Marketing in a recession — 8 important lessons from the last 73-years

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TLDR: Marketing in a recession is essential

1. No recession lasts forever
2. Keep calm and carry on marketing. This recession brings nothing nothing new, though for marketers born in the late 80s / early 90s it will bring new marketing experiences
3. Especially don’t stop brand building in a recession
4. Brands that do stop marketing in a recession end up losing market share
5. Brands that continue brand building during a recession grow faster and more profitably in subsequent years

Read on to learn more about what the last 73-years have taught us about the importance of continuing to market in a recession.

Why you should keep marketing in a recession

Are we in a recession? Should we continue marketing activities if we are? Should we really be looking to cut marketing budgets right now? Theres’s a lot of uncertainty among marketers and CEOs about the current recession and how to market in it.

I agree that there is no consensus that we are in a recession. Some economists will say that we haven’t had three consecutive quarters of declining GDP. Others will say that we have, it all depends on how you measure GDP. Still others will claim that GDP is no way to measure the health of an economy. But that’s economists for you; if you put three in a room you’ll get five unprovable theories.

The marketing reality is that ‘official’ recession or not, B2B marketers are seeing declining sales, lengthening sales cycles, smaller orders and increased pressure from stakeholders for “sales, now please, at any cost”. They are also seeing colleagues losing their jobs and budgets being trimmed. So whether you believe this is a real recession or not, here we are, yet again, in familiar times for those with a few years marketing experience. Which means, great news, we already know what to do.

Even in a recession your customers won’t stop buying altogether

Short of shutting shop, your customers can’t stop buying altogether, even in a recession. They will still need to to serve their own customers, so they will still need your goods and services. However a recession will heighten their caution and you can expect to see some changes in your customer’s behaviour:

• Reduced order volumes to conserve their cash and protect cashflow
• Longer buying cycles and reduced inventory to mitigate risk and increase their agility
• Taking longer to pay and asking for longer payment terms and larger lines of credit

It’s easy to see these as valid reasons to cut back on your marketing spend, but that is simply making a poor long-term strategic decision based on the short-term effects of a recession. Profitable growth is the ultimate goal of marketing but it can obviously only be achieved in the future. Cutting back marketing investments in a recession to maintain percentage profit levels puts at risk your future profitable growth and cash flows.

Even during an recession there is still business to be won, though less of it. That means that you will see more aggressive short-term sales activation from your competitors, especially in terms of price reductions, deeper discounting and more frequent price promotions.

Focus on building your brand. Having a strong, well understood and carefully positioned brand will help you to defend your market share and prices against much of your competitors desperate recession-driven discounting. If you can find extra added-value to reinforce your barricades so much the better. But you will need a carefully constructed marketing campaign to tell your customers about it.

Your customers probably don’t care that much about you

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Brands are tough things. It takes a lot to kill them off completely, but you’d be surprised how fast they can find themselves fainting onto a chaise longue. What makes a brand so susceptible to a fit of the vapours is that customers really don’t care that much about them.

That’s a painful thought for most marketers and CEOs. After all, you’ve spent years marketing and nurturing your brand into growth, but take a few minutes for a thought experiment. List out as many suppliers as you can and then ask yourself “if any of them disappeared tomorrow, would they be irreplaceable?” It’s likely that they could all be replaced with a bit of effort. So why should your customers care more about your brand?

The unpalatable truth is that your brand isn’t the most important thing in your customer’s universe, particularly during a recession, so they are unlikely to be paying it much attention. Which makes it eminently forgettable and is a major reason to keep marketing your brand.

It has been shown that memories of a brand’s attributes decline rapidly unless they are constantly reinforced by brand marketing. Forgotten brands quickly experience declining revenues and reducing market share. Anything more than 12 months absence from your customer’s mind will cause a difficult-to-recover-from decline in revenues. Any longer and the prognosis for your brand will be very bleak indeed.

Your competitors will be looking for new opportunities as well. If they slip into your customers memory just as they reach a category entry point, you may well lose out. Especially if your competitor offers lower costs to mitigate some of the risks of trying a new supplier.

You need to keep bringing your brand to the forefront of your customer’s minds with creative and consistent marketing to establish it as rapidly rememberable your brand. Otherwise it will be quickly forgotten. After all, replacing you in a procurement system might involve a few hours of bureaucratic effort, but nothing that will cause your customers angst.

Marketing through a recession protects your future growth.

Recessions tend to be nasty, brutish and short. Capital Group’s analysis of 11 cycles in the US since 1950 shows that recessions lasted up to 18 months, spanning an average of 10 months. The IMF says that in advanced economies they typically last about a year. Admittedly that’s an eternity when you are keeping a family, but it means that recession months comprise less than 18% of the last 876 months. On average GDP drops between 3% and 5%.

We all know that B2B customers generally buy according to cycles of need that rotate according to either what their internal needs are or what their customers are ordering. If you are marketing complex solutions to B2B customers you may well find that your sales-cycle exceeds the length of most recessions. Highly commoditised items are likely to have sales-cycles that repeat more than twice in the average recession.

Either way it’s likely that around 90 to 95 percent of your customers aren’t in the market for your products today. Some may be in market a few times during the current downturn, the rest may be in market on the other side of the recession. Tie that back to the above observations about your forgettability and the need for marketing to keep building memories and associations for your brand becomes clearer.

Keeping the lights on in the marketing department during a recession, and maybe even turning the dimmer switch up a little keeps you competitive for the short-term sales and positions you for the post-recession uplift.

*Thomas Hobbs first said this about life without a government.

It takes years to build your brand and months to undermine it

Think of your marketing activities as building blocks made of sand. Each contributes to building brand equity and recognition over time, with each block reinforcing established identity and trust. Every time your customer is exposed to your brand by your marketing you increase the chance that you build and cultivate their memory and perception of your brand.

Over time, this accretive effect of marketing sets your brand’s fame, preference, customer retention, share of voice and ultimately increases your market share. It become synonymous with quality and reliability in the eyes of consumers. Your well established, well maintained and strong brand gains the ability to sustain premium prices. It will withstand market fluctuations, recessions and economic downturns and weather crises more effectively.

The corollary to this is equally important. The greater the gap between exposures to your brand the faster the sand blocks erode. It’s easy for you to lose this salience by underinvesting in marketing. In a highly competitive marketplace, which any recession necessarily creates, your customers will be bombarded with offers, incentives and promotions. If your brand fails to stay visible you risk losing mindshare, share of voice and market share along with your hard-earned brand equity.

What else can you expect to happen to your brand when you stop marketing during a recession?

• Decline in visibility which can lead to a decline in brand recall and recognition
• Erosion of brand awareness. New customers may not discover your brand, and existing customers may forget about it over time
• Loss of top-of-mind position leading to competitors displacing you in your customer’s preferences
• Diminished brand equity which will affect perceptions of your brand’s quality, reliability and value
• Reduced customer engagement leading potentially to a loss of customer loyalty and advocacy and sources of market data
• Downturn in sales. Maybe not in the short-term — your current sales pipeline and run of business should carry you for a while — but definitely in the longer term
• Competitive disadvantage. Competitors will marginalise your brand by more prominent marketing
• Greater cost of long-term rebuilding. It often requires a more effort and investment in brand marketing to regain lost ground and rebuild brand salience and equity than it takes to maintain it

You need to be marketing for when the recession ends

Building brand fame for the future is probably the most critical aspect of strategic marketing. When a recession ends you’ll naturally see an increase in activity in your customer’s markets and segments that will eventually seep through to yours. If your brand has disappeared from their radar, it’s likely that they will start to look at your competitors. So you need to ensure that you are in their minds before they reach their category entry points.

You can only really achieve this by cultivating mindshare through top-of-mind brand marketing efforts. This will build the memory structures that make your brand the first one that comes to mind when your customer thinks about solving a particular need. This helps to preference for your brand, making customers more likely to choose you, a familiar and trusted brand, over unfamiliar ones.

By making the marketing investments that build fame for the future you will be better positioned to capture market share and drive growth when the recession ends. McGraw-Hill’s study of 600 B2B brands showed that maintaining or increasing marketing budgets during the 1981–1982 recession significantly increased sales during and for the three years following the recession.

Brand-building investments will give you an advantage over competitors that have relied solely on short-term, transactional, bottom-of-funnel marketing. It will also contribute to the long-term development of your brand’s equity. By making it more well-known and trusted, you will increase it’s perceived value and credibility, making it a preferred choice among your customers. Just as importantly, investing in marketing during a recession helps to build your future profitability and cash flows. Something that investors and shareholders value highly.

You need to defend your Share of Voice

It has long been understood that there is a strong correlation between your Share of Voice (SoV) and your Share of Market (SoM). While pulling spend on marketing during a recession can look attractive in the short-term, over the mid to long-term your sales will suffer because you will lose your Share of Voice.

If your SoV drops then your market share is likely to fall in the subsequent year which, again, will be expensive and difficult to recover. The good news of course is that, as explained above, it should be cheaper for you to defend your SOV during a recession.

You need to maintain brand marketing spend to ensure that your SoV (the spend on brand advertising and promotion in your category as percentage of the total spend) doesn’t drop below your SOM percentage. That means that if your SoM is 4% your SoV needs to be 4% or higher (excess SOV) to grow your market share.

A highly respected study for the Institute of Practitioners in Advertising by Peter Field and Les Binet showed a link between investing in generating an SOV greater than market share (called Excess SoV) and increased business benefits. Brands that invested in building ESoV saw more large business effects (such as increased profit, stronger pricing, increased market share, greater penetration etc.) and 4.5 times the annual market share growth.

That doesn’t necessarily mean that you need to increase marketing spend. You may find that your Share of Voice increases simply because your competitors dim the lights in their marketing offices. However a recession offers an excellent chance to increase your SOV with a proportionally minimal increase in marketing budget.

Your competitors are cutting back, so you shouldn’t

The standard reaction to an recession is to cut spending. There are certainly some functions in your business that need to be pruned, but only those that can be rapidly rebuilt when the recession ends. Brand marketing is not one of those. With your competitors cutting back on their marketing spend now is the time to take their share of voice and share of market from them.

You could of course take those savings to your bottom line. But the more powerful approach is to reallocate some of that saving to marketing. It’s difficult to find case studies from the B2B sector that are generally applicable because of the near uniqueness of each business. However the B2C sector does provide proof of the need to sustain and even boost marketing during a recession.

The Harvard Business Review reported that during the 2008 recession Reckitt Benckiser increased its advertising investment by 25% while competitors reduced theirs. As a result Reckitt Benckiser grew revenues by 8% and profits by 14%, while most of its rivals reported profit declines of 10% or more.

Analytics Partners researchers analysed hundreds of billions of dollars of marketing spend and found that:

• 60% of brands that increased their media investment during the last recession saw ROI improvements
• Brands that increased paid advertising also saw a 17% rise in incremental sales,
• Brands that slashed marketing spend risked losing 15% of their business to competitors who boosted theirs.

Less noise in a recession means greater marketing impact

Not only are your competitors likely to be cutting back, non-competitive businesses in your segment will unwisely also be looking to trim budgets during a recession. With less marketing communications, less advertising, less PR and less content being produced in your segment, you should be able to stand out even more.

You may also find media prices falling or at least better offers on the table from media sales people. Certainly you’ll see less price competition in the online ad / PPC space and less digital content being produced means that you should be able to grow organic traffic to your website.

Summary — 8 reasons to continue marketing in a recession

• Don’t Stop Marketing: Cutting marketing budgets during a recession, sacrifices long-term growth for short-term gains
• Brand Defence: Maintaining a strong and well-positioned brand through effective marketing through the recession helps to defend your market share and prices against price aggressive competitors
• Continuous Brand Reinforcement: Memories of a brand’s attributes decline rapidly unless constantly reinforced, so marketing efforts during a recession are crucial to prevent brand decline
• Cumulative Marketing Impact: Marketing activities have a cumulative and accretive effect on brand equity, customer retention, and market share over time. Though if you stop marketing in a recession those effects will fade away
• Prepare for the Future: Marketing during a recession helps build brand recognition for the future, positioning your brand to capture market share when economic conditions improve
• Competitive Advantage: Many competitors may be cutting back on marketing, in a recession providing an opportunity to increase your share of voice and market presence.
• Lower Media Costs: During a recession, there is less noise in the market, potentially resulting in lower media costs and better visibility
• Share of Voice Matters: Maintaining or increasing your Share of Voice (SoV) compared to your Share of Market (SoM) is essential for defending it during a recession and growing market share in the future

Questions about marketing in a recession

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Should I carry on marketing in a recession?

Absolutely yes. If you stop marketing during a recession you risk losing new sales opportunities in the immediate future and your brand equity, Share of Voice and Share of Market in the mid to long-term

What can I expect to see B2B customers do during a recession?

Your customers still need to look after their customers so they will keep buying. However you can expect to see smaller orders, longer buying cycles, reduced inventory and slower payments. You can also expect to see them considering alternative suppliers, which is why it’s essential to keep marketing in a recession

Our customers love our brand. Surely that means we can reduce marketing in a recession?

The truth is that your brand isn’t the most important thing in your customer’s universe, particularly during a recession, so they are unlikely to be paying it much attention. Which makes it eminently forgettable and is a major reason to keep marketing.

What happens to brands that cut back on marketing in a recession?

Brands that stop marketing in any circumstances always see an erosion of market share within a 12-month period followed by a long period of terminal decline. Even if you do start marketing after the recession ends, you will have to rebuild your Share of Voice and Market Share back to where it was before you regain your growth trajectory.

Is there a benefit to increasing marketing spend during a recession?

Yes. McGraw-Hill’s study of 600 B2B brands showed that maintaining or increasing marketing budgets during the 1981–1982 recession significantly increased sales during and for the three years following the recession. Peter Field and Les Binet demonstrated a link between marketing focused on building Excess Share of Voice and benefits such as increased profit, stronger pricing, increased market share, greater penetration and faster Share of Market growth.

My competitors are cutting back their marketing during this recession, should we?

What makes you think that they have got it right? Evidence and history tells us two things:

• Marketing in a recession is essential to maintaining Share of Market and
• Brands that stop marketing in a recession lose out to those who carry on.

Should I increase spend on marketing during a recession?

You may not need to, it depends on what your competitors are doing and your plans to grow your market share. If they are cutting back, you may find that simply maintaining you marketing spend during the recession is enough to grow your Share of Voice. Alternatively you could decide to exploit their tactical error and increase your spend on marketing and build Excess Share of Voice to help build market share.

For more information about how Vox Publica can help you to build your brand by marketing through the recession visit our website or send us an email