It was a good ride for many people. The stock market reached all-time highs, business was booming, consumer spending was driving a consumption economy, and inflation was under control. Significant tax cuts, reduced regulation, and low energy costs helped fuel what seemed like an unstoppable American economy. Then warning signs from China showed a looming threat, and in March of 2020, the brakes were slammed, and the economy came to a screeching halt. An economic downturn hit world economies with blazingly fast speed.
Suddenly, businesses were forced to close their retail outlets, office workers were sent home to work remotely, and millions were laid off or furloughed. State unemployment systems were overwhelmed with new claims, and the federal government was forced to pay out stimulus to individuals and loans to businesses to stop an all-out economic collapse. We went from prosperity to uncertainty almost overnight. To say that we’re in uncharted waters would be an understatement. And we’re not alone, the pandemic of COVID-19 has impacted every corner of the world.
Whether the timing is right or not, the pressure is building to get businesses reopened and people back to work. Everyone knows things can’t stay closed forever, and the pressure on company viability and individual’s ability to pay their bills is forcing the economy to open whether we’re fully ready or not. It’s unclear how this work or even if it will work, but the reality is that businesses need to be thinking about what it means to reopen and what business will look like under a new set of realities.
As businesses look to reopen or ramp up their sales efforts, there will be a temptation to cut back on expenses. For many companies, marketing can be a tempting target for cost-cutting, but research has shown that this would be a mistake. According to studies by the Harvard Business Review, it is recommended that companies continue marketing spend during an economic downturn. There is clear evidence showing the benefits of reworking plans and executing thoughtful marketing campaigns. While it’s wise to be cautious as the economy comes back to life, cutting out marketing spend would leave a company at a disadvantage.
Marketing Still Drives Revenue
An economic downturn may be the best opportunity for your business to stand out. In a thriving economy, companies find it easy to fund marketing budgets. Sentiment is high, businesses are making money, inflation is low, and the job market is robust. In a downturn, companies tend to retreat both because of uncertainty and to save money. But this is where the opportunity emerges. As companies reduce advertising spend, marketing campaigns, and brand awareness efforts, businesses have a chance to gain market share and increase awareness of their brand in the marketplace.
To be clear, I’m not suggesting you push ahead with your pre-pandemic marketing plans and spend. The world has drastically changed, and plans made before the pandemic need to be reworked for new realities. You need to spend wisely. In good market conditions, marginally effective tactics may be worthwhile as part of a larger plan. But when money is tight, and the effectiveness of existing tactics in this new environment is unclear, you need to proceed cautiously and allow room in your plan for experimentation to see what works and what doesn’t.
It’s also essential to continue to show empathy in your marketing efforts and an understanding that businesses and consumers are struggling. Now is not the time to go after big sales or large deals. Start small, show customers that you care, and are trying to add value to help them ramp up their efforts. Being tone-deaf in this kind of environment can be costly, but it’s essential to be seen.
Build Brand Awareness
While achieving a return on your investment while marketing during a downturn is critically important, don’t forget about brand awareness. During a recession, companies with strong brand loyalty will see significantly less customer attrition than those that are seen as a commodity.
In a harsh economic climate, it can be tempting to chase customers you don’t serve by moving away from your target persona or going downstream. It may be tempting to go after quick wins, but it could cause lasting damage to a reputation you’ve spent years to build. Your customer base will continue to look to your company for the same things they have previously. Customers want consistency and expect your brand to be empathetic and understanding of the current environment while continuing to uphold brand values you’ve worked so hard to espouse.
Buying Patterns Have Changed So Know Your New Buyer
As the economy reopens, it’s unclear exactly to what extent buying patterns will change. Some analysts predict things will quickly return to normal as there is pent up demand. Others see the staggering unemployment, social distancing measures, and overall economic uncertainty as potentially throttling back the speed of a recovery. As States start to open, we’ll need to see some new data before making judgments, but in general, when the economy goes into a downturn, buyers broadly fall into five main categories:
- Stopped – there’s a significant pullback on spending and a focus on only what’s deemed essential
- Cautious – purchasing is scaled back and mostly focused on essential items but to a lesser degree
- Comfortable – no significant changes to spending but may forgo large purchases or niceties. This group isn’t in pain but is aware of what’s happening.
- Unaffected - no changes to behavior or spending. For them, it’s business and spending as usual.
- Positivity Affected – this downturn has provided this group with a unique opportunity, and because of this, they are accelerating their spending and activity in the market for products.
Begin by understanding where your customers and prospects fall on that spectrum. Are they going to change their spending immediately and drastically, or will their purchasing habits remain the same or increase? The answer to this question should impact how to focus your marketing efforts in this economic downturn.
Although it’s essential not to commoditize your brand, recognizing that spending will be reduced may incentivize companies to consider new options. It could be promotional periods, add-ons, financing, or other things that enhance the value of your offering while not diminishing the brand. Branding becomes even more important during this time as you consider how these changes will live on in better economic times or be slowly phased out as the market improves. Being transparent with customers is essential so they understand when promotions or offers will be phased out.
In the best economic times, many marketing tactics can produce positive results. Bigger budgets allow for more experimentation and less focus on the ROI of every tactic. What happens when that changes, and suddenly you’re in an economic downturn? Have you built your marketing infrastructure to give you concrete, actionable information you can take to develop better strategies and more effective marketing campaigns? Have you built enough brand value and trust that it can survive restricted spending by your core customers?
It’s an exciting time to be a marketer because the lessons you learn during a downturn are going to pay off when the market recovers and people start spending again. Let marketing principles guide your strategies and budget decisions, regardless of the market conditions.
Research has clearly shown that marketing is even more important during a downturn. It’s an opportunity for you to reevaluate where you spend your time and money and to set your company up for long-term success.
Resources to Restart Business
The economy will start opening soon. Our goal is to help businesses navigate this unprecedented disruption and prepare for the unique opportunity that awaits in an economic recovery. It's time to restart your business!