After two years of the pandemic, many businesses have adjusted to the new normal and are preparing for the post-pandemic era so that their next steps to align with future market trends.
So the big questions now are:
- Where do businesses plan to spend their money?
- What should your post-pandemic budget look like?
In this article we explore more about how COVID-19 impacted business spending and where companies will be allocating their budgets in 2022.
Impact of COVID-19 on Business Spending
Before delving into expenses for the year, we can look at how business spending has changed due to COVID-19. At the height of the pandemic, many companies implemented cost-cutting measures to cope with the economic recession and sustain their operations.
According to a survey by Kaspersky, 66% of small businesses said that their financial position worsened in 2020, with 38% stating that they had to reduce their budgets.
Some of the main areas that suffered budget cuts include the following:
- Hiring. Hiring was deprioritized at this time since companies were generally trying to survive. Many even had to lay off employees, cut working hours to get through the crisis, and cut losses.
- Marketing and Advertising. As brands and companies focused on navigating the pandemic, most reduced their ad spend to cope with the initial hit from the lockdowns. As a result, 2020 marked the first time in 16 years that Google saw a drop in ad sales, with revenues dipping by 5.3%—from $41.8 billion in 2019 to $39.6 billion in 2020.
- Business Travel. Unsurprisingly, businesses needed to halt their travel plans at this time due to the mobility restrictions imposed. While the situation has eased in the past two years, the changes and advancements in the new normal show poor prospects for the return of business travel. Based on a Bloomberg survey of 45 large businesses, 84% said they plan to spend less on trips in the post-pandemic scene.
Where Will Businesses Be Spending Money in 2022?
So, with all the financial adjustments that businesses had to make to cope with the pandemic, you might now be wondering where they plan to spend their money in 2022. Check out the key areas they will emphasize this year to grow.
1. Marketing Initiatives
While businesses initially had to cut down on marketing expenses due to the aftershock of the pandemic, many are now returning to the scene to reach their target market.
Here are the main predictions for the year:
a) Social Media Marketing
As users spend more hours browsing social media per day, brands want to increase their presence on these platforms. Aside from Facebook, Twitter, and Instagram, emerging platforms like TikTok and Twitch are steadily growing as people seek more ways to stay connected with others online. As a result, these serve as a good opportunity to maximize returns on your ad spend.
b) Search Engine Optimization (SEO).
SEO has become a staple in the digital marketing industry today. What makes it so attractive is that the results are organic, so you need not shell out such a big investment, and you can grow the results over time. Thus, this will be especially popular among small businesses and new entrants trying to make a name in the online space.
c) Connected TV Ads
Companies are starting to see the potential in Connected TV ads, which is the fastest-growing video advertising platform. With more people spending time at home, connected TV has become a primary source of entertainment and you can expect more companies to invest in these ads in all industries. Of course, marketing strategies can vary significantly per company. However, based on the insights above, it is clear that digital marketing will be a core focus for many businesses this year.
2. Technology Investments
Tech is another major area where businesses will spend this year looking for ways to automate their processes and provide better experiences for users. Specifically, these trends will incur more expenses for the year:
a) Tech Software
According to Bain & Company, over three quarters of US companies expect their IT budget to be higher in 2022 as the economy slowly recovers.
Now that businesses are back on track, they are ramping up their digital transformation strategies to stay ahead. This move will also help them maintain efficiency amid remote work setups.
Specifically, companies will mostly be spending on cloud-based security, public cloud infrastructure, and software as a service (SaaS).
b) Augmented Reality (AR) and Virtual Reality (VR)
While AR and VR have been around for a while now, the pandemic has made them even more relevant today. Moreover, since users are spending more time online, they are looking for immersive experiences.
Thus, brands invest more in AR and VR features to elevate the customer experience and stand out more from the competition.
Aside from this, the sudden rise of the Metaverse has also led to a “revival” of the AR and VR markets.
As more people engage in such conversations, you can expect companies to keep a close eye on how they can integrate these technologies into their offerings.
c) Artificial Intelligence (AI) and Data Analytics
Businesses will continue to invest in AI and data analytics to provide more personalization. Nowadays, users are more selective about the brands they support and gravitate towards those that offer personalized experiences.
The statistics say it all: 91% of consumers are more likely to shop with brands that give them relevant offers and recommendations. Likewise, 80% are more likely to buy from brands that offer personalized experiences.
3. Employee Benefits
Like marketing, HR also suffered a big budget cut at the start of the pandemic as companies laid off employees and downsized their workforce.
However, in 2021, things took an unexpected turn with The Great Resignation, when millions of workers quit their jobs due to toxic cultures, poor response to COVID-19, and a lack of recognition.
With the effects lingering this year, businesses will try to attract and retain top talent by spending more on benefits.
Companies need to step up and provide more initiatives to keep workers productive, engaged, and happy now that employees are taking charge of their lives and demanding more from employers.
Major Influences on Budgeting Trends in 2022
When thinking through how to determine the size and allocation of your budget it is improtant to consider new workplace standards brought in by the pandemic and COVID-19:
- Increased demand for hybrid work or flexible arrangements as employees have grown accustomed to working virtually
- More emphasis on mental and emotional health to help employees achieve work-life balance and encourage them to be more open about mental health concerns
- More emphasis on diversity, equity, and inclusion (DEI) to improve organizational culture
- Implementation of holistic leave strategies to accommodate COVID-related concerns
- Providing financial wellness benefits
Speak with our Digital Marketing Experts About Allocating Your Budget
Based on the statistics and insights above, it is clear that business spending must change significantly, from pre-pandemic times to the height of the pandemic and now, the new normal. Thus, with many changes in the market today, you must keep up with the latest advancements to plan your budget correctly.
At 1st on the List we’ve heard from plenty of businesses determining how to spend their marketing budgets in a post-pandemic era and listened to what has worked and what hasn’t worked so far. Our team of experts can provide advice on how to create and allocate a Digital Marketing budget that will deliver the results and growth you need in the post-pandemic era. Call us at 1-888-262-6687 or connect with us online.