When the economy is down, as it’s been in the past few years, we tend to see more layoffs and budget cuts. But history has shown that many recession-proof actions will do more harm than good.
Especially for companies that are cutting their marketing budget.
Marketing in a strong economy is easy. Just put the right message in front of the right people, and you’re good to go. But marketing in a recession (or just a down economy) is another matter.
In this article, we’ll show you why marketing is essential in a downturn and share tips on how to approach marketing in a recession.
First, Don’t Stop Marketing
Whatever else you may do, you should never slow your marketing efforts — in any economy.
Marketing is the life’s blood of your business. By continuing to invest in marketing throughout a recession, you’ll not only protect your revenue, you’ll emerge as an industry leader when the economy stabilizes.
We’ve seen this play out throughout history.
Take the 2008 financial crisis. It was the worst recession the world had seen since the Great Depression. When it hit, most companies stopped all spending, including keep-the-lights-on essentials like hiring, subscriptions, and (you guessed it) marketing.
Their thinking was logical: If no money is coming in, no money should go out.
But it was a grave mistake.
We learned the hard way that the key to growth is momentum. If you slow the cogs of your marketing machine, it’s doubly difficult to get them moving again. And reacquiring customers is both expensive and difficult.
What it takes to drive growth
McKinsey evaluated business’ survival potential during the 2000-01 recession and found:
- 40% of leading U.S. industrial companies and 33% of banks lost their position as leaders in their sectors
- 15% of companies that weren’t industry leaders before the recession rose to that level during the recession
What made the difference?
The companies that maintained or gained leadership status never stopped investing in growth. Many of them actually increased their marketing spend.
It was the same in the 2008 recession. Companies that maintained or grew their marketing spend saw a 17% compound growth rate. Meanwhile, 60% of brands that went dark saw a 24% decline in brand usage and 28% decline in brand image (Millward Brown, 2008).
Again, in the 1980-82 recession, companies that maintained or raised marketing spend had higher sales after the economy recovered. If they advertised aggressively, they drove 256% more sales revenue than those that stopped advertising.
We see this in every recessionary period. The companies that maintain or raise their marketing spend come out stronger than those that cut marketing efforts.
Let’s look at some examples
When the 2000-01 recession hit, Talbots chose to shift their strategy rather than cut their budget. They decided to focus their advertising mix on customer groups with the highest sales potential. Their spending in 2000 was 120% higher than the sector average and, in 2000, it 80% higher.
Prior to the recession, Talbots was a challenger in their industry. When it ended, they emerged as a leader.
Reckitt Benckiser has a similar story. During the 2008 recession, they raised marketing spend by 8%. In order to compete with powerhouse companies like Procter & Gamble and Unilever, they focused on speed of execution, branding, maintaining their global presence, and being socially responsible. They even continued to role out product launches.
During the recession, when most companies in their space saw profit declines of 10% or more, Reckitt Benckiser grew revenues by 8% and profits by 14%.
During the same period, Amazon continued to innovate, successfully boosting sales by 28% in 2009. On Christmas Day, their customers bought more ebooks than printed books. It was perfect timing for a Kindle launch because the lower cost of ebooks was attractive during a recession.
The Big Mistake
Today, we’re seeing history repeat itself. During the pandemic, marketing budgets were cut by 43%. And in October 2022, 52% of brands admitted that their media budget would likely be impacted by the threat of recession in 2023.
Businesses are trying to protect revenue. But if they go so far as to cut marketing spend, they’ll limit their growth potential and weaken their brand.
Smart Marketing (in Any Economy)
The key to marketing is to deliberately seek and capture opportunities. You just have to be smarter about how you do that when the economy is down.
Here’s how Tom Holland, partner with Bain & Company’s Accelerated Transformation business, described it in a 2019 Bain & Company press release:
“Think of a recession as a sharp curve on race track – it’s the best place to pass competitors, but requiring more skill than on straightaway. The best drivers brake hard just ahead of the curve, turn hard toward the apex of the curve and accelerate hard out of the curve. Winning companies take out excess costs, identify the short list of projects that will form their next business model, and spend and hire before markets rebound.”
Smart marketers realize they need to be strategic about how they invest their marketing. They also understand they don’t need to reinvent the wheel. Their biggest opportunities are often already teed up, waiting to be leveraged.
If you have an existing process for acquiring and retaining customers, you may only need to streamline and optimize it. If you’re just getting started with marketing, you can create a simple ascension ladder that quickly moves people along their journey with your brand.
The key is to:
- Identify your best prospects
- Create awareness among them
- Build an efficient lead generation process
- Refine your conversion process
- Improve your customer onboarding and retention
It’s marketing 101 — but optimized for efficiency and results.
Rather than focusing on slow-return marketing plays, take a page from Talbots. Focus your energies on the market segments that are most likely to convert. Update your messaging to reflect their current pain points and explain why they need to invest now. Then execute efficiently, so you get the highest possible ROI.
With this approach, you don’t need to see huge returns on every tactic. By creating incremental improvements at every stage of the customer journey, you can yield higher profits and consistent revenue growth while other companies are cutting costs.
Tips for Getting the Most from Your Marketing Dollars
When marketing in a recession, cost management is key. It’s vital that you take a revenue-first approach, prioritizing campaigns that will drive profits.
Take a long view.
Long-term ROI is more important than short-term gains. Become laser-focused on promoting your brand, what you do, how you do it, and why now is the time to invest. Prioritize customer retention to guard your revenue. And resist the temptation to raise your prices. A “we’re in this together” approach to marketing can help you acquire and retain customer even when budgets are tight.
You may need to be creative. Design new offers, campaigns, and messaging. And test everything to understand what’s resonating with your customers.
Optimize what works.
Review your metrics to identify the campaigns and marketing motions that give you the highest return on investment (both now and in the past). Identify the segments that are most likely to continue spending throughout the downturn. Then double down on the things that are working.
Play offense, not defense.
Don’t wait until finances are dire before taking action. Start developing a recession-proof marketing strategy as soon as you see the storm clouds on the horizon. That may involve:
- Protecting your current revenue. Reach out to existing accounts to ensure they understand the value of continuing their relationship with you. Personalize their experience to keep them happy.
- Creating efficiencies, so you can drive the same results with less spend. You may be able to consolidate your tech stack, for instance.
- Replacing paid strategies with organic and physical campaigns with digital. You may need to test to know what will work.
- Examining your pricing strategy to ensure you aren’t asking for more than the market will bear.
- If you have a new product or service, wait until you see early signs of recovery to launch it. Research has found that the best time for a product launch is just after a recession’s mid-point, as people are beginning to loosen up their spending.
Don’t use scare tactics. Create hope. Your messaging probably needs to shift away from vanity or luxury spending. Instead, develop messaging that clearly communicates your concern for your customers.
- Highlight the practical elements of your product/offer.
- Tap into emotions, especially happy emotions such as peace, hope, and love.
- Empower your customers.
- Talk about value rather than price.
- Meet people where they are. Be sensitive to their challenges and fears.
It’s also a good idea to actively look for ways to help your customers and community survive and thrive in the downturn. Tell stories about your team members who are rising above or making a difference. Feature customers who are finding innovative solutions for common problems.
There’s a saying that, “When times are good, you should advertise. When times are bad, you must advertise.”
Bottom line, marketing isn’t an option. If you cut your marketing efforts — regardless of the economy — you’re going to suffer the consequences. Maybe not right away. You can coast on previous years’ marketing efforts for a while. But you’ll lose market share to the companies that continue to invest in marketing.
When your competitors go dark because they’re trying to protect their revenue, it’s easier for you to stand out. So do the work to stand out.
Cut spending if you need to. But don’t cut marketing. It’s your lifeline when times are tough.