5 Reasons Why You Shouldn’t Cut Your Marketing Budget in a Recession

We’re sure the country’s recession status is something that’s well on your radar, especially given the fact it’s been looming on the horizon and in the headlines for such a long time. We aren’t going to focus on the reasons behind the current economic picture, but we are going to explore a trend that almost-always happens when any type of economic downturn occurs.

We’ve seen it happen many a time – marketing always tends to be one of the first casualties when things get tough.

Despite the efforts of the likes of the Institute of Practitioners in Advertising (IPA) to prevent it from happening. Do you remember the full page ad they placed in the Financial Times in August 2022, calling for companies to not do the same thing again this year? They also backed it up with a report that showed how increasing marketing spend during tough times can give companies the competitive edge (more on this below).

What Happens to Marketing in a Recession?

Generally speaking, customers reduce their spend and sales start to fall, creating a ripple effect that then results in businesses taking stock of their budgets and cutting costs, wherever possible. 

During these times, it’s not uncommon for business owners to go into survival mode and slash their marketing activity because it’s viewed as a discretionary or non-essential cost when compared to other expenditure, such as salaries. When pitched against other outgoings, marketing may not be perceived to deliver the same ROI as other activity. But in reality, it should be one of the core tactics that stays and is used by companies to help ride out the storm.

As much as cutting marketing budgets is a common reaction during economic downturns, it’s widely acknowledged to be far from effective in the long-run, with companies playing catch-up for a considerable time.

To further put this into perspective, research by Nielsen found that brands that go down this route stand to lose 2% of their long-term revenue each quarter. And with marketing making up 10 to 35% of a brand’s equity, trying to bounce back after making those cuts can take between three and five years.

Why You Shouldn’t Cut Your Marketing Budget

Marketing budgets get cut during economic downturns – fact. But as we’ve just explained, they shouldn’t take a back seat for multiple reasons, including these five:

  1. You’ll stand out even more from your competition 

As we’ve mentioned, marketing budget cuts tend to be the norm for most companies, reducing their share of voice within the market. However, maintaining or increasing your marketing spend will fill the void left by your competitors and help keep you at the forefront of people’s minds.

Take Reckitt Benckiser, for instance. Following the 2008 financial crash, it launched a marketing campaign to persuade customers to continue to buy its more expensive products. It also hiked up its marketing budget by 25%. As a result, the company’s revenue grew by 8% and its profits rose by 14% at a time when its competitors were experiencing a 10% dip in their profits.

Reckitt Benckiser Increase Marketing Budget following 2008 recession

  1. There are still customers out there 

Granted, customers’ buying habits may change during times of uncertainty, but there will always still be people out there who are in the market to buy your product/service.

But if you have little-to-zero market presence, how are they a) ever going to find you? and b) be compelled to choose you over other companies?

  1. It’s an opportunity to nurture more valuable relationships

Marketing ROI is still valid during a recession, it’s just that you may find you are focusing more on building relationships than driving sales.

Maintaining your marketing spend is an opportunity to share stories and messages that reinforce how much you value your prospects, customers and loyal brand ambassadors. In doing so, you’ll strengthen people’s trust within your brand and help forge relationships that last for many years to come. 

  1. It reinforces your brand stability and presence 

Brands that remain present during economic downturns remain relevant to customers. While they may have less disposable income or have prioritised their spend in different places, customers will still be aware of the brands that are still out there doing what they do. 

What’s more, it’s not uncommon for customers to choose the only option that seems to be available (i.e. the one that’s still being marketed) because of the perception that it may be the only viable choice. Having a consistent marketing presence during a recession will also help make sure your customers don’t feel abandoned by you.

  1. You won’t have to worry about coming back with a bang

Because you never went away, even if you had to scale back on marketing and realign your activity in response to current customer demand, you remained a constant presence. 

This constant drip-feed of activity enables you to remain front of mind. Even if people aren’t in a position to buy from you right now, they know about you when they are and can recommend you to others in the meantime. In comparison, companies that choose to turn the dial right down on their marketing activity, have to initially work harder to get back in the picture again. When they do decide to ramp up their marketing, it undoubtedly comes at a cost too. Interestingly, according to the IFA’s report, businesses that increased marketing spend in a recession recovered faster.

Why Marketing Is Important during a Recession

Marketing generates sales, customers and repeat business. Cutting marketing budgets during a recession may initially deliver an immediate upfront saving, but over time, it’s a cut that will become apparent company-wide.

As the IPA said in its keep marketing campaign in 2022, ‘A short-term reaction is never as effective as long-term investment. Increasing marketing spend in recession helps to grow profits faster in recovery.’

And we couldn’t agree more.

Recessions aren’t the time to do away with marketing spend, but review and refine your existing activity. Companies need to keep doing what they’re doing, making sure they carefully review performance and refine their tactics along the way.

Marketing isn’t an option, it’s a necessity that’s capable of being a lifeline for all companies that continue to embrace it. Don’t fall into the trap of thinking you don’t need it.

 

Need help setting your marketing strategy, defining your priorities, or just want general guidance? Book a consultation call today with our team of experts.

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