In an uncertain economy, businesses are looking to reduce their costs. To do this, they begin by looking at variable costs, for example, their marketing budget.
Some businesses will look at marketing as an expense, but the better way to look at marketing is as an investment, and reducing your marketing budget in an uncertain economy could provide short-term relief but long-term problems.
Research conducted by The Pipeline exhibited that 40% of the 250 marketers they surveyed were planning to cut back on their marketing spend due to the current cost of living crisis and looming economic decline.
Successful marketing is consistent marketing.
Reducing your budget on marketing is essentially reducing the promotional aspects of your business as well as the connection to your audience. This can be detrimental to your business as you can lose the relationship you have built with your consumers.
Taking care of your consumers is taking care of your business.
In 2020, GSK conducted a survey that found 73% of respondents said that their future purchase of a product depended on how the company presented itself in the current global crisis.
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When businesses make the decision to cut back on their marketing efforts, they will lose their share of market voice. This makes them less competitive in their industry. This provides the opportunity for competitors to take advantage of being in a less competitive position by marketing loudly while their competition is quiet.
An example of this competitive success is the brand Kellogg’s.
Kellogg’s has the market share that it does today because of how the brand reacted to the 1930s recession. Prior to the Great Depression, Kellogg’s was in rivalry with another American cereals manufacturer called Post. Both companies were looking for ways to emerge as the market leader.
When the economy went into a recession during the Great Depression, Post cut its marketing plans. Meanwhile, Kellogg’s tactfully continued their marketing activities and doubled their ad budget.
By 1933, even with the economy still on the decline, Kellogg’s profits had risen by almost 30% and it became the industry’s dominant market leader.
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Research done by McGraw-Hill revealed that in the 1980s recession, businesses that were determined to continue building their brand through advertising grew 256% more than those who reduced their marketing budget.
Whilst it is recommended that marketing efforts resume throughout uncertain times, it is also suggested to take the 3 R’s approach to marketing; rethink, resist and refocus.
Businesses should be mindful of how they are communicating with their audience in difficult times. Advertising in an uncertain economy should consider the challenges that consumers are facing but also answer the question- how can we help?
For example, in 2020, the global brand Coca-Cola showcased the work of frontline workers, reminding its audience that Coca-Cola will always be there and support its consumers. This built a positive brand reputation as it was a comforting message during difficult times but also reminds consumers that the brand is considerate towards current challenges.
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When faced with declining sales figures, businesses get tempted to increase prices in the hopes of maintaining revenues.
Many businesses will increase prices forgetting that their consumers will be more price sensitive during a time of uncertain economy. This could have negative impacts on the business in the long run.
Ultimately this price increase soon leads to a decrease in price due to even more lost sales which businesses try to compensate for by pushing price promotions. Research shows that this back and forth in pricing can make a business lose more market share than those that do not mess with their prices.
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Producing and promoting new products during an economic decline can also be more effective than most people think.
New products released in recessions show higher long-term survival and higher sales revenue. This is because there are fewer new products to compete with and new, innovative products indicate that the economy is on the mend and that consumers will soon be able to afford it.
Research suggests that the best time to release a new product is after the mid-point of a recession when consumers are starting to think about purchasing non-necessities again.
In conclusion, more marketing means a more likely chance of survival through tough and uncertain times. Whilst it seems obvious to cut costs during an economic decline, it could also mean loss of potential revenue, loss of competitive advantage and an increased amount of long-term problems.
If you have any questions about how to optimise your marketing efforts in an uncertain economy, don’t hesitate to get in touch with one of our helpful team members.