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In the aftermath of the 2008 recession, businesses lost confidence in the economy, and the entire ad market in the U.S. dropped by 13%. As history has a funny way of repeating itself, a recent report from the International Business Barometer shows that more than half of businesses anticipate cutting marketing spend over the next 12 months in fear of the next recession.
While short-term savings are important, businesses that continue to invest in share of voice by maintaining their marketing strategies ultimately realize longer-term profitability improvement. It also gives them the opportunity to be the only voice in the room — leading those who are bold enough to make leapfrog moves in the market to come out bigger and stronger on the other side.
It’s a recession, not a regression
The ghosts of recessions past show that consumers are quick to reduce their spending when hard times are on the horizon, and business leaders behave no differently. When anticipating reduced sales and profits, their first decision is often to cut back on variable costs, like marketing, to deliver on the expectations of the financial market.
A great deal of evidence suggests, however, that this isn’t the right idea, as doing so may leave the brand in a less competitive position when the economy recovers. In fact, many research studies have confirmed that the best strategy is to continue marketing — and often increase investments — during a slowdown to capitalize on long-term ROI.
Analysis by Kantar Millward Brown during the 2008 financial crisis found that 60% of the brands that “turned off the lights” to marketing by stopping all TV ad spend for six months saw brand use decrease 24%, and brand image decrease 28%.
A McGraw-Hill Research study looking at 600 companies from 1980 to 1985 found that businesses that chose to maintain or raise their level of marketing during the recession had significantly higher sales after the economy recovered. Specifically, companies that decided to advertise aggressively during the slowdown had sales 256% higher than those that stopped.
Capitalizing on the most bang for the buck
While customers may not be buying as much during a slowdown, they’re still consuming every day and are aware of which brands are advertising to them. Therefore, they’ll know immediately whom to purchase from once the rough waters still, as they’ve been constantly exposed to the brand during the recession period. As for the consumers still purchasing, they’ll go for the only solution being advertised, as it will likely be seen as the only option on the market.
Additionally, from a business standpoint, the cost of advertising goes down as the demand does, allowing businesses to advertise more for less with decreased competition.
A recent example of this strategy working successfully comes from Expedia-owned vacation rental marketplace VRBO. Prior to the pandemic, Airbnb took the vacation rental market by storm, grabbing nearly 20% of the lodging market and completely disrupting the industry over its short history. However, once COVID-19 hit and people stopped traveling, Airbnb’s ad spend took a back seat. VRBO stepped up to increase its market share by outspending Airbnb 10-fold in advertising during this period. In fact, VRBO spent $90.8 million in advertising from January to February 2021 while Airbnb spent only $8.9 million. As a result, VRBO saw its bookings recover by 61%, which stacks up well against Airbnb, whose booking dipped by 15% over the same period.
How to navigate recession marketing
When continuing to advertise during a recession, the key is to ensure authentic and empathetic messaging that remains considerate of the current economic climate and accurately describes how the product or service benefits the consumer. For example, some brands may be tempted to emphasize low pricing to pull in consumers during a “closed wallet” period, but that generally only works for companies whose value proposition has affordability built in, like wholesale clubs or Amazon and Walmart, as consumers will see through such inconsistent messaging.
When faced with less demand, it’s also important to streamline product portfolios to reduce noise and focus on marketing the strongest assets — especially those that may benefit the consumer now versus later. Product lines that are too broad unnecessarily soak up marketing costs and tie up resources that can be better allocated elsewhere during this period.
Leapfrog the competition
As in VRBO’s story, marketing loudly while the rest of the competition is quiet provides the perfect opportunity for long-term growth moves. History shows that companies that have maintained or doubled down on their marketing budgets come out greater on the other side and create an influx of opportunities to edge out competitors and make real strides in the market.
In short, keep the lights on when others go dark.
Robert Rothschild is CMO of Botify.
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