In-depth: Does large-scale advertising by start-ups while announcing mass layoffs make sense?

Netflix (150), Vedantu (624), Cars24 (600), Unacademy (925), Trell (300), Meesho (150), and Byju’s (800), the numbers are not the unique shows/offerings by these companies but the employees laid off by them quite recently.

The post-pandemic economic situation, coupled with inflation and international unrest, is taking a toll on the Indian start-up ecosystem, and unfortunately, these start-ups have had to resort to mass layoffs. 

Despite the economic situation, start-ups have risen to be the biggest advertisers in the past few years. Companies like Unacademy, Byju’s and Meesho continue to advertise across mediums. We have also seen a lot of start-ups go all out to advertise on expensive properties like IPL. 

At a time when businesses have started to struggle, BestMediaInfo.com tried to decode whether spending big bucks on marketing is the right approach. 

Prashant Deorah

According to Prashant Deorah, CEO, Puretech Digital, layoffs are one of the toughest decisions for any business and they need to be mindful of it. 

“The decisions taken by the start-ups probably aligns with their priorities and business strategy and perhaps should not be seen only in one light. The laying off decision versus marketing budget allocation comes from a more strategic focus on driving business in the long-term,” he said.  

Vishesh Sharma

Vishesh Sharma, CMO, Ashika Groups stated that a business has to deal with these two issues (layoffs and marketing spends) separately. He said layoffs may happen due to multiple reasons in a company, while marketing spending is a separate issue around which a discussion can probably happen about how and where the brands should be spending. 

“I think even if they are struggling from revenue point, marketing spends, in all probability, will help them get to some sort of scale-up which in turn will have a positive impact on revenues.”

There has been a lot of chatter about what these public layoffs mean for the Indian start-up situation. While some state that the current situation is a bump in the road, others suggest the situation is indicating a deeper economic reality. 

However, Sharma of Ashika Groups suggests that notions like ‘The Indian start-up story is over’, are premature. “According to me, the Indian start-up story has not even started. What you are seeing today is the rationalisation and better sense prevailing in start-ups. The luxury is getting crunched right now and they have to rationalise their resources. Unfortunately, this is also having a severe impact on the workforce.”

“Marketing activities are the only thing consumers are seeing at the front. They (start-ups) are also investing in technology, infrastructure, distribution etc. Unfortunately, the consumer does not see it. So, marketing spends become the only talk point,” he explained. 

Lloyd Mathias

Expressing similar sentiments, Lloyd Mathias, Business Strategist and Angel Investor, said that businesses have to stay accountable to stakeholders. “For most companies, profitability or the path to it is the key criterion to evaluate its performance by their investors and stockholders. So, companies will sometimes have to take hard calls like laying off employees to ensure they meet their profitability goals.” 

“Often their objectives also include growing their revenues and increasing their user base - which may require big ad spends on popular properties like the IPL. Simply questioning these two developments, laying off staff and spending on advertising, because they happen in the same time period may be a bit skewed. Yes, while it’s important for companies to be empathetic and compassionate, especially during a pandemic, businesses may need to take tough decisions that may on the surface seem unpalatable,” he added. 

Allocating budgets creatively 

According to experts while companies deal with cash crunch and layoffs, they must equip themselves to allocate resources creatively. 

Nisha Sampath

As per Nisha Sampath, Managing Partner, Bright Angles Consulting, in such times brands should look at advertising creatively. She said many of these companies continue to advertise through celebrities, which is very expensive. “Do they have to fall back on stars who are a huge expense?” she questioned. 

Abhijeet Khinch

Abhijeet Khinch, Founder of Stealth Mode, through a LinkedIn post, shared how companies can allocate marketing budgets creatively.

“In 2019, due to a delayed funding round at RentoMojo, we had to cut all our marketing costs. We spent zero bucks for 3 months. And once, the spending restarted, we doubled our orders and traffic. The big reason was our amazing organic marketing efforts supported by strong content and creative team,” he said.

“This is the time to leverage your content, creative and SEO teams. In difficult times, these teams will be the only source of organic traffic and will help in maintaining a brand presence. This is especially important once cuts happen to operations/sales and experience teams,” he explained. 

Impact on brand value

At a time when consumers are smart and value compassion, loyalty and honesty by brands, do such practices not affect the brand image?

According to Sampath, the idea of a brand was related to a product. However today, brands not only reflect the product but also the purpose and vision of their leadership. “Paradoxically, the start-ups were the ones to bring this change. Today, the images of the founders are driving the images of the brands. For eg:  Kunal Shah and Nitin Kamath.” 

“Employees and investors are also a channel of communication for brands.  The youth is conscious of the world around them today, and yes it does impact the brand’s equity also. Today, one does not build a brand just through advertising, they are building it through actions and building affinity.”

“Gen Z believes in compassion; we also see the realisation coming in for both sides. The consumer is also aware of the way business functions and the need to take such calls. The companies are well-aware of the consequences of their actions, although from a business perspective one needs to see that disrupting markets calls for such cost-balancing. As these companies lay off, some of them are also hiring. They are in a constant process of making their hiring decisions better,” said Deorah. 

Will start-ups cut down spends?

This may be subjective to the brand’s performance, experts suggested. “The tough external market environment is making capital scarce. One needs to move monies to the more sustainable factors in the organisation. As the companies get rid of the burdening costs, they can channel funds to the more crucial parts of their business. Depending on the industry they operate in, and the audiences they target, budgets for adex could be hit,” stated Deorah. 

Info@BestMediaInfo.com