Should you cut the budget in a recession?

A recession may be coming, and many brands are cutting marketing budgets. That’s a big mistake. Many research studies confirmed that the best strategy is to continue marketing — and often increase investments — during a slowdown to capitalize on long-term ROI. While short-term savings are significant, businesses that continue to invest in a share of voice by maintaining their marketing strategies ultimately realize longer-term profitability improvement.

While customers may not be buying as much during a slowdown, they’re still consuming daily and aware of which brands are advertising to them. Companies that have bounced back most strongly from previous recessions usually did not cut their marketing spend and, in many cases, accreased it. But they did change what they were spending their marketing budget on and when to reflect the new context in which they operated.

“Analysis by Kantar Millward Brown during the 2008 financial crisis found that 60% of the brands that”turned off the lights” to marketing by stopping all TV ad spending for six months saw brand use decrease by 24% and brand image decrease by 28%.”Analysis by Kantar Millward Brown during the 2008 financial crisis found that 60% of the brands that “turned off the lights” to marketing by stopping all TV ad spending for six months saw brand use decrease by 24% and brand image decrease by 28%.

McGraw-Hill Research study looking at 600 companies from 1980 to 1985 found that businesses that chose to maintain or raise their level of marketing during the recession had 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. 

“When continuing to advertise during a recession, the key is to ensure authentic and empathetic messaging that considers the current economic climate and accurately describes how the product or service benefits the consumer. For example, some brands may be tempted to emphasize low pricing to pull in consumers during a” closed wallet” period, but that generally only works for companies whose value proposition has affordability built in, like wholesale clubs or Amazon and Walmart, as consumers will see through such inconsistent messaging.”When continuing to advertise during a recession, the key is to ensure authentic and empathetic messaging that considers the current economic climate and accurately describes how the product or service benefits the consumer. For example, some brands may be tempted to emphasize low pricing to pull in consumers during a “closed wallet” period, but that generally only works for companies whose value proposition has affordability built in, like wholesale clubs or Amazon and Walmart, as consumers will see through such inconsistent messaging.

Marketing is not a luxury; it’s a necessity. It’s as essential to brands as a utility like power or water. You need marketing to stay in business. Your brand also needs to attract new customers and stremaint the forefront of established customers’ minds. Following that fear-based instinct to cut as much spending as possible will have the opposite effect. Think beyond the recession and focus on what’s right for your business.

One thing you can do is build upon customer loyalty. Customer loyalty is an asset to companies during a recession. It tends to be easier and more effective to market to existing customers than to bring in new clients. Ensure your existing customer base knows you appreciate them by keeping in touch regularly. Use email campaigns to send out positive messages, surveys, and coupons. By continuing to market to your customers, you’re showing stability, giving them confidence that your company will weather the storm.

Make your customers feel appreciated.
Keep messaging positive to show stability.
Use email campaigns to keep in touch with customers.

The other is to ramp up your analytics. Challenge analytic teams and agencies to provide hard ROI results, not soft metrics like awareness or clicks. You will need to convince management that marketing is an essential investment in your brand.

Consumers are still spending; make them feel good about spending on your brand.

About richmeyer

Rich is a passionate marketer who is able to quickly understand what turns a prospect into a customer. He challenges the status quo and always asks "what can we do better"? He knows how to take analytics and turn them into opportunities and he is a great communicator.

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