3 Reasons Why Small Businesses should NOT Decrease Marketing during a Recession

It has been an interesting couple of weeks and will continue to be.

Given the current state of the world, there are a lot of businesses, large and small that are worried about the coming months and whether they’ll have to shut their doors. It’s the ultimate fear for any business owner, including myself. When your livelihood is at stake against something you can’t see, hear, taste or smell it’s only natural to put in contingencies so that your business can survive.

For many that means cutting back on expenses, possibly slashing stock and asking employees to take leave or reduce work shifts. For tougher times it means more radical measures.

Unfortunately, when we enter such times, the first thing that usually gets cut in business is marketing. Like the COVID-19, marketing is something that you can’t quite explain clearly its total effect on your customer base. It’s tough to measure and to prove its direct correlation (sometimes) with a sale.

So in this post, I’m going to break down reasons why you should maintain or double down on marketing your small business during the tough months ahead.

Marketing is a critical asset, not a business expense

Marketing is also what a lot of businesses mistakenly consider an expense when they should consider it a critical asset.

If you are considering cutting expenses, you need to be strategic, and think what’s going to be best in the long term instead of for just right now. The UK’s Institute of Practitioners of Advertising published in a 2008 report that “Communications, R&D and new product development were all areas where increased expenditure was associated with business success during downturns.” In other words, marketing, product launches and development all helped businesses succeed during economic downturns.

Amazon is a prime (no pun intended) example of keeping product innovation and R&D during a recession and reaping the benefits. In 2009, right smack in the middle of the Global Financial Crisis, the e-commerce giant decided to launch its ebook reader Kindle instead of waiting for better times or scrapping the product altogether. In that year alone, Amazon’s revenue grew by 28% because of the launch, and for the first time ever in the company’s history, ebooks sold more than physical books.

And this would not have been possible without marketing, as marketing includes everything that brings money into a business.

If you cut your marketing budget, irrespective of whether you cut it altogether or simply trim it down, you’ll have a long slippery slope to regain your share of voice and market share in the long term. In the short term things might seem ok, but as the graph shows from Data2Decisions, any trimming of your marketing efforts will hurt your business.

You need to give your business the best possible chance to survive what’s ahead. And considering marketing as something you can do less with or without will do you more harm than good.

Market share and share of voice will be ripe for the taking

You obviously have some competition, and each business will do what they think is best for them in the long or short term.

That means that some will still decide to cut their marketing budget.

And for you, that’s an advantage.

Going dark in brand awareness marketing, or even being seen less in any space allows people to simply forget about you, or worse, think that something is wrong with your business and you’re not doing so well. 

And when your competitors do cut their budgets, there’s the opportunity for you to increase your voice in the market. Nigel Hollis from Millward Brown, one of the premier consumer research institutions explains “companies that increase their marketing investment when most others are cutting back have an opportunity to substantially improve the standing of their brands.” 

The table below from Bluetrain shows this in action. A Recession also makes your customer pool smaller, as people become more budget-conscious. But as your competitors decrease budgets and your pool decreases too, your market share will increase as long as you maintain your marketing efforts.

Kellogg’s did this to Post Cereals during The Great Depression, and to this day it still dominates the cereal market. Post originally dominated the relatively new dry cereal market in the late 1920s, and as soon as The Great Depression hit, retracted most of its advertising and marketing spend. Kellogs’s, who at the time was still a fledgling company, did the exact opposite and doubled their spend. By 1933 Kellogg’s was the new king of cereal. Post has never been able to recover.

Same goes with fast food. During the recession in the early 90s, McDonald’s decreased their budgets, and Pizza Hut and Taco Bell took advantage. While Pizza Hit’s sales exploded by 61%, Taco Bell’s increased by 41% and McDonald’s dropped by 28%.

Looking at an even bigger picture, research going back nearly a century shows companies who maintain or increase they're advertising and marketing spend during economic hardships see an increase in sales growth by 20%, whereas companies who reduce or eliminate their spend decrease by 7%. 

So which side would you rather be on?

The cost of digital ads will decrease

With businesses decreasing their marketing and advertising budgets, that means they will be spending less on digital ads, which again is an advantage for you.

Because that means fewer people are competing for the same type of audience, the same type of ads and in the same industry.

Which means you’ll be getting even more bang for your buck, and ad spending on Google, Facebook etc. will become a buyer’s market for a limited time.

How to rethink your marketing for the times ahead

So hopefully by now you’re convinced not to take metaphorical scissors to your marketing spend. Maybe I’ve even managed to convince you to increase your spend and efforts slightly. 

So what to do next? Here are some tips on what you can do to ride the tide.

Pivot your content to keep customers interested

With a recession or any economic downturn, people naturally get more frugal if they have to. Some will even stop spending on items they deem unnecessary, which unfortunately could be products you provide.

That doesn’t mean you should stop giving them something valuable. If you’re not doing it already, tell your story is a great way to keep them interested. If you’re continuously showing your products in their finished phase, start showing content on how they’re made, or something new you’re working on.

If you have products that can last a long while, give customers content on how to clean or maintain your product, how to fit your products properly, or other uses of your product. It might sound mundane or boring to you, but your customers are not in the thick of your business like you are.

Give your followers love…and lots of it

The travel and hospitality industry is feeling the brunt of the current and upcoming crisis, especially here in Australia. We had the bushfires rip through parts of tourist destinations during peak holiday times a few months ago, and now with the novel COVID-19 businesses are forced to shut due to health and safety concerns, and unfortunately in some cases due to racism and xenophobia. 

So now’s the time to nurture your patrons into ultimate fans, and get them excited about coming back to you when they can. If you’ve had to cancel events due to COVID-19, why not live stream them? If that’s not feasible, make a social media version of the event, such as posting trivia quizzes, getting your staff involved in filming jokes, experimenting with the menu, or showing how your signature dishes are made. In essence, if you make the customer your priority when they’re physically in your location, make them the priority on your digital platforms. You should already be doing this, but now you just might have to do it even more.

Show customers how much other customers love you. Show them your rave reviews, reward customers who give you a good review on Google or Facebook. After all, testimonials are a great form of social proof, proving to prospective customers you’re the best at what you do

And don’t forget to COMMENT. Your most devoted fans will be following you and showing their love, so show it back to them by keeping the conversation going. Show up for them, because they’ll eventually show up for you.

Pivot your offering

Some rules are in place for good reason, but with restrictions comes innovation. So now is the prime time to take a page from Duncan Wardle. Duncan is the former Head of Innovation & Creativity at Disney, so he knows a thing or two about bring imagination to life.

List out the rules, and find a way around them (in a completely legal way of course).

Simply saying “no we can’t” isn’t a solution.

When the original Fantasia film was released, Walt Disney wanted smoke machines and pyrotechnics in theatres, so that moviegoers could immerse themselves in the film. Of course, his team said it was impossible and too expensive. Instead of giving up, he thought how to create a real experience for the film and Disney characters, which led to a 3D experience, which during that time meant actors. But then how to keep Cinderella separate from Snow White? Or Davey Crockett? The solution was a little idea called Disneyland.

So if customers can’t get to you, then how can you get to them? Maybe it’s time to think of curbside pick up, drive-thru or home delivery. Maybe it’s time to build that e-commerce store you’ve always thought about. 

We have tough times ahead, but it is also a time for opportunity. If you have questions, need some professional advice, feel free to get in touch using the button below.