We’re rounding out 2022 new business trends with a focus on Experimental Budgets. Those elusive and magical dollars are set aside to try new things and open new channels for brands.
We know that marketers’ budgets for testing are continually increasing, but now more than ever is a time when these budgets are no longer afterthoughts. The Pandemic’s disruption colliding with a huge diversification of media and an acceleration of new consumer behaviors means that marketers are having to try new things and look for new creative avenues and media channels to put their budgets. They are doing this too with full knowledge that a large portion of these budgets may not get them a Return on Investment (ROI) immediately.
Skip the Procurement Approval Process
The ROI conversation is a big one because when you are in a testing mindset, as these brands are, you are willing to look at ROI differently in order to evaluate a campaign more holistically. Rather than just “did sales increase?”, marketers are exploring how else these campaigns may affect the brand image/recognition as a whole. This open-mindedness opens new opportunities for an agency to get their foot in the door.
We have seen this play out over the past 12 months in a number of ways. Recently, one of Catapult’s clients was speaking with a direct-to-consumer mattress company about their 2022 growth goals. They had already set their performance marketing budgets for the year, but what they set aside was $150k/month to try new channels. Because they already have these dollars budgeted, the marketers themselves can sign off on new partners without having to go through the typical CMO/procurement approval process, saving a massive amount of time and energy for our agencies. While $80k may not be a huge initial project, that is a monthly budget, so the calculus is that the program you are running is going to be fantastic and you are going to be able to continue all year – totaling closer to an overall $1 million client.
What the Data Tells Us
If these budgets are easier to get signoff, how do we know they are out there happening at an increased rate? We looked at the data. In 2021, we looked at the number of new agency relationships added to the Winmo database vs agency relationships ended in the database. You would expect these to be close to a 1:1 ratio if you assume these are retainer relationships, one agency wins a new piece of business, and as such another loses. 1 new win, 1 new loss. What we actually saw though was that new relationships happened at double the pace of ending relationships. Essentially, brands are hiring more agencies for projects and experimental work at an increasingly fast pace.
Further evidence to this was looking at our select group of over 50 agencies within the Catapult group and we found that 72% of our agencies’ new work started last year was in the form of an initial project, not a retainer. There are certainly retainers out there to be had and won (and increasing RFPs back that up), but the quicker decisions being made by marketers right now in mass are those with a project background.
We aren’t saying that you only consider project work moving forward. What we are saying is that when you go into an initial fact-finding call with a new brand, be aware of these experimental budgets and keep it in the back of your mind as they talk about opportunities that do or do not exist currently. While they may not be out there searching for a new Agency of Record, we are sure they are looking to find a new way to break through to different audiences and there is money to be spent.