autonomy, marketers do still require sign off from senior management for some market-based decisions. For example, the may need to discuss an increase in overall marketing budgets to respond to a competitive threat or to capture a new market. However, these decisions are difficult to agree at board level, where broad heuristics such as allocating a specific % of revenues to marketing are often used. The exceptions are considered in our research on actual marketing budgets.
Building marketing agility
By separating micro (market) concerns from macro (societal) concerns, we hope you can see how marketers can build agility. Once a marketer knows whether a challenge sits within their control, they can work quickly and independently of senior leadership teams to resolve it.
To read more, then perhaps consider reading the articles linked throughout. To continue the conversation with us, don’t hesitate to get in touch below.
Until next time.
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