Home Articles Marketing wisely in an economic downturn

Marketing wisely in an economic downturn


Historically, the marketing budget is the first to get cut back when companies feel the squeeze. As Darwinian principles take effect, the unprepared marketer can end up on the scrap heap.

In tough times, as well as the good ones, panic is the enemy. With some clear thinking, careful planning and clever spending, it is possible to ride out these times. It is an opportunity to grow your customer base and improve your competitive position in your industry or sector.

The danger of jumping to conclusions

Many people in senior management see an economic downturn as a time to hunker down and try to ride out the storm. Investing in marketing in the current environment should be seen as an opportunity to gain a much greater presence in your market while your competitors retrench.

Let’s focus on a few of the common misconceptions around marketing in tough times.

Misconception #1:
“Customers aren’t spending – advertising and promotions are a waste of money.”

Even if it appears that your customers have disappeared, they are still there. If you choose not to communicate to them, they will forget your brand exists. Companies that increase their marketing activity have the ability to wrestle market share away from their competitors and position themselves for rapid growth once the climate turns.

Misconception #2:
“We have a strong brand. It can survive these times.”

A brand is like someone you know. If that person stops calling or emailing you start to forget about them and, eventually, you drift apart. Putting the effort into remaining ‘front of mind’ will only strengthen the connection a customer has to your brand.

Misconception 3:
“All of our competitors are pulling back advertising and media expenditures to save money, so we should too.”

Being cautious is always prudent. Being timid is disastrous. Going on the offensive while your competition cowers has worked for many of the world’s best-known brands. It is just one more way in which you can differentiate your offering to customers.

Seeing opportunities

Large firms are usually the first to make marketing budget cuts in a downturn. This cycle is no exception. A survey conducted by the marketing research firm Marketing Sherpa suggested that only 13% of small companies have made, or expect to make, a cut. Meanwhile, 60% of large companies are cutting, while 52% of small businesses were in the “no change” category. Mid-sized companies were close behind, with 46% not making any significant budget changes. From this it appears SMEs are better prepared to seize opportunities during recession times.

Clearly, larger firms generally have bigger marketing budgets and, hence, achieve greater dollar value gains from cutting. However, if budgets must be cut, this in itself should be seen as an opportunity. If you do slash the marketing budget, you should in fact see it as an opportunity to be smarter about your spending. Many new and innovative ways exist in reaching and engaging your customers and building brand equity at a lower cost. Branding expert Martin Lindstrom has pointed out that large businesses can often get at least the same effect from half the spending by applying fresh thinking to their marketing tactics.

Direct marketing holds great potential

Direct Marketing generally involves the use of marketing communications to some extent targeted at an individual level and with some form of immediate response built in. Originally, the term was closely tied with Direct Mail, yet the ‘Direct’ category now relates to a wide range of tools aimed at engaging customers individually and facilitating action. Therefore, Direct Marketing holds great potential for so much more than ‘simply’ driving measurable response and revenue. It is recognised as a set of excellent tools for branding. It is possible to brand with direct marketing. In fact, “Direct Branding” now seems a more appropriate term.

This form of marketing is measurable and trackable in terms of ROI. It holds great appeal in any environment, but especially in a downturn. The best marketers always focus on direct tactics during times of budget cuts. Marketers want to be able to document the return on their marketing investments.

Finding ways to build and leverage databases has become more important during this time of economic uncertainty. Retailers in particular should find ways to extend their markets as foot traffic decreases. Using email marketing and assessing the viability of expanding their market through e-commerce should feature high in retailers’ plans. These methods are cost-effective and don’t rely on customer location to generate sales.

Don’t focus on what is easy and familiar. Face the challenges that have the greatest potential of improving sales and brand equity during an upturn.

Consumer markets are feeling the effects more

Studies are showing that B2C marketing is being hit by the downturn much harder than the B2B sector.

B2C marketers need to assess their model. Retailers can reach more customers by utilising e-commerce and search optimisation. They should work on a model where the supplier of these (consulting & creative) services and products accepts some of the risk and receives some of the reward as a way of lowering the cost of a new ‘programme’ and aligning the incentives of their service supplier with the interests and objectives of the client retailer.

A successful programme will keep taking the retailer to its customers and let them know it is thinking about them. It’s always far more cost effective to market to an existing consumer than to acquire a new one.

The marketing material must be aligned with your customers’ needs. If a decent case can be made around the value and specific benefits customers will receive from your products, the battle is half won.

Online marketing tactics are where the money is going

Online media is the only category seeing a significant increase in spending. Marketing Sherpa’s survey showed that 38% of respondents are planning an increase in online spend, while 36% are decreasing traditional media spend.

Accountability and cost appear to be the main factors in this change. ‘Natural search’ and email marketing have seen the greatest jumps in budget allocation for precisely these reasons.

Online events such as webinars are also seeing a lot of activity. The reason for this activity may be because the only cost to the user is time. Cutting transport and accommodation out of the equation makes a lot of sense when it is necessary to stretch budgets as far as they will go.

The online areas that are seeing the greatest cuts are paid search, display ads and email-to-rented lists. While they are highly measurable, they are the most expensive online tactics.

Social networking has matured

Web 2.0, or social networking tactics, have seen an increase because very little in the way of running costs are involved. As a bonus, if a company spends the time updating its blog, commenting on other users’ blogs and answering questions on other social networking sites it will improve their natural search ranking.

Social networking allows marketers to conduct conversations with their customer base, follow trends and accumulate demographic information.

Remember, when it comes to social networking in this environment, your customers will be asking a lot more questions. Make sure you are there to answer them.

Act now

With the economy languishing, it’s time to rethink your approach to marketing. Whether you are gearing up to seize the opportunities in recession times or you aim to get more from your reduced budget. Whatever you do – don’t panic. There are plenty of opportunities in thinking Direct and moving your spend to more cost-effective media or targeting your existing database. Be direct and be heard.

Mark Cameron is the creative director and a partner at Working Three. He has been developing digital strategy for a range of clients for the last eight years. More articles from him are on the Working Three blog.

Photo: Artemfinland (Flickr)