Pivot to growth: How top marketers tackle spend efficiency
August 1, 2023 | Infographic
New challenges
Headwinds in the form of cost increases are putting additional pressure on marketers to spend more efficiently.
37%
spend reduction on non-food discretionary items¹
5–8%
media inflation, forcing companies to spend more²
10%
reduction of their non-working spend, shifting budget to working spend
42%
improvement on media to production ratio
Assess the opportunity size
Prioritize areas with the highest value potential to increase efficiency.
Working
Non-working
Opportunity size,³ as % of category spend
POS / Promotion
Reduce waste by cost efficient material sourcing
10–17
Traditional media
Optimize TV spend tactics (eg, spot length); leverage volume of scale by budget pooling
8–14
Sponsorship and events
Focus on the right level of sponsorship activation to ensure high ROI
7–10
Digital Media
Focus investment on campaigns with high return on ad spend (ROAS)
7–9
Production
Increase production efficiency by re-usage / longer usage of assets; move towards offshoring
10–15
Agency fees
Optimize agency costs with should-cost model; build a fit for purpose model based on capabilities
6–10
Consumer insights
Establish consistent protocol for standard vs ad hoc research requests; global contract (re)negotiations on panel research
5–7
Develop actionable initiatives
Three case examples where outperforming marketers are using spend efficiency to drive growth.
Budget allocation
Spend management
Inefficiency elimination
Budget allocation
Strategic budget allocation to high-growth areas
reallocation opportunity identified for a global sports brand
Initiatives
Potential impact
Tactical data-driven spend management
Top-down benchmarking and growth-related budget allocation to meet strategic objectives
Bottom-up allocation helps to guarantee sufficient spend levels
~8–10%
Continuous efficiency analysis identifying savings to (re)fund initiatives with highest ROI and strategic relevance
Initiatives
~20%
reinvestment opportunity identified for an international chocolate manufacturer
Potential impact
Operational inefficiency elimination for re-funding
Inefficiency elimination
Capability building and spend guidelines (incl
KPIs) to enable a data-driven spend management
Implementation of a central spend management
team to optimize efficiency
Initiatives
~20–25%
reoccurring spend freed up for a leading beauty player
Potential impact
Spend management
¹European Commission; McKinsey analysis, October 2022 and McKinsey Global Institute.
²Magna Global Inflation report 2022.
³McKinsey proprietary (MEG) database across industries; post-2021 vs. pre-2021 evolvements.
Thomas Bauer is a partner in McKinsey’s Munich office, where Aline Dahmen is a consultant; Brian Henstorf is a senior partner in the Dallas office; Jeff Jacobs is a partner in the Chicago office; and Priya Rammohan is an associate partner in the Brussels office.
ABOUT THE AUTHORS
Based on insights from over 50 projects, we’ve seen some outperforming marketers address these challenges by finding opportunities to reinvest in top-line growth.
New approaches
How do you discover these efficiencies in your organization?