It seems we’ve just gotten out of the confusion and the abrupt changes caused by the pandemic, but here we are, gearing up for a potential pending recession. The looming “recession” has been widely discussed since the pandemic began. And we did have a little preview; we had what was dubbed the “COVID recession.” One of the shortest ones in United States history, lasting only two months. And now, many economists and entrepreneurs believe we’re at a point where a recession is inevitable. Businesses and individuals are preparing and setting up systems to survive and thrive in the coming months or years.
During times of a recession, people are understandably much stricter with their budgets and spending habits. Similarly, companies have to tighten the strings of their metaphorical wallets and cut some costs.
One might think that marketing is one of the costs that could and should be cut down. But that couldn’t be more wrong!
Marketing should be an indispensable part of your long-term strategy. But how do you work it in with the necessary changes needed to cope with a recession and what comes after?
Before we continue, it’s important to emphasize that we are, as of now, NOT IN A RECESSION. Experts have and are still debating on whether or not a recession will come, and, really, only time will tell.
This post will discuss what to do during a recession and some important things to remember. But first, let’s look at a brief history of marketing in past recessions.
MARKETING DURING RECESSIONS
First, what is a recession? A recession is characterized by a downturn in economic activity. While the most common indicators would be two consecutive quarters of negative GDP, other factors, such as employment rate, industrial production, and retail sales are also considered.
The term “recession” is scary. It may be the flashbacks from the Great Depression, which lasted 10 whole years (1929-1939), or the relatively recent 2008 one, which lasted 18 months. Whatever it is, recessions have historically been difficult times, and we are very wary of the term, and rightly so. And while it is scary, our understanding of what a recession looks like can be very different from what it actually looks like. You might be surprised to know that the Great Depression was not one continuous, no-rest recession but rather an unfortunate consequence of two recessions happening closely within one another.
Throughout human history, we’ve learned that while times may be tough, it also brings about new opportunities and a chance to re-evaluate our current systems. Similar to businesses during economic downswings. Companies buckled down, re-arranged, and made key changes to ensure that they weathered the recession and came out of it bigger than they were before. With all the recessions we’ve managed to survive so far, you’d think we’d have systems locked and loaded, ready to be fired at a hint of a recession. However, the truth is no two recessions are the same. However, it still pays off in the long run to study how companies reacted and helped their companies stay afloat during past recessions.
Cutting the budget on systems or company processes that do not directly result in an increase in income would be an understandable knee-jerk reaction. For example, a company might question the importance of spending money on lead generation when they don’t directly equate to an immediate income. Or cutting back costs on marketing, which are usually sizeable.
However, the past performance of certain companies during recessions actually shows the opposite. Case in point: Kellogg. Yes, one of your favorite cereal brands. Kellogg is one of the leading brands in its field today. However, before the Great Depression, the brand Top was leading. Unfortunately, when the recession hit, they majorly cut back on their marketing spend. In contrast, Kellogg, seeing the opportunity, doubled down on its marketing efforts. Despite a recession, they actually managed to increase their revenue by 30%.
What to do during a recession
Knowing that companies have managed to survive, even increase during recessions, is all well and good. But it doesn’t take away the anxiety of managing a business during economically hard periods. Take a deep breath, put your head down, and do the following:
Do Not Stop Advertising/Marketing
When less money is coming in, companies often react by making sure less money comes out. While it may seem like the opposite, companies have actually seen an increase in profit by 4.3% compared to those who cut their advertising budgets which had increased profits by 0.8%. Just imagine advertising when no one else is. There will be a lot less competition and a greater chance to place your brand in front of consumers. Think of it this way: marketing is a necessity, maybe not as friendly to your current budget restrictions, but for your recovery. In such times, it’s important to focus on the long-term rather than the short.
Evaluate the status quo
Acting fast is necessary to survive and even thrive in a recession. The first order of business should be to evaluate the status quo. While these systems may have worked, a recession calls for certain changes in priority and unfortunately, cutting off some. Some questions you can ask yourself are:
Are executives trained enough to navigate trends?
This question might be better answered preemptively. It’s important to make sure that your executives are always well-equipped to face problems that may come, like a recession. In-house marketing executives, who have been in their positions for some time and in the same environment, often fail to make sure they’re knowledgeable about new trends and navigating new platforms. The company needs to provide adequate training. (Tip: You could enlist the help of a marketing agency )
What are the systems currently in place?
The systems currently in place might not make the cut or may not even be totally necessary during a recession. Aside from saving money, it’s also important to make sure you don’t expend energy and resources in systems that are not working. At least for the time being.
For example, evaluate your product line. Which products require a lot of labor but have low profit margins? You might have to stop producing these products in favor of products that perform better. Or, are there jobs that could be handled by one person instead of two? Can an existing but non-essential employee’s talents be better utilized in another department? On that note, while lay-offs are not ideal, sometimes it’s a necessary evil.
Assess your tech stack.
During times when the company is making a decent amount of money and an impending downturn in consumer spending is not looming over, it’s easy to just let whatever system is working continue to run. Your tech stack, for example, can be easily overlooked. You might not even notice you’re paying for tools that provide the same service that another tool also have. When you’re looking to cut costs, your tech stack might be a good place. Ask yourself these questions:
- Are there any tools with duplicate services?
- If so, which tool provides more service and can cater multiple department needs?
- Can doing away with the tool actually save you some money or are you sacrificing some marketing outcomes?
Lean Into Analytics
Assessing numbers and ensuring objectivity is more important than ever. Gut feelings are important but, at a time crunch and when decisions need to be made and made fast, analyzing your numbers will help you a lot. Lean into KPIs that indicate good performance, evaluate what’s working and what’s not. Aside from that, your analytics can help you adjust your goals to become more realistic, fitting the recession. Identify which is giving your company adequate return on your investments, and scrap the ones that just aren’t working. This way, you not only save resources from ineffective campaigns but transfer the resources to campaigns that work.
Test & Iterate New Approaches, Strategies, and ideas
You might think: Isn’t it too risky to try something new during such a stressful period? On the contrary, extraordinary times call for extraordinary measures. Let’s not forget that, often, human beings are able to find light in seemingly hopeless situations and turn them into opportunities. Just look at the delivery industry. At a time when people are anxious, in doubt, and the economy is at risk, the industry has managed to grow a staggering 96%! They adapted with the times, adopted regulations that fit the needs of the pandemic, and even catered to local businesses more than ever before.
Another case study worth discussing at this point is the performance of fast-food companies, Pizza Hut, Taco Bell and McDonalds during the early 1990s recession. Pizza Hut and Taco Bell had their revenues increase by 61% and 40% respectively. In contrast, McDonald’s dropped 28%. The disparity in the results is a combination of McDonald’s making the mistake of cutting their marketing budget and the other two chains innovating their product line. They pushed budget-friendly items such as stuffed crusts and value menus. This just goes to show that in a recession, freezing up and stubbornly sticking to what worked in the past, when there was no recession threatening the company, is not going to work.
Be Flexible
Recessions means instability and, in turn, instability requires companies to be able to be flexible and nimble enough to pivot. Forget the one-year plan your team made in the beginning of the year. Instead, make shorter-term and more realistic plans to enable you to react immediately to different situations without upending a whole year’s worth of planning. Start with monthly, or in more extreme cases, even weekly plans.
Go Back to Basics
Eliminating your marketing budget is out of the question. But, if push comes to shove, lowering your marketing budget might mean going back to the basics of marketing. You might not be able to afford an influencer or celebrity endorsement, but you can make organic social media posts. Engage your current audience and make sure you don’t lose sight of what’s already there. Make content and build trust. Double down on your email marketing. Your email list is most likely composed of customers that you’ve built a relationship with. That relationship and their loyalty will help you get through the recession. Don’t be scared to get personal! Remind them you’re there, send them vouchers and discounts and that you’ll get through these trying periods together. Join groups on different social media platforms, or, participate in your community. Going back to building real relationships with your customers or potential customers will benefit your company in the long run.
Set Yourself Up For The Upswing
Dealing with the curveballs of a recession is very tiring and requires a lot of strategizing and finesse. However, it’s also important that you don’t lose sight of your long-term goals. Positioning yourself for an economic upswing is vital. While surviving is, as of the moment, the most pressing concern, thriving is the ultimate goal. Marketing is especially important with this goal. Eliminating or significantly cutting your marketing budget would set you back when the economy inevitably recovers.
What to Remember
When in a recession, or in the threat of one, don’t panic! Things might look bleak, but they will get better. These are things to remember:
Recessions are not forever
The 20th and 21st centuries have seen a total of 15 recessions, the Great Depression being the worst of them. As mentioned, the Great Depression was a result of 2 back to back recessions. It lasted for approximately 10 years. The worst recession in the 21st century was the 2020 recession, which saw a whopping 31.4% downturn in the second quarter of 2022. However, it’s important to note that within the next quarter, the economy had an impressive increase of 33.4%. For the 2008 US recession, a global depression was averted through a program proposed by former President Obama. For the Great Depression, the recovery was long and slow, we practically crawled our way out of that one but the point remains: we got out. No matter how bleak the current situation is, you need to remember that everything passes. When the recession does come, we will do as we’ve always done: put our heads down and work as hard as we can until we see the light yet again.
Be wise with your budgets
The most significant changes you will make in a recession will probably be concerned with your budgets. Money will be tight, and we don’t know when the recession will end, but we can’t just not spend.
Making the right budget cut
Unfortunately, marketing budgets are often victims of budget cuts during recessions. But that’s not gonna help! When competitors are hardly advertising, advertising costs are cheaper, and the customers are looking for the next best option, advertising is more important than ever. With that said, you can make budget cuts in redundant processes, tools, and even manpower in the company. Analyze each and every investment and see if it does give you a return. If it doesn’t, make the cut and look forward.
Marketing costs during a recession
While eliminating your marketing budget is a no-go, you might need to decrease it if push comes to shove. However, this is where creativity and thinking out of the box come into play. You can enlist the help of a marketing agency! These agencies can help you strategize to maximize your budgets and deliver satisfactory results. Marketing agencies are experts in the industry and their input will also help lessen the processes you need to do in-house.
Stay calm and steady
Keeping a cool head on your shoulders will never be as important as it is during a crisis. Stay calm and steady. Assess the situation and learn what can be done considering the circumstances. Analyze your numbers and make informed objective decisions.
With recessions comes uncertainty and panic, which unfortunately often result in unwise instinctive reactions. Companies going bankrupt or performing alarmingly low is a real reality in times of downswings. However, you need to act fast but act wisely. Don’t let a relatively short period of time ruin your business. Cater to your customers, study your numbers, and be flexible. Most importantly, know that the recession will end and remember that, even in recessions, there’s always the opportunity to not just survive, but thrive.
