WHY CONSISTENT MARKETING IN A DOWNTURN ECONOMY IS A SMART MOVE

In the face of an economic downturn, businesses are often tempted to cut back on marketing budgets, viewing marketing as a non-essential expenditure. However, history and research have shown that maintaining—or even increasing—marketing efforts during a down market is a strategy that can lead to long-term success. In this post, we’ll explore why consistent marketing during tough economic times is not only necessary but can also set you apart from the competition.

The Case for Marketing in a Downturn

Visibility When Others Cut Back

Concept of Share of Voice:

The concept of “Share of Voice” (SOV) is a marketing principle that measures the amount of the marketplace your brand owns compared to your competitors. It includes all promotional activities:

  1. advertising
  2. social media buzz
  3. customer interactions
  4. other direct or indirect forms of reaching your audience

The principle is predicated on the theory that a higher SOV often correlates with a higher “Share of Market” (SOM), which means more sales and a stronger market position.

Here’s why SOV is especially important in a downturn: as competitors cut back on their marketing spend, the relative SOV of brands that maintain or increase their advertising grows even if their budgets remain the same. This increased visibility can translate into a stronger market presence. In essence, maintaining or growing your marketing efforts when others are pulling back is a chance to capture more attention, at a lower cost, which can lead to a larger market share.

The key factor is that you do not have to spend a lot to outshine your competition.  As competitors cut back, a business just has to spend more, and appear more than its competitors.

Statistics support this principle. A study by Millward Brown found that companies that maintained or grew their SOV during recessions experienced a 256% increase in sales over their silent counterparts when the economy recovered.

  • Historical Examples:

One of the most cited historical examples is Kellogg’s during the Great Depression. When consumer spending dropped and economic uncertainty led many businesses to reduce their advertising budgets, Kellogg’s doubled its ad budget, investing heavily in radio and introducing a new cereal, Rice Krispies. As a result, Kellogg’s profits grew by 30% and the brand became the category leader, a position it has maintained for decades.

Another example comes from the 1990-91 recession. McDonald’s decided to decrease its advertising and promotion budget significantly. On the other hand, Pizza Hut and Taco Bell took advantage of McDonald’s reduced SOV. They increased their marketing spend, resulting in sales growth of 61% for Pizza Hut and 40% for Taco Bell, while McDonald’s sales declined by 28%.

These examples demonstrate how maintaining or increasing SOV during economic downturns can not only defend a brand against the rigors of a tough market but also position it for greater success when economic conditions improve.

  • Building Brand Equity

    • Customer Trust:

Trust is the cornerstone of customer relationships, and consistent marketing plays a pivotal role in fostering this trust. In uncertain economic times, customers crave stability and reliability, which can be communicated through a brand’s unwavering presence in their lives. This presence can come in the form of regular advertising, digital marketing, content marketing, social media interactions, brand visibility and customer service excellence.

During an economic downturn, a brand that continues to market itself effectively can become a beacon of dependability for consumers. For instance, according to a study by Kantar Millward Brown, brands that are consistently visible are 3.2 times more likely to be trusted by consumers than brands with an erratic marketing presence. Moreover, during the 2008 financial crisis, brands that maintained their ad spend were found to have a 9% increase in trust post-recession, according to a report by the Harvard Business Review.

The steady flow of communication during hard times reassures customers that a brand is strong, confident, and stable, which can significantly influence purchasing decisions when every penny counts.

It is consistent engagement that helps maintain a relationship with existing customers and increases the likelihood of attracting new ones.

 

Brand Perception:

A downturned economy is an opportunity to improve brand perception and build brand equity. As some companies reduce their marketing activities, customers are left with a void that other brands can fill. By continuing to market during these times, a brand can demonstrate its industry leadership and commitment to its customers.

Marketing efforts can be tailored to address current consumer concerns, showcasing the brand as empathetic and understanding, which enhances its perception. A Nielsen study on advertising efficiency reported that brands focusing on emotional engagement tend to experience a 15% increase in sales uplift compared to those focusing solely on promotions.

Marketing during a downturn can also be seen as an investment in brand equity.

For instance, Amazon increased its spending by 28% in the 2009 economic slump, focusing on customer value by promoting lower costs on their products without compromising quality. This move paid off handsomely as Amazon’s sales grew by 28% in 2009, while others faltered.  Additionally, Amazon was such a trusted brand that by the time of the pandemic shutdowns of 2020 and 2021, Amazon was the online brand consumers trusted most to purchase the items they needed. Research FDI reports that Amazon saw a 70% increase in earnings in the first nine months of 2020 alone.

These strategic moves during tough economic times speak volumes about a brand’s values and priorities, positively influencing consumer perception. When the market eventually recovers, these brands often emerge with a much stronger equity position than before the downturn.

  • Taking Advantage of Reduced Costs

    • Cost of Advertising:

Advertising costs are known to fluctuate in response to market demand. During downturns, overall advertising spends tend to decrease as businesses tighten their budgets, which can lead to lower advertising rates across various channels. This relationship between market confidence and advertising costs creates a unique opportunity for businesses willing to maintain or increase their marketing budgets.

For instance, during the 2008 economic recession, ad space costs dropped by as much as 13% across all media, according to the World Advertising Research Center. The decrease in demand for ad spots allowed advertisers to negotiate better rates or secure more premium placements for their campaigns, leading to a higher return on investment (ROI).

Capitalizing on lower advertising costs can also mean extending the reach of campaigns without increasing spend, resulting in a higher frequency of ads and potentially reaching new market segments. This strategy can enhance brand visibility and awareness at a time when competitors might be less present in the minds of consumers.

  • Digital Marketing Efficiency:

Digital marketing is particularly well-suited to times of economic downturn due to its inherent efficiency and the ability to target and measure campaigns with precision. Unlike traditional advertising, which can be costly and challenging to measure, digital channels offer cost-effective scalability and detailed analytics, allowing marketers to optimize campaigns in real-time.

Statistics from various digital platforms support the cost-effectiveness of digital marketing. For example, a report by eMarketer noted that the average cost per click (CPC) on paid search can decrease during economic slowdowns, as there’s less competition for the same keywords. This reduction in CPC means businesses can drive more traffic for the same budget or achieve the same results with less spending.

Moreover, digital marketing efficiency is also enhanced by the wealth of data available for targeting. With advanced targeting options provided by platforms like Google AdWords and Facebook Ads, businesses can reach specific demographics, interests, and behavioral profiles, ensuring that marketing dollars are spent on the most relevant audiences.

The measurable aspect of digital campaigns means that businesses can quickly assess which strategies are working and which aren’t, allowing for agile adjustments. For instance, conversion rates, click-through rates, and engagement metrics provide immediate insights into campaign performance. During the 2009 recession, businesses that utilized digital marketing’s data-driven insights were able to achieve up to 50% savings in their customer acquisition costs, as reported by Forbes.

The blend of reduced costs and increased efficiency makes digital marketing an attractive option for businesses looking to optimize their advertising spend during downturns, maintaining their market presence, and preparing for a stronger rebound.

  • Innovation and Adaptability

    • Market Shifts:

Economic downturns have a profound impact on consumer behavior, often driving changes that open up new market opportunities. During these times, consumers become more price-sensitive and value-oriented which alter their purchasing priorities. A Nielsen study conducted during the global recession of 2008 found that 52% of global consumers surveyed adapted their spending to economize, which included switching to cheaper grocery brands and reducing discretionary spending.

These shifts create openings for brands that can quickly adapt their offerings to meet changing consumer needs. For instance, during the 2008 recession, Hyundai introduced the “Assurance Program,” which allowed customers to return their cars if they lost their jobs. This program addressed the newfound consumer focus on financial security and resulted in a 5% sales increase for Hyundai in 2009, even as the overall automobile market shrank by 21%.

Brands can also find new niches during economic shifts. For example, the rise of the “staycation” trend amid economic downturns has provided a boon for local tourism and entertainment industries.

By understanding these shifts, businesses can redirect their marketing efforts to where demand is growing or emerging.

  • Agility:

Agility is the capacity of a business to change direction quickly and efficiently in response to market changes. It’s particularly crucial during economic downturns, when the ability to pivot can mean the difference between thriving and merely surviving, or closing all together. Agile marketing is characterized by a willingness to test new ideas, measure results, and iterate quickly based on feedback and data.

A 2009 study by the Economist Intelligence Unit reported that companies that responded to the recession by innovating their business model enjoyed a significant performance advantage, with 37% reporting a better financial performance than their peers.

Marketing helps a company pivot by providing insights into consumer behavior through data analytics, enabling brands to adapt their messages, channels, and product offerings. For instance, companies may shift from promoting luxury features to emphasizing durability and value. They may also reallocate their marketing spend from traditional media to digital platforms to achieve a more immediate and measurable impact.

Agile marketing requires both responsive thinking and a proactive approach to market trends. It involves experimenting with new marketing strategies, adopting a test-and-learn mentality, and using real-time data to guide decisions. During the COVID-19 pandemic, for example, businesses that swiftly adapted their marketing strategies to focus on online services, home delivery, and safety measures saw increased consumer support and loyalty.

Economic downturns necessitate a reevaluation of consumer needs and market conditions. Brands that monitor these changes closely and respond with agility can not only preserve their relevance but also discover potential areas of growth that were previously untapped.

Marketing plays a crucial role in strategic pivots, offering the insights and flexibility required to navigate challenging economic landscapes effectively, efficiently and within a reasonable budget.

  • Long-Term Planning

    • Future Growth:

Adopting a long-term vision in marketing strategies during economic downturns is vital for sustained growth. During recessions, it might be tempting for businesses to prioritize immediate cost savings over sustained investment in marketing. However, statistical evidence suggests that companies that consistently invest in their brand during downturns can enjoy superior growth when the economy recovers.

For instance, a McGraw-Hill Research study of 600 companies from 1980 to 1985 found that businesses that maintained or increased their ad spend during the 1981-1982 recession outperformed those that did not by 256% over the following three years. This illustrates that the benefits of continued marketing investment can extend far beyond the immediate end of a recession, setting the stage for accelerated growth in the aftermath.

Companies investing in marketing during a downturn can capture greater market share as competitors reduce their marketing efforts. This strategic approach not only preserves sales volume but can also improve it due to less competition and increased visibility.

Continued investment in marketing can foster innovation and the development of new products or services designed to meet growing needs in a marketplace where overly cautious businesses are constricting information on their goods and services. This innovation and development of new deliverables designed to meet those needs are crucial for post-recession growth.

  • Consumer Memory:

Consumer memory plays a significant role in shaping future purchasing decisions. Brands that actively engage with their customers and provide support during tough times are often remembered positively when the economy rebounds. The presence of a brand during a downturn, through empathetic marketing and community support, can create emotional connections with consumers that last long after the recession has passed.

Studies have demonstrated the impact of brand continuity on consumer memory and future choice. According to a study by the Harvard Business Review, brands that consistently communicate their value proposition and maintain visibility during economic downturns are likely to be “Top-of-Mind” as the economy recovers. This top-of-mind awareness can lead to increased market share and foster customer loyalty.

For example, during the 2008 recession, brands like Ford refused government bailout funds and continued to invest in new product development and marketing. Ford’s decision to invest $4.5 billion in electric vehicle development and its “Drive One” marketing campaign enhanced consumer perceptions of the brand as innovative and responsible. When the market began to recover, Ford was ahead in consumer recall, which translated into sales growth—Ford’s sales increased by 19% in 2009.

By understanding and leveraging consumer memory, brands can ensure they not only survive economic downturns but emerge stronger, with a loyal customer base ready to engage as purchasing power returns.

These strategic efforts highlight the importance of consistent marketing efforts that prioritize long-term relationships and growth over short-term cost reductions.

Marketing Strategies for a Down Economy

SharpShell Digital believes that in today’s digital age, consumers are spending an increasing amount of time online, making digital channels essential for marketing strategies. With the rise of e-commerce and digital content consumption, businesses have unprecedented opportunities to:

  • Reach and engage with appropriate messaging to target audiences
  • Where they are most active
  • When they are seeking information

Focus on Digital

  • Shift to Online Platforms:

Reallocating marketing resources to online platforms allows businesses to optimize their spending by targeting consumers more directly and personally. This shift is supported by the fact that internet advertising is projected to represent 54.2% of total ad spending by 2023, according to a report from eMarketer. Businesses that prioritize digital marketing can benefit from the continuous growth in digital media consumption.

  • Content Marketing:

Content marketing has become a powerful tool for engaging with consumers. Providing valuable content – whether it’s informative blog posts, engaging videos, or insightful infographics – can help retain customers and establish a brand as a thought leader in its industry. A Content Marketing Institute study found that 72% of marketers say content marketing increases engagement and the number of leads.

Customer Retention

  • Loyalty Programs:

Loyalty programs, which reward customers for repeated purchases, are a proven method for increasing retention. They not only encourage repeat business but also gather valuable data on customer preferences, which can be used to tailor future offers and communications.

  • Engagement:

Engagement strategies in marketing are crucial for maintaining customer interest and satisfaction. Regular newsletters, interactive social media posts, and personalized communications can keep customers involved with the brand. Gamification is another effective tool, as it can increase engagement by up to 30%, as reported by Forbes.

Value Proposition

  • Communicate Value:

Communicating a clear value proposition is essential for differentiating a brand from its competitors. This involves a clear statement that explains how a product solves customers’ problems, delivers specific benefits, and tells the ideal customer why they should buy from you and not from the competition.

  • Problem-Solving:

In times of economic uncertainty, consumers are particularly focused on finding solutions to their problems. Brands that effectively communicate how their products or services can address current challenges will resonate more with consumers. For example, during the COVID-19 pandemic, companies that pivoted to provide home delivery, contactless service, or products to aid in health and safety saw an uptick in customer acquisition and retention.

Data-Driven Decisions

  • Market Research:

Effective market research can uncover what consumers are looking for during economic shifts, allowing businesses to adapt their offerings accordingly. This research can include analyzing search trends, social media behavior, and online consumer feedback.

  • Customer Feedback:

Customer feedback is a goldmine for improving products, services, and marketing strategies. It provides direct insight into what works well and what doesn’t from the customer’s perspective. Encouraging and facilitating customer reviews, surveys, and feedback can lead to better product development and more effective marketing messages, ensuring that a business’s offerings remain closely aligned with consumer needs and preferences.

SharpShell Digital advises customers that integrated strategic campaigns create brand awareness 3-4 times faster than limiting marketing and advertising to one or two channels or platforms. It takes 5-7 meaningful exposures to a brand for a consumer to recognize a brand and associate it with the goods, products and or services being offered. Using a multi-faceted delivery method, paired with a comprehensive, strategic plan that provides value, education or information to consumers is the most effective way to build a trusting relationship with consumers carefully considering purchases in times of economic uncertainty.

While it may seem counterintuitive to some, maintaining a consistent marketing presence in a down economy is a powerful strategy. It’s a time when your business can gain ground while others retreat, build lasting brand equity, and set the stage for recovery and growth once the economy rebounds. Thoughtful planning and strategic action make your marketing efforts shine, even in challenging times.

Remember, downturns don’t last forever, but the benefits of a well-maintained marketing strategy can and will.