Marketing in Recession

“Be fearful when others are greedy and be greedy only when others are fearful.” – Warren Buffett 

Every marketer’s most dreaded word – RECESSION.  

At the first hint of an economic recession, companies have a tendency to cut the marketing team’s budget or get rid of them altogether. Businesses build an infuriating narrative where the marketing department is treated as something disposable, and all the time, effort, and money invested in marketing all of a sudden becomes irrelevant. 

A war in Europe, a disease that refuses to go away and a difficult economic situation have forced a lot of companies to operate in recession mode. It’s smart to plan ahead but cuts need to be well thought through and cutting the area that brings in new business can be a fatal mistake.  

What is a Recession? – A Brief History

Before we start panicking, it is important to understand the exact definition of recession and take a look at the history of this phenomenon. The technical definition of a recession is marked by a “slowdown of economic activity that’s more precisely defined by at least two quarters of negative growth in the economy”.   

The role of marketing is essential in such a crisis for a few reasons to reduce the severity of the downturn or the extent to which your growth slows; to increase your business during the upturn once the economy starts to recover; and ultimately, it can shorten the duration of the recession’s effects.  

Businesses cannot afford to lose the authority they have created in their niche by abandoning all marketing processes. Staying committed to a digital marketing strategy even in times of uncertainty is what will set your brand apart. 

I have worked through 3 major economic downturns and in each I have seen the brands that continued to spend on marketing (with some changes in message, channel, budget allocation) succeed and sadly I have seen many businesses close after stopping their marketing activity.  Removing your brand from top of mind, declining on search appearances, not being where potential customers are when they need you only makes the recession harder.  Sure, marketing spend is easier to cut than other operational costs, but it is not the smartest budget to slice in difficult times.  Not only does it hurt you during the recession but it is hard to come back from afterwards making the recession have a long tail effect unique to your business. 

What can you expect in a period of recession?

Right now, nobody can predict the intensity or duration of the economic downturn. The best way to prepare is by looking at historic data and being mentally ready to handle this crisis. Below are a few things you can expect to encounter when things get tough.  

1. High Returns on Low Market Investments

Marketers should always be transparent about the results their marketing campaigns are bringing in. Are they proportionate to the investment made? Expect this pressure to perform to intensify. Sales processes will also slow down and expectations from the marketing team will increase manyfold, despite budget reductions.  

This period will be exhausting for marketers. In such a situation, you have to make sure that the Customer Relationship Management systems your company use (such as Salesforce or Hubspot) are solid. Be sure your CRM has the reporting tools you require to demonstrate the return on your marketing investment. The duration of conversion cycles will also increase as customers will be extra cautious of where they spend their money. Read my article on best marketing automation tools that might help you overcome these difficult times.  

2. Increase Advertising Budget 

Spending on advertising plummeted by 13% during the Great Recession. This move is understandable as it seems to be the safest choice – for example, stopping advertising does not affect any major attributes like the quality of the product or its distribution. However, businesses must realise that the quality of products, services, and processes are of no use if nobody is able to discover your business. Therefore, the best possible move to survive a recession is to retain / increase the marketing budget. During this time, there will be less competition in advertising, so you may be able to buy more advertising space for the same price, and your ads will be more visible. This will increase the possibility that your target market will recognise and remember your brand. 

You must be familiar with the expression “out of sight, out of mind”. During a recession, the last thing you want is people forgetting your business. Businesses that continue to market themselves during a downturn stay in consumers’ minds; when consumers have money to spend again, they naturally gravitate toward these brands. A great example of a company that benefited from increased advertising budget during a recession is Del Monte.

Del Monte – A Case Study to Aspire To

Del Monte successfully averted crisis during the great recession. The company increased advertising at a time when all their rivals were cutting back on spending for promotions of any kind. Instead, Del Monte used this opportunity to concentrate on a pipeline of creative products that would help them survive the recession and emerge from the crisis stronger than before.  

The company aggressively ventured to access a new target segment during the Great Recession by designing and executing the eye-catching “Fruit Undressed” campaign to capture the attention of their viewers. They completely revised their brand promise and put the needs of children and their busy mothers first. Rather than slashing budgets for advertising, this company focused heavily on getting its message across to audiences with an irresistible new campaign.

The fuel behind their success was Bill Pearce, who was chosen by Del Monte Foods to be the organisation’s first CMO in the midst of the 2008 recession. His objective was to advance the business through efficient marketing. He upped the advertising budget for the business in reaction to the downturn and after one year, the business turned a profit of $58.6 million in Q1 from a loss of $10.1 million. His advice on how to survive a recession is, “Don’t scale back spending. The old way of dealing with a recession was to slash and burn head count, marketing, and capital investment. But companies that do that are likely to be out of business in five years. Now is not the time for across-the-board cuts.” 

3. Authentic and Effective Marketing 

Consumer confidence will decline as a result of economic deprivation. The way to stand out here is not by pushing advanced features of your product but instead, its value in terms of return on investment (ROI). I always talk about how marketing should be authentic, especially when consumers have a lack of confidence in the market. They do not need fancy products during this time, but cost-effective products that will help them maintain their desired standard of living. Give them raw data and value-based facts that convince them to get onboard with your product. The case study below demonstrates the importance of authentic marketing, which helped Amazon not only stay afloat during the Great Recession, but also to thrive.   

Amazon, a Recession-Resistant Business  

Amazon has witnessed two recessions since its birth in 1994 – the Great Recession of 2008 and a short-lived recession brought on by COVID-19. Amazon is the largest e-commerce service provider in the world and the largest American provider of e-commerce services, with a share of 35 to 45 percent of the US e-commerce market, depending on which source you look at. Amazon continues to dominate such a competitive market year after year, and what made them so popular was their commitment to offering the best possible prices to their customer base. Even when the economy was in a slump, the tech company continued to innovate with new goods, most notably with new Kindle products that helped to increase market share. For the first time ever, Amazon consumers purchased more e-books on Christmas Day 2009 than physical books. Amazon gained consumer respect as an innovative business as a result of providing a less expensive alternative to cash-strapped customers.  Amazon remained headstrong even in times of crisis and focused on what matters the most – their clients.  

When entering a recession all marketers should be looking at their performance and ensuring they can justify the ROI or long term benefits of each as they are sure to be asked these questions.  Demonstrate real value and ensure that your budget holders cannot cut you back at the time when you need to be adding value. 

What’s the way out of recession for businesses? Simple, progressive ideas and the courage to do something different. An economic crisis is a time where rather than playing it safe, you should take some risks. And as marketers, we have to believe in ourselves and take a leap of faith. You cannot convince anyone of your value until you believe it yourself. There will be rejections, cut offs, and an overall slump, but you have to keep pushing through because there will be an end to this tunnel.  

Remember the proverb, “those who cannot remember the past are condemned to repeat it”. Research deeply into past economic crises and learn from companies that bloomed during such times. Although this economic downturn will pass , how you handle it will determine whether or not your company survives. The bottom line is that in this unstable economic climate, you must either boost or retain your marketing expenditure. After all, the only form of marketing that works is continuous and persistent, making sure your brand stays in the forefront of consumers’ minds. I’ll conclude with the wise words of Peter Drucker – “Marketing and innovation bring results; everything else is cost.” 

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