What does a recession mean?
A recession is defined as “a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters”. With UK news outlets reporting that another recession is looming and living costs are still rising, it would be safe to assume that based on the last recession in 2008 that businesses should do two things. First, halt and not take risks in any major investments, and secondly, cut the marketing department’s budget and use it elsewhere.
However, are these the right steps to take? Or is it possible to thrive despite economic downturns? The concept of spending on marketing during a recession may seem crazy, especially since everyone ( and that includes you and your business) will be looking to save money to meet the increasing costs that come with a recession. Here are 3 reasons why you should continue to invest in your marketing:
1. Historical Data Supports Marketing During Recessions
History has shown that in the economic recessions of 1974-75, 1981-82, and 2008, whilst everyone else was focused on cutting costs, the businesses that continued to invest in their ads saw accelerated growth, while their money-saving counterparts, who shrank or eliminated their marketing budgets saw their market shares decrease. An example of this in practice is Coca-Cola; though this cost-cutting didn’t exactly occur during a recession, the same principles can be applied. Coca-Cola heavily pulled back on marketing costs which led to an 11% drop in their 2020 net revenue whilst their competitor PepsiCo doubled down during the pandemic and kept their marketing budget leading to their net revenue growing by 5% in 2020.
2. Enjoy Less Competition For Ad Space
Going against the grain and NOT cutting costs in a less competitive ad market will enable you to buy more ad space and thus stretch your marketing budget during that period. The P&G Group is a perfect example of this, and they stated that increasing ad spending during a recession is worth it and that recessions are a time to “move forwards, not backwards”. Increasing or maintaining your marketing ad budget will increase your company’s share of voice within your chosen market and help capture a larger market share and revenue, as well as showcase corporate stability.
3. Marketing Helps You Maintain Customer Interest
For your marketing to be successful, consistency is key, and this applies before, during, and after an economic recession. It’s also good to remember that your marketing activities shouldn’t solely focus on attracting new customers. Your current customers are just as important, and at times of great uncertainty, they will need assurances about your products/services and how you will offer support during this period. Keeping this communication and explaining the benefits of your services increases brand loyalty and strengthens customer relationships, which in turn could lead to referrals and digital word-of-mouth.
Potential Pitfalls You May Face
We’ve highlighted some of the most significant benefits of keeping your marketing activities and budget during a recession, but it’s still worth watching out for some of these pitfalls.
- Deliver results – marketing departments and marketing agencies will experience increased pressure to deliver results to justify the costs. Ensure that all ongoing activities are proven effective in the current market.
- Consumer behaviour – assume changes in consumer behaviour; you are not the only one worried by the cost of things. Don’t expect to close deals/sales in the same timeframe preceding the recession.
- Be wise with resources – just because you can buy more ad space for less, you must remain strategic with who your ads target. Prioritise targeting users from your target list and apply/optimise ads to show up for leads depending on their current customer journey stage. An ABM approach may help solve your need to maximise resources.
As difficult times become a recession, cutting or eliminating marketing costs is not an option. To stay competitive or grow during times like these, you must constantly communicate and offer assurances to your customers.
If you’re struggling with the recession and need help coming up with an effective marketing strategy, our experts at ExtraDigital can offer you the support you need. Get in touch with us today to discuss your needs, and help us help you stay invested.
