To protect margins during the impending recession, many marketers, budget holders, and C-suite executives may turn to a tried-and-true strategy: cutting marketing staff and advertising expenditures.
That makes sense because, should a recession occur, both public and private companies will face increased scrutiny. CFOs aim to protect profits while maintaining stable and low acquisition costs. It might seem like the most practical action to reduce marketing spending.
However, marketers must pause and consider, “What will the competition do?”
Cutting marketing budgets is the solution, which is something that most brands are thinking about.
However, studies have shown that increasing advertising expenditure or introducing a new product during a downturn can increase margins and generate revenue, allowing a company to raise its profile as rivals cut back on communication.
Companies that increase their marketing budgets during a downturn recover their market share three times more quickly. According to Gartner’s 2023 Multichannel Marketing Survey, marketers are more willing to spend when the economy struggles to meet their organizations’ goals. According to the report, many people still hesitate to implement a contingency plan, which could jeopardize efforts to accomplish objectives during disruption. It is true that, depending on the company, marketers may need to reduce spending drastically. It’s all right. Investment opportunities in organic marketing channels are still available, putting marketers in a strong position for the inevitable recovery.
Also Read: The Impact of Globalization on International Marketing Strategy
Here are a few measures marketers and business owners can take to boost marketing and encourage growth regardless of their appetite level.
Get acquainted with the data
During a recession, businesses frequently cut back on marketing expenditures. However, data shows that the approach is often ineffective. According to research by Analytic Partners ROI Genome Intelligence Report, brands that increase media investment during a recession experience a 17% growth in incremental sales, whereas brands that reduce spending experience an average loss of 18% in total sales. Additionally, marketing can stretch every dollar further as media demand declines during a recession. During the Great Recession, 54% of brands reported ROI improvements.
Similar dynamics are present in the R&D division. Marketing executives who want to increase spending in a downturn may come off as eccentric. However, marketing history would seem to support their argument. Marketers can argue for increasing spend by citing data that shows cutting back on advertising during a recession is not associated with any increase in profits and that during a recession, market share increases are larger as advertising increases.
Setting priorities
Consumers are very accustomed to setting priorities. People have ranked their needs and want in priority order in good and bad times. Each individual (or family) looks for their ideal balance; they spend more on some things while saving money on others.
This give-and-take gets more intense as prices rise. Three-quarters (73%) of the world’s population exasperatedly admitted in the recent Global Issues Barometer study that they don’t expect their incomes to keep up with inflation. Then, they went into great detail to outline the steps they have already taken to combat affordability by controlling price increases. Businesses must manage challenges and re-prioritize during this “self-triage” of consumer needs and wants. Although their true aspiration is a worthy place in the safe bucket, their survival imperative is to avoid the “save money” bucket instinctively (and rightfully so).
Boost long-term planning
Because organic strategies take 12 to 18 months to build audiences and generate returns, such as SEO and content marketing, they are excellent investments during a recession. Marketers who give up on those initiatives now will be left behind when the economy starts to recover. Investors who keep their assets active will benefit from higher returns as the economy recovers. By doing audience research, marketers can make organic investments with specific targets. Brands must comprehend what their potential customers are looking for as well as the keywords that will help them find them naturally so that they can create content that meets those needs. The audience will grow, and the brand will profit when customers are prepared to purchase.
Use agile marketing instead
The trend of the world economy over the previous 11 years has been “up and to the right.” In addition to ending this historic streak, the pandemic has brought about previously unheard-of levels of volatility on the political, financial, and societal levels. With news cycles shifting by the hour in such a context, marketing teams must be more adaptable to reduce “faux pas” and increase performance. Agile marketing is useful in this situation.
Agile encourages cross-functional cooperation, data-driven decision-making, and high responsiveness to change. Software development practices inspired it. Regardless of the methodology, switching to Agile Marketing is a smart move that will help the company navigate this crisis uncertainty and ensure it doesn’t miss out on the coming economic rebound.
Also Read: The Role of Marketing Operations in Transforming Businesses
The Go-To-Market Process
Align resources with market priorities that will produce the best results now and in the future. For instance, some sectors, like the healthcare industry, may be more resilient to recessions than others.
Make changes to the engine:
Spending on marketing should be adjusted to stimulate demand in target markets and cultivate consumers prepared to take action when the economy recovers.
Digital marketing channels:
Think about potential changes in consumer behavior. Consider whether this is the right time to invest in digital selling capabilities if, for instance, they want self-service, and such ideas can meet customer needs while saving on costs.
Seller facilitation:
Inform direct and partner sellers about updated messaging, packages, and offers. Additionally, provide them with coaching to utilize these resources well.
Quota and coverage:
Coverage should be changed to ensure that current and targeted priorities are adequately covered. Consider modifying quotas or incentives to motivate action toward the opportunities and clients with the highest potential. Also, consider how incentives or percentages may change if previous targets are no longer reachable.
Studies have shown that increasing advertising expenditure or introducing a new product during a downturn can increase margins and generate revenue, allowing a company to raise its profile as rivals cut back on communication. Companies that increase their marketing budgets during a downturn recover their market share three times more quickly. In marketing, those who use data to inform their decisions and take the long view will prosper in a potential downturn.
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