Marketing during a recession or not. It’s a difficult decision. Recent announcements of staff cutbacks at tech giants like Alphabet (Google), Amazon, Microsoft, IBM, Yahoo and Zoom suggest a far from rosy picture at the moment, and the economy is struggling.
Yet whilst we can’t control the market, all of us can control how we respond. And it’s the decisions made now that’ll determine how we recover.
During an economic downturn, businesses face difficult conversations: What’s the direction we need to take? What do we need to do to get through this? Where can we cut back? What activity should we pause or continue? All of these questions are current.
And it’s inevitable that marketing budgets are scrutinised, very often slashed. Because it’s easy to think of marketing as a luxury expense that can be postponed until the economy improves.
However, if you’re considering cutting your marketing budget, you may want to give some serious thought about doing so. Whilst it’s a logical short-term cost-saving measure, cutting your marketing budget could potentially do more long-term harm than good.
Cut back or continue
Ask yourself this. Do you cut back and stop promoting your business at the exact time you need to capture every sale? Or do you adopt a long-term approach and think about the opportunities to gain an advantage?
- Cutting back – short term thinking:
Where a business cuts marketing, goes dark and disappears from view. Battening down the hatches to try to see out the storm.
- Continue your marketing – long term thinking:
Maintain budget and marketing to capitalise on the actions of those who cut back, benefit from short-term opportunities, and be in position to come out the other side thriving in the long term.
Very often (and indeed most commonly) cutting back can feel like the right option. It delivers instant benefits by reducing your cost base, helping offset any revenue or sales decline.
But in the long run, cutting back puts your organisation at risk. Because compared to those who maintain their marketing presences through difficult times, your brand is at a disadvantage. You disappear from view for those people still buying what you sell. And your brand has been forgotten about when people are ready to buy once again. Playing catch up will then take a lot more money and effort.
4 reasons why you shouldn’t stop marketing in a recession
1) Gain market share through Excess Share of Voice (ESOV)
If your competitors react to the recession by hitting pause on their marketing, it presents a huge opportunity for you to capitalise on their lack of ongoing investment. Simply by maintaining your spend, not even increasing it, you’ll command a bigger share of the media market. Your message gains Excess Share of Voice, and this ESOV can translate into gaining more market share. Doing nothing more than what you’re already doing will see you outrival your competitors and gain a crucial advantage over those pulling back on their marketing activity. Their reduced presence is effectively handing you their share of the market! Giving you the potential to capture new customers.
2) Retain customers and build loyalty
By showing your customers you’re still investing in your brand, you can enhance existing loyalty and trust. Your customers are looking for stability and reliability when it comes to their purchasing. Never more so than during tough economic times, when customers may be more likely to switch to a competitor if they perceive a lack of investment. Don’t give them the opportunity to have cause for concern and take their business elsewhere.
3) Attract new customers, buyers are still spending (they’re just more risk-averse)
Even during a recession, there are still customers looking for what you offer. There may be less, but they’re still there. And you want to make sure you, not your competitors, capture them.
But with budgets being scrutinised and the pressure to make the right purchase decision more intense, they have to make the right decision. So choosing to buy from a brand that’s recognisable and present feels like a safer bet. This is why having a strong brand, with a visible presence, becomes ever more important. By continuing to invest in marketing, you’ll reach these customers and generate new business, potentially helping offset any decline in sales from existing customers.
4) Quicker recovery post-recession
Looking further ahead, to minimise the impact recession has you need to put in the work now so you’re ready to capitalise when the economy picks up.
It takes time for marketing activity to convert into customers because the majority of your target audience isn’t ‘in market’ at any one time, let alone now. And purchase decisions often take weeks or even months. If you cut back on, or even pause, your activity, disappearing from view will negatively impacting your future pipeline, the lifeblood of your organisation.
However, maintaining your marketing activity, keeping your brand visible and your message front of mind makes it more likely that customers will choose you over your competitors when they’re ready to buy again. Because when confidence returns, those whose presence has been maintained will be the ones who customers turn to. Helping you recover fast and grow quicker than your competitors.
Invest in marketing during a recession to position yourself for success
So there are 4 reasons why maintaining your marketing activity & spend is the right thing to do during an economic downturn.
And history has shown that recessions present incredible opportunities for business growth for brands that maintain their marketing activity and budgets. Analysis by Kantar Millward Brown during the 2008 financial crisis found that 60% of the brands that “turned off the lights” and stopped their marketing saw brand use decrease 24%, and brand image decrease 28%.
Furthermore, a McGraw-Hill Research study looking at 600 companies from 1980 to 1985 found that businesses that maintained or raised their marketing activity during recession saw significantly higher sales after the economy recovered. Specifically, companies that decided to advertise aggressively during the slowdown had sales 256% higher than those that stopped.
So whilst it may be tempting to cut your marketing budget, doing so can put you at a disadvantage. Resulting in long-term negative consequences for your business.
Continue to invest in marketing however, and you maintain your brand’s visibility, can attract new customers, retain existing customers and position yourself to outpace your competitors when the economy picks up.
We can help you
Building strong brands through effective marketing is what we do. If you want to make your brand and your marketing activity work as hard as possible now, so your business can thrive when the economy picks up, get in touch and let’s have a chat.
And let’s work together to create marketing that drives your business forward. Now and in the future.
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Further reading: What happens when brands stop advertising? Ehrenberg Bass Institute.