Why Scaling Back Marketing in Hard Times is a Costly Mistake
One day, your business is cruising along smoothly, when BAM – the economy takes a nosedive.
Your first instinct might be to batten down the hatches, cut costs wherever you can, and ride out the storm.
Marketing, with its oft-seemingly-intangible returns, often becomes the first budget line to get the axe.
At first glance, this seems like common sense. Sacrifices must be made somewhere, and the short-term effects of scaling back marketing seem comparatively minimal.
But like a lot of things, once you scratch beneath the surface, you’ll find that there’s more nuance to this decision than it first appears.
Marketing as we know it – not just as the concept of promoting goods and services, but as a formalized discipline – has been around since before the Great Depression. According to the history of marketing, since then, it’s been around for plenty more difficult economic times: the 1970s Stagflation, the recession of the early 1980s, the Great Recession that peaked in 2008, and the brief but gruelling disruption of the COVID-19 pandemic.
And what we see, time and time again, is that when the going gets tough, marketing isn’t a luxury – it’s your business’s lifeline.
To put it simply, cutting marketing in a downturn is like switching off your headlights on a winding road. You might save a bit on gas, but you’re also setting yourself up for a potentially serious crash.
On the other hand, there are surprising ways that maintaining (or even increasing) your marketing efforts can not only help your business survive a recession, but thrive in the aftermath.
Let’s explain.
In case you missed it, TrafficSoda has joined forces with REM Web Solutions to bring you even more comprehensive digital marketing expertise. Check out REM’s Small Business Blog for more useful marketing resources or get in touch today for a free consult.
1. Customer Psychology Shifts in a Downturn
The conventional wisdom is this: “We’re hurting. So are our customers. So why waste money trying to convince them to buy stuff they can’t afford?”
Fair point. But what’s really going on in your customers’ minds during a recession isn’t quite that simple.
Research shows it’s not as cut-and-dry as, “less money = less spending.” Sure, people are watching their bank accounts more closely, but their desires and needs don’t disappear overnight.
In fact, when the economy gets shaky, consumers become more emotionally invested in their purchases. They’re not just buying products or services – they’re seeking reassurance, stability, and a sense of control.
During tough times, people tend to gravitate towards familiar brands or products during tough times. That’s because consistency fosters trust. Studies have shown that customers who have a strong emotional connection to a brand are more likely to stick with it through thick and thin.
When a company continues to market itself during a downturn, it sends a powerful message: “We’re here for the long haul. We believe in our products, and we believe in you.”
On the flip side, disappearing from the scene can be disastrous for your brand image. When consumers see a company scaling back on marketing, they might start to wonder, “Are they struggling? Are they going out of business? Should I even be buying from them?”
When you slash your marketing budget, you’re not just cutting costs. You’re potentially severing ties with your most asset – your loyal customers.
2. Your Competitors’ Retreat Is Your Marketing Opportunity
When the economy takes a downturn, it’s not just consumers who change their behavior – your competitors do too.
Many businesses make the knee-jerk reaction to cut marketing budgets, figuring it’s an easy way to save money. We’ve already touched on the dangers of this.
But here’s where the savvy business owner can make a power move. While your competitors are retreating, you have a golden opportunity to step up and claim some of their market share. Every dollar they cut from their marketing budget is a dollar you can use to amplify your voice, reach new customers, and solidify your brand’s presence.
To give a real-world example, that’s exactly what Kellogg’s did during the Great Depression.
While most cereal companies were slashing their advertising budgets, Kellogg’s boldly doubled theirs. They launched radio ads, introduced new products like Rice Krispies, and relentlessly promoted the nutritional value of cereal, positioning themselves as a reliable source of sustenance during tough times.
The result? A 30% increase in profits during the Depression, while their competitors struggled to stay afloat.
Even in recent economic downturns, companies like Amazon and Apple thrived by maintaining (and even increasing) their marketing investments. They understood that a recession isn’t just a threat, but a chance to gain a competitive edge.
Studies have shown that the cost of marketing in a recession drops due to decreased competition. This means your marketing dollars can go further, giving you a higher return on investment.
So, while your competitors are busy hunkering down, you can be out there building brand awareness, generating leads, and positioning yourself for a major rebound when the economy recovers.
3. Your Brand’s Reputation Is Worth Playing the Long Game
Okay, let’s say you’re still skeptical. Maybe you’re thinking, “Alright, I get it. Marketing is important, but when times are tough, I need to focus on the bottom line. Can’t I just ramp things back up when the economy gets better?”
Not so fast.
Think of your brand like a tree. You can prune a few branches to save resources in the short term, but if you cut back too much, you risk stunting its growth and weakening its foundation.
Marketing isn’t just about driving immediate sales. It’s also about nurturing a long-term relationship with your customers.
Brand equity – that all-important mix of awareness, loyalty, and reputation – is the fruit of your marketing labour. It’s what makes your brand more than just a name or a logo. It’s what makes people choose your product over the competitor’s, even if it costs a bit more.
Brand equity isn’t built overnight. It’s the result of consistent, sustained effort over time.
Think about your favourite brands – the ones you automatically turn to when you need something. How long have they been around? How often do you see their ads, hear their jingles, or interact with their social media?
Now, imagine if they suddenly went silent. What would happen to your perception of them? Would you still feel the same way?
Scaling back on marketing during a recession is a risky move. Sure, you might survive, but you won’t thrive. And when you make it out the other side, it’ll take a lot longer to recover than if you had continued to market and nurture brand equity.
There are plenty of cautionary tales out there:
- General Motors significantly reduced its advertising budget during the 2008 recession, hoping to cut costs. This led to a decline in brand awareness and sales, while competitors like Hyundai and Kia, who maintained their marketing efforts, gained market share. GM eventually filed for bankruptcy, and though they recovered, the brand suffered lasting damage.
- Starbucks temporarily closed hundreds of stores and reduced marketing in the recession. This move alienated customers and led to a decline in sales and brand perception. Starbucks eventually recovered by refocusing on customer experience and innovation, but it took time and effort to rebuild their reputation.
- While not solely due to recession cutbacks, Blackberry’s decline was exacerbated by their failure to adapt and invest in marketing when the smartphone market shifted post-2008. They didn’t effectively communicate their value proposition against newer competitors like Apple and Samsung, leading to a loss of market share and relevance.
Brands that slash their marketing budgets during previous downturns often struggle to regain their footing when the economy bounced back. Some even fade into obscurity. Why? Because they lost touch with their customers, their brand awareness dwindled, and their competitors swooped in to fill the void.
So, while it might be tempting to seek short-term savings by cutting back, think about the long-term cost. Your brand’s reputation is worth far more than a quick buck.
4. It’s Not About Spending More, It’s About Spending Smarter
We’re not going to sugarcoat it: marketing in a recession requires a bit of a balancing act. You want to keep your brand in the spotlight without breaking the bank.
The good news is, you don’t have to choose between staying visible and staying profitable. It’s all about adapting your strategy to the new economic reality.
During a recession, it’s time to ditch the flashy tactics and opt for a more practical, value-driven approach. What does that look like in practice?
- Emphasize Value: Instead of focusing on aspirational messaging, highlight how your product or service can help customers save money, reduce stress, or improve their lives in tangible ways.
- Double Down on Loyalty: Your existing customers are your most valuable asset. Offer them special deals, exclusive content, or personalized experiences to show you appreciate their business.
- Get Creative with Content: Don’t just talk about your products; offer valuable insights, advice, or entertainment that resonates with your target audience.
- Embrace Digital: Digital marketing channels are often more cost-effective than traditional advertising. Explore social media, email marketing, and SEO to reach your customers where they’re spending their time.
Take Ford, for example. During the Great Recession, they launched the Drive One campaign, which invited potential customers to test drive their vehicles with no obligation to buy. This low-pressure approach resonated with consumers who were feeling cautious about spending money.
Or consider P&G, who during the 2008 recession shifted their focus to promoting the value and affordability of their everyday products. This resonated with consumers who were looking for ways to cut costs without sacrificing quality.
The key takeaway? Marketing during a recession isn’t about throwing money at the problem – it’s about being smart, adaptable, and customer-focused.
Rethink Scaling Back Marketing
Recessions are like uncharted waters. It’s easy to get swept up in the panic, to focus on the immediate threats, and to forget about the long-term destination.
But remember, a ship without a course is at the mercy of the storm. Your marketing strategy is that course – it’s what will guide you through the rough seas and lead you to calmer waters.
Don’t make the costly mistake of abandoning your marketing efforts when you need them most. Instead, embrace the challenge, adapt your approach, and seize the opportunities that a downturn presents.