Continue Marketing During an Economic Downturn or Lose 15% Market Share (and Other Reasons Not to Cut Budgets)

With all of the fearmongering about a recession, companies are making knee-jerk decisions to amputate their vital marketing efforts in order to conserve and redirect cash flow. However, history has taught us that this isn’t the wisest course of action for brands, and that it can result in higher market share recovery costs than the cost to continually maintain efforts. The deleterious impact is something marketers should avoid.

Increasing or maintaining ad spend during a recession and afterwards resulted in higher sales and market share.¹ In fact, 60% of brands increasing media investment in the last recession saw an even greater ROI, and brands that specifically invested in paid advertising enjoyed a 17% increase in incremental sales.² A point that may be even more important for brands to understand is that 15% of their business is typically lost to competitors when marketing spend is cut.²

Economic downturns cull the crowds and allow consistent marketers to take advantage of boosted visibility and a higher ROI.² In other words, when other brands go dark, it’s your turn to shine and win over new customers. Losing that continuous flow of long-tail brand advertising ROI means that your renewed (and more costly) efforts will only bring back some of the ROI that’s associated with short-term advertising initially; like an SEO campaign, the long-term ROI won’t show returns for at least half a year.

Research has shown that the right strategy and innovation can spell the difference in success or failure during economic downturn.³ So, rather than stunting your strategies, our team of marketing strategists at BrandMuscle recommend shifting gears to focus on marketing lower-cost products, to target tactically at a device level to spend budget conservatively, and to time campaigns to flight when tax return checks are flowing so customers are buying. Meta published additional techniques to help brands grow in spite of economic downturn, including: account structure simplification, creative diversification, API conversion verification, ROI validation, and partnering with content creators.⁴

Looking for case studies to convince your brand not to cut marketing spend? Here are a few examples to make your case:

• Kantar ran an A-B test on a beer brand and found that cutting all marketing spend resulted in a 13% drop in long-term sales, whereas dropping spend by only 50% resulted in just a 1% decline in long-term sales.⁵
• McGraw-Hill Research studied 600 companies across 16 industries between the 1980-1985 recession and found that brands that maintained or increased advertising averaged significantly higher sales growth during the recession and in the three years following it. By 1985, brands that did aggressive advertising during the recession had grown sales by 256% compared to those that didn’t maintain advertising.⁶
• During the 1990-1991 recession, McDonald’s dropped advertising and promotions, and Pizza Hut and Taco Bell took advantage of the opening to seize market share. Pizza Hut was able to increase sales by 61%, Taco Bell grew by 40%, and McDonald’s declined by 28%.⁷
• During the 2009 recession, Amazon grew sales by 28% by introducing new products as a lower-cost alternative for cost-sensitive customers.⁷

Ready to adjust your marketing strategy for the economic downturn? BrandMuscle is here to help. Contact us to learn more.