Photo Credit: Immersion Imagery / Shutterstock.com
Recessions are a part of the normal business cycle. The up and down reactions to changes in performance of commercial markets are generally supported by consumer attitudes and emotions. While many professional economic prognosticators are willing to bring out expert crystal balls to espouse opinions on when a change will occur or how severe a recession will be, the reality is that most are not particularly good at predicting future downturns and recoveries. However, successful entrepreneurs of all experience levels are 100 percent certain of one thing. Multiple recessions will come and go over the life of a business, and those with a clear strategy for reacting in a downturn will achieve greater value and market growth over time. The 2020 recession brought on by the COVID-19 pandemic was mostly unpredicted and immediate, sparing few players in the market sector. As revenue from operations completely stopped overnight, most businesses immediately initiated cost-cutting efforts and embarked on a campaign for survival.
Controlling costs is always a fundamental and prudent business practice, but during a recession, cutting non-essential costs is imperative. Fixed costs, expenses associated with operations that occur whether the business is serving one customer or a thousand, are a good place to flush-out inefficiencies. Reducing common expenses that do not hamper mission-critical marketing and business activities can be a source for immediate savings. Utility expenses, unnecessary convenience services, and ineffective programs that fail to benefit the employer and employees, should be targeted for modification or elimination.
Marketing budgets are often one of the first to be slashed and earmarked as a nonessential expenditure during periods of lessening revenues. Often seen as an expense rather than an investment, It seems to be a fair and equitable area of a cost cutting strategy; one that promises to share the pain across all business organizational functions. But is it really a good decision to halt marketing and advertising efforts during an economic recession?
According to marketing expert Stephen King, “…businesses that cut their advertising expenditures in a recessionary period lose no less in terms of profitability than those who actually increase spending by an average of 10 percent”. When marketing efforts come to a complete stop, the process of connecting with customers is greatly impacted due to increased organizational instability and declining brand awareness. It is an opportunity for competitors to fill a void of silence and draw customers to a new brand. Maintaining or even increasing marketing and advertising commitments during a recession does go against basic business management instincts, but consumer behaviors and motivations change dramatically during difficult financial times. Completely eliminating marketing efforts will negatively impact a brand’s ability to react and adjust to consumer dynamics.
Studies of past recessions reveal that companies that retain some level of marketing spend during an economic downturn are more likely to have a long-lasting boost in sales and larger market share, which will result in the business being in a better position to recover. When Sam Walton, the founder of Wal-Mart, was asked “What do you think about a recession?” he responded, “I thought about it and decided not to participate.”
Even low-cost marketing efforts will produce significant positive results for relatively little money. There are several options when it comes to inexpensive, minimal marketing efforts that can have a great impact on a company’s success. Create organic social media content across appropriate channels and send emails to loyal customers to let them know you are with them during difficult times. Increase regular blog posts on topics that resonate with your target audience and support local charities and non-profit activities to demonstrate support for the community. Pay attention to new trends in digital marketing and be agile. Slowing financial times can cause immediate and unexpected shifts in consumer perceptions. During an economic recession, marketing spend should center around efforts to increase brand visibility and grow customer retention and acquisition once the economy rebounds.
To learn more about developing an effective marketing strategy in times of economic recession, contact Junction Creative Solutions (Junction) today at 678-686-1125.