27 April 2020
With COVID-19 disruption continuing worldwide, it seems certain that the world is heading into recession – so how should marketers react?
This won’t be the first recession most marketers will have experienced. Learning from the mistakes and opportunities of past recessions is critical in navigating what comes next. While some businesses will be consumed by the task of staying afloat, recessions present unique opportunities to steal market share – providing the foundations for long-term growth once the economic recovery begins.
Marketing budgets are an easy target in times of financial hardship, but marketers should be prepared to fight their corner as the long-term brand damage can be significant. Making the case for maintaining, or even increasing, marketing spend could result in a stronger brand – and a stronger competitive position – post-recession.
Don’t lose sight
Economic uncertainty often pushes marketers to focus on short-term tactics instead of longer-term strategy. Reactionary marketing is important in the moment but it’s critical to not lose sight of goals that sit beyond the horizon.
As I advocated in a recent B2B Marketing blog post, successful marketing requires both short- and long-term thinking. This does not change in recession. While it is tempting to move budget towards lead generation that drives short-term impact, neglecting long-term brand building could cause lost market share that may never be regained. This has been well documented by Peter Field and Les Binet in their research for the Institute of Practitioners in Advertising (IPA).
Indeed, there is strong evidence that a recession is the ideal time to strengthen your brand. If competitors scale back their advertising, you have an opportunity to increase share of voice more easily – and cost effectively – than during boom years. If you succeed, you will generate long-term impact that lasts well beyond the recession, a position championed by Mark Ritson in his recent Marketing Week webinar: Marketing in the time of Coronavirus.
Cutting spend can be deadly
A survey by Advertisers Perceptions found that almost half of advertisers (49%) spoken to would be reducing advertising spend as a result of Coronavirus. However, history has taught us that cutting back can bring severe consequences.
A 2009 study by USC Marshall School of Business marketing professor Gerard Tellis and student Kethan Tellis concluded that, “there is strong and consistent evidence that cutting back on advertising during a recession can hurt sales during and after the recession, without generating any substantial increase in profits. Such cutbacks can result in a loss in capitalization.”
“On the other hand, not cutting back on advertising during a recession could increase sales during and after the recession. Moreover, firms that increased advertising during a recession experienced higher sales, market share, or earnings during or after the recession.”
This conclusion was echoed by a McGraw-Hill Research study analyzing 600 companies from 1980 to 1985, which found that “those businesses which chose to maintain or raise their level of advertising expenditures during the 1981 and 1982 recession had significantly higher sales after the economy recovered. Specifically, companies that advertised aggressively during the recession had sales 256% higher than those that did not continue to advertise.”
These studies should provide fortitude as marketers navigate the next few months – and walk into difficult planning discussions.
Where do we go from here?
With the economy brought to a juddering halt a recession seems unavoidable, but no-one can predict the shape it will take. While there is no formula to guarantee any business comes out the other side, marketers can take strength from the experiences of those that have come before.
The opportunity for marketers was elegantly stated by the Institute of Practitioners in Advertising (IPA) in a recent advert in the Financial Times: “When others go quiet your voice gets louder”.
Focus on the fundamentals. Manage your balance sheet. Look after your people. But make sure to keep an eye open for opportunity.