There’s a dirty word that we’re hearing a lot lately.
It’s the R-word: recession. While we aren’t officially in a recession — a recession requires two consecutive quarters of economic contraction, which we haven’t yet seen — there’s no doubt that we’re in a state of low consumer and investor confidence. Despite relatively strong employment numbers in many parts of the world, global markets are bleeding gains and much of the world struggles with explosive inflation.
Recessions demonstrate the psychological side of economics. When people believe they’re in hard times, they tend to start saving more. This means less money circulating in the economy, which means economic slowdown.
Regardless of whether we’re officially in a recession, we’re definitely in a period of economic pessimism. From our clients and partners to our own business, we see the impact. Belts are tightening. Budgets get re-evaluated. Ambitious and risky projects get put off or have their scope narrowed.
One of the first taps many business owners look to turn off is marketing spend. Production, operations, and sales are tangible business units. Cuts to these areas are felt immediately. Marketing is less tangible; slashing spending has a harder-to-measure (or easier to obscure) impact on the day-to-day operations of the business.
The message we want to share is that marketing is essential during hard economic times, but it may not look the same as it does during an economic boom. By mitigating risk, focusing on fundamentals, and investing in the right prospects and customers, marketing can be a tool to keep you afloat during economic uncertainty.
This too shall pass
One of the most impactful ways we can recession-proof our marketing is by adjusting our mindset. Before we get into the nuts and bolts of recession marketing, let’s consider the view from 10,000 feet. The big picture.
In Spring of 2020, many of us watched the world around us change in rapid and concerning ways. Within the course of a week or so, the world went from wide-open to shut down. Air traffic practically stopped. Schools and offices closed. We sat in our living rooms and home offices, transfixed by an influx of bad news. Everything seemed to go from bad to worse.
Then it got better.
I’m not calling the pandemic over. Cases are surging in many areas. Experts forecast another wave this fall. The situation continues to evolve, and ‘normal’, defined as ‘the way things were without COVID’, may never fully return. But we learned to live with it. We got vaccinated, managed our risk, and in much of the world can live life as we did pre-2020, for the most part.
The point I’m getting at is this: when things are bad, it’s easy to lose sight of the fact that they will likely get better. A recession looms, but it will pass. It’s a normal part of a global economic cycle that expects highs and lows over time. Successful businesses will weather this economic storm by keeping an eye on the upswing. Instead of despairing, they’re preparing: getting ready to make a splash when the good times come again.
Three burning questions
Before we dig into some specific recommendations, we have a few questions you should ask yourself to understand your position as we slide toward recession. By understanding where you are, you’ll be able to tailor your approach to suit the unique needs of your business.
What’s on your horizon?
Just like people, businesses have a life cycle. New businesses tend to be scrappy, energetic, and motivated to fight for market share. However, they may lack financial and human capital to accomplish their goals. Their situation tends to be more precarious.
Older businesses tend to be more conservative in their approach, better established within the market, and more financially secure, often at the cost of agility and hunger.
Where your business is at in its life cycle is an important consideration for how you approach marketing during a recession. If you’re a startup, this may be the first big macroeconomic hurdle you face. This is a time to prepare your business for the struggle ahead, focusing on efficiency gains and securing your position in the market.
Established businesses may approach the problem from another angle: how can they best throw their weight around when their younger competitors are vulnerable? Marketing initiatives that exploit the precarious situations of less-established companies (competing on price knowing startups can’t afford to match, or promoting speed of service when other businesses have to lay off service staff) will be a better fit for businesses with the resources to stay the course and outlast their competition.
How does a recession affect your product?
Different industries experience a recession in different ways. An alternative finance company offering title loans and invoice factoring will benefit tremendously from economic contraction, assuming their capital reserves are intact. Their clients experience the exact kind of squeeze that pushes them to make use of an alternative lender.
Many other businesses benefit. Resellers of used vehicles and equipment tend to experience an uptick in business in hard financial times. Ironically, luxury brands often find themselves immune to recessions. High-income purchasers of their products tend not to experience the brunt of an economic downturn. The people whose purchasing habits are most impacted aren’t the ones buying Chanel perfume and Rolls Royces.
Tourism, hospitality, and retail-centric businesses tend to struggle most, as do the manufacturers and resource industries that directly support these verticals.
Purchaser perceptions can either be a boon or a pox on your marketing performance. Understanding the impact on your industry vertical is essential when planning your marketing through economic hardship.
How stocked are your cupboards?
Although saving for a rainy day is good practice for both people and businesses, many companies operate with sparse resources in reserve. Especially for younger companies, a healthy rainy day fund may be difficult to maintain as staffing and supply costs continue to balloon. If your business has a healthy financial buffer, the coming months are a good occasion to dip into that reserve. It may be a competitive difference-maker for you.
For example, if other businesses in your vertical don’t have the resources to continue their advertising efforts, they will stop purchasing advertising inventory. This has a deflationary effect on the cost of that advertising inventory. Because you saved for a rainy day, you get to buy ad inventory at a discount and actually increase your reach compared to pre-recession times.
If you don’t have a healthy rainy day fund, don’t despair. You won’t be able to take advantage of the situation, but you also aren’t alone in that regard. What you must focus on is doing better than companies in the same situation. Your biggest opportunity to succeed is in fostering better marketing efficiency. Seek out and excise wasted ad spend, campaigns with poor ROI, and initiatives that are risky. Double down on safe and consistent channels.
Recession Marketing’s Golden Rule: Don’t Stop!
The easiest thing to do when facing an economic struggle is to panic. Shut off the taps! Slash the budget!
Budget management does become essential during a recession, but a full stop is never the right answer.
Consider this article on the relative performance of consumer goods giant Procter and Gamble and Coca Cola during the first year of the COVID pandemic. Coca Cola blinked (again). They halted advertising campaigns, believing that marketing did little to help generate sales ‘right now’. They reported a net 11% revenue reduction year-over-year. Pepsi, which did not halt its advertising, reported a net 5% increase in revenue YOY. P&G saw a similar net 4% increase in revenue.
Delayed reaction, momentum, and the marketing funnel
Though there are valid criticisms of the marketing funnel — that it’s too linear, not representative of contemporary decision-making processes, that it over-simplifies people into purchasing units — it is a fundamental concept that underpins so much of our understanding of marketing. If you aren’t familiar, the marketing funnel is a visual concept for understanding the customer journey. Customers enter the top of the funnel, often labeled ‘awareness’, then progress down the funnel through interest, consideration, intent, evaluation, and finally to the point of sale. It’s used to conceptualize campaigns for each stage of the purchasing process. How do we generate awareness? How do we turn awareness into interest, or intent?
One concept the marketing funnel illuminates is that a lot happens between product awareness and final sale. All those stages take time. When we halt marketing campaigns abruptly, we’re severing a stage of our funnel. We’ll see the outcome on net sales in the weeks or months to follow. In some cases, it can feel like a business saves money by cutting their campaigns short. Dollars that otherwise would have been spent on the campaign remain in the company coffers.
But what happens next month, or next quarter? How many fewer sales might you accrue for halting your marketing?
Many businesses struggle to answer that question, which is why…
Evaluating ROI is critical
Without a full spectrum accounting of your marketing performance, mapping marketing spend to sales outcomes, you’re guessing.
Your guesses may be educated, but they are still guesses. Marketing can be counter-intuitive. The flashy print ads you’re running in trade publications may feel good, but what do they do for your bottom line? Meanwhile, maybe that long-forgotten blog post on some niche problem tackled by your industry drip feeds you a few leads per year, unseen and unheralded.
Knowledge is power, and marketing ROI is knowable. Before hacking and slashing your marketing budget, develop a deep understanding of what’s working and what isn’t. Try to reset your understanding of your own marketing to view the challenge with fresh eyes. Make no assumptions about what works and what doesn’t. Between CRMs, analytics trackers, and marketing platforms, the data is there. Let it show you the answer.
A business that doesn’t understand itself is one doomed to mediocrity.
During hard times, marketers should be especially deliberate about playing to their strengths, mitigating their weaknesses, and embracing their opportunities. A living SWOT document, adjusted regularly as conditions change, is essential to your recession marketing performance.
💡 Do you need support with business analysis, positioning, or business strategy? We can help you identify your strengths and weaknesses, evaluate your market and competitors, and position you for success. Connect with us today!
Client composition is another facet to be explored. Knowing specifically what each of your customers is worth to you can inform your marketing strategy. As you analyze your clients, you may identify that some are unprofitable. This is a good time to consider moving on from these unprofitable clients to focus on those that deliver value.
Clients that require a lot of care but aren’t very profitable may share attributes that you can strategize around, steering campaigns away from generating these low-value, high upkeep customers. Conversely, the attributes of particularly high-value clients may be identified and targeted by your campaigns.
The training montage
If you’ve ever watched any of the Rocky movies, you’ll remember the iconic training montages. Rocky gets beaten down in the first couple acts, then grits his teeth and trains himself back up, better than ever.
He throws logs around, punches meat, runs through the snow… whatever it takes to come back stronger, meaner, and leaner.
A recession can be your chance for a training montage. Our recommendations require that you develop strong attribution, look inward and analyze clients and competitive strengths, and carefully monitor money in and out.
If your business is impacted by a recession or slowdown, don’t let idle time go to waste. This is your opportunity to build up marketing best practices and institutions within your business. When the cycle turns and we’re back to the boom times, you’ll be prepared to make a big splash.
We’ve mentioned several times that recessions aren’t forever. In fact, they happen like clockwork. In the past 90-odd years since the Great Depression, the United States has seen fifteen recessions, averaging one every six years. With the exception of the sharp drop in spring 2020 as the world temporarily closed down, we’ve been in an extended period of growth for over a decade.
Like a wildfire brings renewal to a forest, a recession cleans house in the economy. Stagnant and inefficient ventures fail, sending their human and financial capital to new ventures and more valuable sectors. Humans and businesses alike learn better financial habits.
Although keeping afloat during a recession is tough, those that survive the meltdown emerge to a brighter future. The months after a recession are among the most creative, innovative, and exciting times to participate in the economy. Customers reject their previous dogma and embrace new products, new brands, new ideas. This is why getting organized during a recession can prove so valuable. If you invest your time wisely, you will be in the best position possible to benefit from post-recession goodwill and opportunity.
The bottom line
In the end, a recession will mean something different to your marketing department depending on the current health, life stage, and industry sector of your business.
Established businesses may look to maximize their reach by purchasing discounted advertising inventory and investing in marketing channels their less established competitors cannot afford. More vulnerable organizations may be better served by turning inward, streamlining operations, and preparing to make an impact when the good times return.
Whether you’re established, an up-and-comer, or something in between, we can help you realize success — whatever that looks like to you. Reach out to us to learn more about how a marketing consultancy engagement can support your revenue goals and safeguard you from economic turmoil.
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