With more than a third of the world’s population in lockdown, the global economy has been subjected to one of the steepest downturns since the Great Depression. Stock markets have been crashing, unemployment has been staggering, consumers have lost their confidence and businesses have become desperate. Consequently, companies have started to slash costs dramatically in order to ensure short-term revenue rather than generating income for the long-run. This would seem perfectly logical in the same way as if you were attacked by a shark during your surfing holiday you would focus on how to get back to the beach as soon as possible rather than thinking about what to wear during next week’s work meeting. When the economy faces a downturn, cutting costs seems to be the most logical response to ensure your company’s survival. However, the opposite seems to be true. This article will illustrate how maintaining your marketing in times of a recession will lead to long-term success.
Increase to Succeed
A great deal of research has proven that, even though it opposes our primal response, companies should be increasing their spending in times of an economic downturn. Self-evidently, not on every cost area, but cutting costs in one area allows spending a little more in others, with the marketing department being one of those areas of the business that should benefit from reallocating costs. Therefore, cutting costs should be decided strategically. It is said that increasing your marketing expenditure in a recession leads to long-term profitability. Cutting your marketing costs will mitigate short-term losses and result in (misleading) short-term profitability while it unnoticeably endangers long-term profitability. The brand image and brand usage are damaged significantly when a company quits its marketing from one day to the other as it gives off a perception of failure. It takes those businesses twice as long to get back to normal profit than businesses who cut half of their marketing expenditure. Moreover, businesses which maintain their marketing budgets or even increase them will be more likely to experience long-term success in terms of increasing their market share and return on investment at lower costs than in times of prosperity. The reason for this is that in times of uncertainty, when customers lose their confidence and get more cautious on their expenditure, the right marketing can capture the consumers’ attention and redirect them towards your brand. Thus, brands should focus on maintaining their share of voice in times of a depression rather than on share of market as a powerful brand image and strong brand awareness will ensure future profitability.
Maximise Marketing Effectiveness
However, solely reallocating budget from one cost area of your business to your marketing department does not provide you with the solution to survival. In order to maximise the effectiveness of your profitability, you have to ensure that you maximise your marketing effectiveness. The following will take you step by step through optimising your marketing in times of a recession.
Map your Customers
First and foremost, take stock of your customer’s wants and needs in times of recession in order to ensure that your messages tap into their current emotions and thus have a more effective reach. In general, customers value more durable and reliable goods and tend to negotiate harder in tough economic times. They are willing to trade down, buy less and buy later. Yesterday’s necessity goods belong to today’s luxury items. Consumption becomes irregular and unpredictable. In times like these, attaining loyal customers are key. However, loyalty needs time to develop as it depends on promises being kept and customers’ expectations being met. Right now trusted brands and goods are thriving whereas new ones are having a hard time to penetrate the market. Another way of ensuring consumer loyalty is by connecting with your customer on deeper emotional levels. Here’s where on-point marketing steps in. It is said that in times of trouble, marketing should focus less on visually-pleasing content and more on it’s reassuring and informing ability to tap upon your customers’ need for certainty, safety, connectivity and unity. The latter stimulates a more deeply embedded connection and will be more likely to ensure your customer’s long-term engagement.
Kill your Darlings
Secondly, don’t go spreading your scarce resources amongst all your different brands or products, but focus them on your most profitable and viable ones. Customer behaviour changes and so does the demand for your products and services. Based on the current needs of your customers, forecast which of your products or services will thrive during the recession and let products which currently provide less value swim or sink.
Reprioritise your Channels
Thirdly, reconstruct your marketing tactics and reprioritise your media channels within your overall strategy. Your customers look for value for their money and so should you! Look at the costs and effectiveness of each of your marketing channels and trade down which one you want to focus on. Channels that seem to thrive in economic downturns are point-of-sales marketing also known as in-store marketing (especially point of sale displays with video) and readily measured media also known as digital media (including digital video). Broadcast media, on the other hand, seems to lose popularity. Therefore, the costs for marketing on online platforms usually increases.
However, marketing on social media, when unpaid, is often ineffective as very little of the impressions are high enough quality that they will contribute to building your brand. On the contrary, these channels might inspire people to damage your brand with negative comments. Therefore, it is said that there is little to gain and potentially more to lose from maintaining your organic socials in times of a recession. Now is the time to take stock of the cost and effectiveness of all your channels and reallocate your marketing budget accordingly.
Increase your Creative
Fourthly, set the bar high on the creativity of your marketing content. According to a meta-analysis of econometric sales modelling published in Admap (2006), creative marketing content can double your profit. Thus, leverage your media budget as effectively as possible, now more than ever.
Anticipate your Competitors
Finally, whatever you decide; to cut or not to cut, you should not forget to keep your finger on the competitive pulse. Especially in time of recession, the moves of your competitors might have a significant influence on your company’s survival and vice versa. Therefore, you should never cut or increase costs without having anticipated your competitors’ response to your actions.
Reinforce your Values
Most importantly, do not abandon your current marketing strategies but adapt it to focus on your strengths! Focus your marketing efforts on reinforcing what made your brand successful in the first place. The reason for this is that most consumers find security in buying an established and trusted brand. Therefore, you need to stick to and emphasise core brand values. If you deliver premium-priced products don’t go price promoting in order to retain a price-sensitive customer. Usually, premium-priced products offer a rational or emotional advantage over competitive products and the people who purchase these will return as soon as the economy is recovering. Cutting prices does not only lower your margin in the short term but also risks losing the premium status of your product and trains your loyal customers to expect lower prices in the long-run.
Moreover, don’t go cutting quality to save costs as the reason for your customers to return is your brand’s exceptional performance and experience. Instead, you should make your brand more accessible through reframing your brand’s core values. For low-price brands they should definitely emphasise their low pricing aggressively So, whatever you decide to do, do not renounce your original brand values!
In the Long-Run
Running a business all comes down to generating profitable sales. As marketing encompasses everything that brings money into the business, maximising marketing effectiveness should, in theory, maximise the effectiveness of profit generation. That is why an increasing amount of companies start looking at marketing from a more strategic perspective, yet marketing is often still separated from other departments in the organisation such as the sales. Many marketers argue that in order to optimise profit, businesses should implement full-funnel marketing. This means aligning your marketing with all the different specialities inside your organisation such as finance, operations, etcetera, to create an entirely measured marketing communication network or so-called funnel in which information is transparent, measurable and accountable. A recession is the time to reinforce the fundamentals of your company by setting up the practice of full-funnel marketing. Therefore, today is the day to start investing in your marketing, identifying the life-time value of a customer, locating the most profitable customers and determining how to target them. In other words, to warrant profitability in the long-run.
Wrap Up
During recessions, consumers and businesses alike must make the best of a bad situation. Those companies that decide to slash costs in the short term will find themselves in more trouble in the long-run than those companies who maintain or increase their expenditure. Being able to maintain your share of voice in tough economic times like these gives you a competitive advantage when the good times return.