Earlier this year when reports started swirling about the troubled Canadian economy, Alberta businesses began bracing themselves for the possibility of a recession. Some reacted faster than others with a handful of businesses preemptively laying off staff and cutting non-essential expenditures. And given that oil prices continued to falter this summer even the most optimistic economists began seeing clouds.

As someone that meets with multiple companies weekly, it is my experience that when facing a recession the first thing that business owners usually do is cut marketing costs which, in many cases, can prove to be a major strategic misstep.

An uncommon opinion

Before I dive into what I admit is a fairly uncommon opinion to hold during an economic downturn, let me first state that I realize that many, many Alberta businesses are facing some really tough choices right now. I’d also like to add that there are industries for which this argument may not apply, such as high-end luxury goods, for example. Lastly, I want to be clear that I am not an economist and what I am suggesting is not a “solution” but simply a different way to frame a fairly old problem.

A question of cost

Now that I’ve gotten my disclaimer out of the way… on to the crux of the problem:

“How do I keep my business afloat and operating at pre-recession levels when the market is shrinking and leads are drying up?”

When sales are down and the recession-mindset has begun to set in, everything becomes a question of cost. And I get that. Really, I do. Cutting marketing budget is a lot easier than laying people off who you know have families to feed.

The only problem is, cutting marketing can be a bad business decision. Here’s why: if your pool of customers has shrunk due to an economic downturn, you simply cannot afford to forgo communication with the customers that are still in your pool.

The other side of the coin is that your competitors will likely be reducing marketing, improving your chances of increasing your market share.

I realize this may seem risky, perhaps even nuts, to maintain marketing spend (or potentially increase it), but remember that you may be able to get more bang for your buck with that same marketing dollar.

A Stronger Voice in a Smaller Market

Let’s create a really simple example for a moment; imagine the circle on the left represents your business’s pool of potential customers during a healthy economy, and the circle on the right represents your pool of customers during a recession.
During a recession, it’s inevitable, your pool of potential customers is likely going to shrink. Period. However, instead of cutting marketing, as your competitors are likely to do, why not maintain or even increase marketing so that you can maintain, and even increase, your share of the available market? Your marketing efforts will now become much more noticeable due to the reduction in noise from competition.

Recession Economy

How to Market in a Recession

As everything in business, there is risk in taking this approach as there is no guarantee just because you maintain (or increase) your marketing spend that your campaign message will resonate with the market. It is also essential to take the time to do proper market research and understand how customers are acting during this downturn and what they now value most.

John Quelch provided some excellent marketing adjustment considerations in his 2008 How to Market in a Recession article for Harvard Business Review, which I’ll summarize in short below.

  • Research the customer – need to know how customers are now defining value
  • Focus on family values – during hard times, we tend to retreat to our family/community
  • Maintain spending – (as we’ve suggested above)
  • Adjust product offering – customers may now favour lower-end models with fewer features
  • Support distributors – Motivate and strengthen existing relationships, drop weak distributors
  • Adjust pricing tactics – assess pricing and promotions to gain customer support
  • Focus on market share – know your cost structure to take advantage of market consolidation
  • Emphasize core values – build employee loyalty by staying the course on core values

 

Be Bold

In summary, it’s important to acknowledge that in an economic downturn marketing programs need to change to better match the new market reality. However, that doesn’t necessarily mean marketing spend should be cut to better ride out the recession. In fact, you could be exacerbating the problem by not first assessing whether you can feasibly maintain or increase marketing spend.

So when your management team meets to discuss various measures for getting through the recession, be bold and share this new perspective. Take the opportunity to be a stronger voice in your market and measure what happens to your market share. It will be a case-by-case decision, as not every market category will have the right conditions, but it’s your obligation as a marketer to employ every opportunity to sustain and grow.

2 thoughts on “Why You Should Keep Marketing During a Recession (Especially If Your Competitors Aren’t!)

  1. Great post Bryan, and while the companies ‘selling advertising’ may seem biased, the logic is sound. During these “tough” economic times, those that continue to invest in their brand, can actually grow their business more during a recession than they can in the boom because as demonstrated by the chart, the same advertising spend yields better results because they have less competitors.

    1. Thanks Andrew. Yes, I realize most people may take it with a grain of salt coming from an agency. However, I too often see management teams looking at their financials and cutting variable costs without considering the ROI on that marketing spend. For example, if an advertising campaign is clearly providing ROI based on analytics fact, why would that be cut or turned off? Anyway, my goal was to simply make people think about what they could be missing as an opportunity.

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