A long time ago, at a university not too far away, I had a public relations professor that said in an economic downturn, one of the worst choices a business could make was to drop their advertising and marketing.
Today, against the backdrop of the COVID-19 pandemic and its social distancing guidelines, I couldn’t agree more because as a consumer, I have no idea how most companies have responded to this crisis.
For example, several times during the past few months, my wife and I have discussed if we should order dinner from some of our favorite restaurants. But we keep coming up against the same question: Are they even open? So we check their website and their social media. If we don’t find an answer online, we call them. But let’s be honest, in today’s culture of providing exceptional customer experiences, that’s a lot of work on the part of us, the consumers. Wouldn’t it be easier if we already knew the answer?
This is why marketing in an economic downturn is critical to the success of your business. But everything I’ve told you so far is just anecdotal. Luckily, there are some folks out there that specifically study this sort of thing.
In a 2015 study by the International Journal of Business and Social Science, they tracked 1000 U.S. and European companies during a recession, recording their marketing and financial data. Each firm fell into one of three categories:
- Those that cut their marketing in the downturn;
- Those that maintained their marketing in the downturn;
- And those that increased the marketing in the downturn.
When the recession ended and the economy recovered, what they found was on average:
- Those that cut their marketing had a profit loss of 0.8%;
- Those that maintained their marketing had a profit increase of 0.6%;
- And those that increased their marketing had a profit increase of 4.3%.
Those numbers weren’t just single quarter changes, either. Those trends continued through the first two years following the recovery.
The reason this happens is because during an economic downturn, consumers become cautious. They need reassurance you’re still in operation and you’re still offering the same level of quality that made them a customer in the first place. If you go radio silent, consumers will wonder about your current stability and potentially move on to another company that they know is open for business.
Consider these two specific case studies…
During the Great Depression, Post was the industry leader in the breakfast cereal market. Due to the economic downturn, they significantly reduced their advertising budget. Instead of following suit, their rival, Kellogg’s, doubled their advertising budget. Kellogg’s profits grew by 30% and they became the new industry leader, a position they still hold to this day.
McDonald’s is one of the most popular brands on the planet. However, during the 1990-1991 recession, they opted to drop their advertising and promotion budget. While their sales declined by 28%, Pizza Hut and Taco Bell went in the opposite direction, increasing their marketing budget and profiting from sales increases of 61% and 40%, respectively.
To make sure you’re keeping your business first and foremost in the minds of your customers, here are some steps to follow to stay relevant during this current recession:
During a recession, you can follow certain steps to ensure you are relevant in the market and to your customers.
- Increase your marketing, advertising and promotion. This will show company stability and increase your market voice – especially if your competition decreases their marketing.
- Develop a strategic marketing plan that puts the right message in front of your target audience. It should reassure them that you are still in operation and what you’re doing to help them.
- Spend time with your most loyal customers. Let them know how important they are to you and what you’re doing to take care of them specifically.
- Don’t decrease the quality of your advertising. Customers will notice the drop in quality and wonder if the same drop is occurring in your product.
- Focus your messaging strategies on how your product or service can help your customers during this difficult time.
To learn more, drop us a line. We’re available and we’d love to help. Remember, we’re always stronger together.