SURVIVING DOWNTURNS: WHY IT’S ESSENTIAL TO CONTINUE MARKETING DURING A RECESSION
In the face of economic uncertainty, small business owners often find themselves at a crossroads, contemplating whether to tighten their belts or continue investing in growth. However, marketing during a recession is essential to ensure business continuity during economic downturns.
While the temptation to cut costs may be strong, one aspect that should never be sacrificed, even during a recession, is marketing. In this blog, we'll explore the invaluable role of marketing in times of economic downturns and the risks associated with scaling back on these efforts.
THE POWER OF MARKETING DURING A RECESSION
MAINTAINING BRAND PRESENCE
When the economy takes a hit, it's natural for consumers to become more cautious about their spending. In such times, businesses that continue to advertise, remain top-of-mind for their customers. Think of marketing as your lifeline to your customers. By maintaining a strong brand presence, you reassure your audience, reminding them that you're still here, ready to serve their needs.
Consider the case of Lego during the 2008 financial crisis. While many would think that toys are unessential during an economic recession, Lego was able to increase both sales in the UK by 20% and post pre-tax profits of nearly £100m. Focusing on their products’ longevity, Lego were able to recover from a seemingly dire financial position as recently as 2004 to become one of the biggest toy brands in the world.
NAVIGATING CHANGING CONSUMER BEHAVIOUR
Economic downturns often lead to shifts in consumer behaviour. Customers don't disappear in a recession they just become less frivolous. They focus on the necessities and are more conscious of their spending habits. They become more price-conscious, research their options more thoroughly, and spend differently.
They're still there, they are just more selective in whom they buy from when they buy and how regularly they buy. This is where adaptable marketing strategies shine. Digital marketing, in particular, allows for real-time adjustments to meet changing customer demands.
See the chart below from the Harvard Business Review that explores the changing behaviours of consumer segments.
If you reduce your marketing during a recession you reduce your potential to win the available business, giving you a smaller slice of a smaller pie. Due to this shift in consumer behaviour, the pie may now be smaller, but seize the opportunity to grab a larger slice of it while you can.
When customer spending returns to pre-recession levels, who is in a stronger position? Those who withdrew marketing funds, or those investing in it?
THE ROLE MARKETING PLAYS IN YOUR BUSINESS
Think of your business like a car. It's made up of different components (departments) that all have a specific role to play in helping the business operate.
Customer Service (steering wheel)
And so on
They all have different roles to play but are equally integral to delivering what your business does. You could have all components in great working order but now try driving your car without fuel...
Without fuel, the car is going nowhere.
Now consider sales and marketing as the fuel to your business. Without attracting and converting prospects into customers your business has no function, purpose, or value.
Sales and marketing are often one of the first business functions to be cut during a recession, but the reality is, without sales and marketing you can’t fuel your business. Instead, Look at other ways you can make efficiencies within your business to cut costs so you can continue to invest in your marketing during a recession.
“Removing fuel from your car is like reducing marketing during a recession. You’re going nowhere.”
RISKS OF CUTTING BACK ON MARKETING DURING A RECESSION
LOSS OF COMPETITIVE ADVANTAGE
Scaling back on marketing during a recession may seem like a prudent financial move, but it comes with a cost. While you’re reducing your activity in the market, your competitors might seize the opportunity to gain ground.
This is particularly true of highly competitive markets where consumer choice is abundant. In a recession, consumer choices are scrutinised more than ever, and if your brand isn't part of the conversation, you risk falling behind.
LONG-TERM IMPACT ON BRAND EQUITY
Your brand is an asset that takes years to build but can be eroded quickly if not nurtured. Neglecting marketing during a recession can lead to a long-lasting impact on your brand's equity. Consumers may perceive your business as less relevant or even assume you've gone out of business.
A prime example of this is General Motors. During the 2008 financial crisis, they drastically cut their advertising budget, which led to a decline in their brand perception and market share, from which they struggled to recover.
SMART MARKETING STRATEGIES FOR ECONOMIC RECESSIONS
In uncertain times, every marketing penny counts. Implementing data-driven marketing strategies allows you to allocate resources more effectively. By analysing consumer data, you can pinpoint the most promising opportunities and maximise your return on investment. Understanding how your consumer behaviours have changed and identifying new markets to explore could help you not just keep your head above water but could even lead to business growth, while your competitors fall behind.
IMPLEMENTING CRM STRATEGIES
During a recession, customer acquisition costs can skyrocket. That's why nurturing your existing customer base becomes a bigger necessity than ever. According to ThinkJar, it can cost 6 times more to attract new customers than it does to retain existing ones. Implementing CRM (Customer Relationship Management) marketing during a recession can improve customer relationships between your brand and your customers. Taking the time to understand and track your existing customer behaviours, buying habits, interests, and needs through customer segmentation, can lead to a better customer experience. This has a positive impact on brand loyalty and in turn can increase retention rates, revenue and profits. By putting a focus on increasing customer loyalty you have the potential to increase profits by up to 95%.
FOCUSING ON CUSTOMER RETENTION
For your business to grow, you need to keep adding new customers to the top of the funnel. Imagine you are churning one new customer a week. To continue growing you would need to acquire two new customers a week to compensate. At a cost of potentially six times higher to acquire each new customer, your marketing spend will not have the same impact on your bottom line as retaining customers can.
Focus on driving value for your existing customers using tactics such as loyalty programs, personalised marketing, and providing exceptional customer services, can help you retain customers and boost their lifetime value.
INCREASE YOUR INVESTMENT IN MARKETING DURING A RECESSION
As an alternative approach, consider increasing your sales and marketing efforts not cutting them.
Think about it this way. If all of your competitors cut their marketing spend by half during a recession, and you doubled yours, it can have a positive impact on your market share.
Let's assume there are 10 businesses in a single market all with a 10% share each. If you double your spending and they half theirs, your market share potentially grows from 10% to 30%. That's a 3x increase in share for a 2x increase in investment.
If you’re prepared to double down on your marketing during a recession by combining a strategic mix of new customer acquisition and retention strategies, you could see growth, retention, and profit metrics all increase while your competitors are feeling the pinch.
CASE STUDIES AND SUCCESS STORIES
Real-life success stories provide powerful evidence of the benefits of marketing during economic downturns. Take a look at these examples highlighted by HubSpot of household names who thrived during the 2008 financial crisis because they were willing to do things their competitors weren’t.
"Stopping advertising to save money is like stopping your watch to save time.” - Henry Ford
SHOULD I INVEST IN MARKETING DURING A RECESSION?
The simple answer is yes. Marketing is not an expense; it's a crucial business function and investment in the resilience and long-term success of your business. When the economic downturn hits, businesses that continue to market themselves can continue to grow and emerge stronger on the other side. It's a strategy that pays dividends not just during the recession but for years to come.
So, as a business leader, the choice is clear: embrace marketing as your ally in turbulent times, and your brand will thrive, not just survive. Your customers are out there, you just need to ensure when they are ready to spend, they spend with you.
SUM AGENCY CAN SUPPORT YOUR MARKETING DURING A RECESSION
Are you unsure about how to navigate marketing during a recession? We're here to help. Due to our unique approach to small business marketing, we can offer expert, tailored, and cost-effective marketing support to help you achieve your goals, without breaking the bank. You may like a blog we’ve written recently to help you unpick the complex world of outsourcing your marketing. We guide you through the services offered by marketing agencies, how they can help your business grow, how to evaluate their suitability, and more.
For more information, click the link for the full article, What is a Digital Marketing Agency: A Comprehensive Guide for Small Businesses.
Think outsourcing your marketing during a recession could help? Reach out for a free, no-obligation consultation, and let's develop a marketing strategy tailored to your business's unique needs. Just click the link below to book a date and time that works for you to get started.