Keep Calm and Continue Marketing
As marketers and business owners, it’s ingrained in our DNA to start trimming the fat from our budgets when the economy starts to tank. Almost everyone cuts marketing spending during recessions primarily because it is easier to cut than payroll. As of this writing, ad agencies are struggling to stay afloat. Google and Facebook are reporting substantially lower ad revenues as marketing spending dives with the business cycle.
But cutting marketing is the worst thing you can do when times get tough. In fact, those companies that increase marketing tend to weather recessions a lot better than those who cut it.
To prove that point, let’s look at the most recent economic downturn in 2007. When the economy took a nosedive that year, the businesses that bounced back did one thing that most failing businesses didn’t: They kept marketing, and some of them increased their marketing spend. What separated them from the pack is that they changed what they were spending their budgets on while adjusting their business models to reflect the changes. Yes, cutting marketing does cut expenses. But it also cuts income. Usually, there is a profit associated with income, so when income gets reduced, profits go down also. It is usually impossible to make up for those lost profits with reduced expenses.
Let’s take a look at some specific categories of marketing and the best strategy to use to succeed in a recession.
R&D and New Products
New product launches are risky even in a robust economy. There’s almost always debate within any firm about which of the new products under development should actually go to market. In this respect, cutting new product development in a recession seems like a no-brainer. To the contrary, some businesses showed that introducing new products during a recession works.
In the midst of the 2007 recession, Chrysler introduced the Dodge Challenger. This retro-inspired hot rod was an immediate hit, and Chrysler could hardly keep up with the demand. To this day, the Challenger remains one of the top
sellers in their lineup.
Timing, of course, is everything. Generally, the best time to launch a new product during a recession is the mid-point. This is when consumers start to think about non-essentials, even expensive products they don’t yet wish to purchase (like hot rods).
Pricing and Promoting
Recently, several news outlets ran stories about how many retailers are pushing the “lower prices” message to capitalize on consumers’ fear. The articles document several companies including the much-covered Starbucks $1.00 cup of coffee.
Is this a good strategy? Maybe. It depends on your brand’s position.
Are you the product or service that’s all about being cheap? Are you ready to live with that new brand position far
beyond the recession?
A low price strategy is one that’s easy to slip on and incredibly difficult to shrug off once the economy turns around. Consumers tend to wrap their arms around a low price position and aren’t likely to be happy about going back to
paying full price.
A recession is the time to be even more diligent about protecting your brand by staying consistent. If you weren’t a bargain basement brand a year ago, you should think long and hard before becoming one today.
During recessions, since most of your competition is cutting ad spending, by simply maintaining the same ad spend as before, it is likely your company’s share of brand awareness marketing will increase.
Increasing ad spend can really make you stand out.
The content of advertising during recessions must reflect the challenges that consumers are encountering. In the early part of this year, Coca-Cola used its ad budget to showcase the work of frontline workers by creating mini-stories about unsung heroes. The brand features itself very subtly in the background of these messages reminding the consumer that Coke will always be there in good times and bad.
Marketing in a recession will never be easy, largely because it often involves going against the instinct to trim budgets. But don’t follow the masses and start cutting marketing, or you will make add more pain to the recession. Just be smart as to how you spend your marketing dollar.