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    In the business world, a risk is a condition or an event that might affect the business objectives if it materialized. Unlike threats, risks are not imminent – they are a probability, or what might happen. For instance, investing money incurs the risk of financial gain or financial loss – except it’s more elaborate than that.

    Translating that into the marketing world, marketing risk entails the potential losses or failures that may arise from a marketing strategy. Such risks cover a myriad of issues affecting marketing, including fraud, performance, and reputation.

    Marketing Risks

    Marketing risks include:

    Brand risks

    A business can lose its brand value due to poor marketing or stiff competition. For example, if you overestimate your brand’s strength, you might end up using inappropriate marketing techniques. As such, you might lose your marketing capital for failing to realize the need for more brand promotion or increased marketing efforts – early enough.

    Demand risks

    Selection of the target market(s) affects the riskiness of a marketing plan. Failure to conduct adequate market research, gathering data from wrong sources, improper use of collected data, etc., can result in a miscalculated target market. Failure to understand your market can lead to improper positioning of your products/services. The demand risk can then trickle into your differential advantages, strategic objectives, and the share of resources among the aspects stipulated in your marketing strategy.

    Promotional risks

    Your promotional approaches should be well-calculated into compelling, effective, powerful, and ethical techniques. Otherwise, the methods may fail with devastating effects. Think of the consequences of false, exaggerated, or misleading messages, such as a ruined brand reputation.

    Changing trends

    Marketing trends change daily, from price shifts to promotional messages and automation technologies. The changes are mainly due to technology, and as such, your marketing strategies must keep up lest you risk having a lowered bottom line.

    Consequences Associated with Marketing Risks 

    Recently, brand safety has rapidly taken up the marketing agenda following high-profile data harvesting. That resulted in the incorporation of GDPR (the general data protection regulation). You probably remember Dixon Carphone admitting to a data breach that affected 10 million of its customer records or the TSB’s IT meltdown. Or the most scandalous data breach involving harvested Facebook profiles by Cambridge Analytical – a data company – to create targeted political campaigns.

    (Now, targeted ads are something many marketers are familiar with, which explains their silence on the Cambridge Analytical saga.)

    Marketing risks can result in a breach of trust. Recoizing this, the Facebook CEO Mark Zuckerberg published an apology- a full-page newspaper ad of an apology! When customers lose confidence in your brand, they’ll (most likely) shift their business to your competitors. Following their failed IT migration, TSB lost 80,000 of its customers to rival banks.

    Losing customers is expensive, probably more expensive than acquiring new ones. A 2018 study conducted by IBM on the Cost of Data Breach concluded that: 1% of lost customers translates to an average of $2.8m (£2.1m) in lost revenue. Thus, losing just 4% of your customers can cost your business up to $6m (£4.7m). In their case, TSB lost £330m of their revenue: £125m on customer compensation, £122m on tech systems, £49m on operational losses, and £34m on waived charges.

    If the customers sympathize and decide to retain their business with your brand, they’ll exert more demands. The 2018 Edelman Trust Barometer indicates that 71% of consumers want companies to pressure social channels to safeguard their private data better.  Moreover, these customers will be keener on your marketing activities. Edelman’s analysis showed that 48% of customers believe that if your marketing/advertising activities appear next to inappropriate content (think of hate speech and violent content), then it’s your brand’s fault. Also, 47% of customers will likely take the content surrounding your ad on Google and social platforms to indicate your values. 

    With your customers’ eyes fully hooked on you, it’s easy for them to spot even the slightest misstep. In their 2018 report, IBM noted the likelihood of a trust breach recurring (in 2 years or less) is 27.9% – of which, if it happens, your customers will be less forgiving.

    The Solution

    Limiting your brand’s risk exposure calls for a marketing risk management plan that’s all rounded to help you anticipate/identify, prepare, and circumvent any marketing challenge. The risk management plan should be a continuous cycle involving risk identification, risk analysis, risk mitigation, and risk monitoring.

    To paint a picture, employees across the business spectrum should collaborate to create heat maps of the anticipated and identified marketing risks, indicating their probability and magnitude of their impacts. The key here is getting the right people on board. Think of the tech stack, content, data management, and customer experience teams. 

    Side note, risk management strategies in marketing activities are more valuable for companies with substantial reputational risks or massive international franchises. Brands thinking in the long-term in that their PR people and marketers take into account brand safety, ad visibility, or brand reputation.  All in all, businesses are beginning to appreciate the need for marketing risk management strategies, as seen in the rise of brand safety officers and Chief Security Officer positions.  


    Marketing risks results in lots of uncertainties. You’re unsure whether your ad will reach the right target or whether prospects will respond warmly. That’s where a marketing risk management plan comes in – to help curb these uncertainties. Thus, consider taking a class (or two) on the matter. For quality and convenience, visit Brain Mass’s online community of academic experts who are experts on risk management issues related to marketing.