As we now find ourselves firmly amid an economic downturn and cost of living crisis, most people's instinct is to cut back on spending, which is a smart move on a personal level. However, in business terms, is stripping back your marketing activity and cutting your marketing budget a good idea?
With the potential of reduced sales and the reality of spiralling overheads, business leaders are understandably concerned about the state of their bottom line. Reducing advertising spend is an easy fix to recoup some funds. Still, the problem with this is that marketing your company is how you increase top-of-mind awareness and lead generation, both of which are vital to building a business and growing sales. Therefore, reducing your marketing efforts during a recession could compound the situation and lead to failing performance as people opt for alternative brands that are still in the public eye.
Past recession trends have shown that marketing is crucial to a company's success and improves the odds of surviving a slump. Businesses that come out of recession strong tend to be the ones who don't make significant cuts to their marketing budgets and often even increase them. Data shows that companies that increased spending during a recession enjoyed a 4.3% increase in profits compared to those that cut spending.
Marketers and business leaders need to fight the urge to tighten the purse strings and instead consider a 'speculate to accumulate' approach to endure an economic downturn and come out of the other side in a strong position.
However, that's not to say that some thought shouldn't be applied as to how best to spend the money, and some changes are needed to activity plans to make the most efficient use of the marketing budget.
Tips for successfully managing the marketing budget and navigating your way through a recession include:
Price – Tempting as it may be to slash prices to retain existing customers and attract new ones, this often results in costs needing to be significantly increased again in the long term. Try to remain steady on pricing, as flip-flopping up and down can create more issues and put off customers who may think your brand is an unstable place to spend. Research shows marketers who opt for short-term promotions followed by sharp price increases lose more market share during a recession than those who don't.
Communications – Try to view advertising as an investment, not an expense. Your competitors may be choosing to advertise less, so this can be an excellent opportunity to increase market share, which health & hygiene multinational Reckitt Benckiser put into practice when they raised their advertising outlay by 25% during an economic downturn. In the face of reduced marketing by competitors, the company grew their revenue by 8% and profits by 14% when most of its rivals reported profit declines of 10% or more.
In terms of messaging, it may be necessary to make some adjustments and acknowledge the economic situation. Consider referencing 'hard times' to appear relatable or use humour to offer comradery and bring cheer to a gloomy time.
Consumer behaviour – It is essential to look at how consumer spending changes during a recession. Rather than losing customers to cheaper brands, perhaps offer tiered pricing such as; value, mid-range and premium versions of your brand. This can help encourage brand loyalty, aiding customer retention during hardship. If customers are looking for a bargain, you may consider using coupons. This can offer an additional way to advertise and discount products as an alternative to changing list prices to avoid the pricing 'flip-flop' mentioned above.
R&D – While it may seem like the wrong time to launch a new product, this may not always be true. With many companies opting to reduce spending and put new projects on hold, there will be reduced competition. An innovative product that solves a problem could still prove popular and enhance your brand image.
Evaluation – Keep evaluating your activity continues to allow for adjustments. Measuring marketing effectiveness will help to define your ongoing strategy to make the most efficient use of the budget available. Cut what isn't working and invest more in what is working. Remember to keep your goals realistic - you are unlikely to see record profits or sales during a recession. The aim should focus more on keeping the company afloat and retaining customers.
So now is the time for marketers and business leaders to be brave. Investing in marketing during a recession could save your company and make it more robust on the other side.
To execute this, you need a capable marketing team at the helm. If you have a skills gap in your team that you need help recruiting for, contact McGregor Boyall and find out how our expert recruiters can help you.