Defying the downturn: cut through the noise, not the budget 

In the weeks that followed Boris Johnson’s plea to the British public to avoid pubs, theatres and offices, marketing budgets belonging to the firms that service these institutions were slashed. But was that the right thing to do? 

In his column for Marketing Moves, Dr. Mark Ritson, an award-winning brand and marketing specialist who has taught the MBA programmes at London Business School and MIT, argued that it’s smarter to focus on the longer-term, brand-building mission rather than the short-term, cost-cutting prerogative: “Keep the brand light burning because the cost of snuffing it out for the rest of 2020 and then trying to reignite it next year is gigantic.” 

He wasn’t wrong. The companies that went into survival mode survived (or died in) the storm. Those that took advantage of the winds of change thrived and sailed towards new horizons. 

Don’t be a loser

To paraphrase Henry Ford, “Stopping [marketing] to save money is like stopping your watch to save time.” Organisations that refrain from cutting their PR and marketing budgets during economic downturns see sales surge by an impressive 256%, according to a recent article in PRWeek

The Institute of Practitioners in Advertising (IPA) backs that message. The IPA commissioned a report – ‘When others go quiet, your voice gets louder’ – revealing that companies which opted to increase their marketing budgets during challenging market conditions gained a competitive edge when the economy bounced back, resulting in higher average profits and superior market share.    

Research by global management consulting firm Bain & Company, in 2019, studied approximately 3,900 companies worldwide during the last recession. It found a clear divide between the winners and losers. The former enjoyed a growth average of 17% during the downturn, compared to the latter which grew by an average of 0%. 

A different study by Nielsen, a global leader in audience insights, data and analytics, found that brands focused on relieving the short-term pain rather than exploring the possibilities for long-term gain, risk losing 2% of their long-term revenue every quarter. As marketing has a direct impact on a brand’s overall value, attempting to recover after implementing such cuts can take a substantial time, typically ranging from three to five years. Most recessions are short-lived in comparison. “Historically, 75% of recessions end within a year, and a full 30% only last two quarters,” Nielsen report notes. 

Don’t be a flake

Plenty of forward-thinking, bold, brave organisations spend more in a crisis simply because they know their competitors will be doing the opposite. In the 1920s, Kellogg’s was miles behind Post in the cereal stakes. When the Great Depression hit, Kellogg’s doubled spend. The Post slashed it. Kellogg’s profits grew by 30%. As for Post… well, err, what’s Post? 

Skipping ahead to the early 90s, and the recession that underpinned it, McDonald’s reduced its advertising budget. Revenue from sales followed suit – dropping by 28%. Pizza Hut did the opposite. It bolstered spend, increasing its sales by 61%.

There is an abundance of examples across sectors. Samsung went from being ranked 21st to 6th in Interbrand’s global list during the 90s recession, again because its marketing team realised spending in a crisis leads to a better return on investment. They knew going full throttle, as it were, would help the brand gain a bigger share of voice, and therefore a bigger share of the market. 

Never waste a good recession

As this article demonstrates, reducing marketing budgets should not be a first port of call during challenging periods, mainly because this will make room for your competitors — many of which will be eager to fill the gap you leave behind, potentially overshadowing your business, not just during the crisis but for years afterwards. If you take your foot off the marketing peddle, you’ll probably struggle to get new customers because you’ll no longer be front of mind or as easily found. 

The solution is to think more strategically about where your marketing budget goes to deliver more value. Are you reaching your target audience in the most effective and engaging ways? Are you investing in high-performing channels? Are you building brand awareness? If not, how could the budget be engineered or bolstered to ensure the answer to all the above is ‘yes’? Remember that committing to the long haul with confidence and conviction demonstrates that your organisation is stable and forward-thinking.

Marketing activity helps to get your organisation better known and found, for the right reasons, boosting sales, cultivating customer loyalty, and supporting long-term, sustainable growth through and beyond economic headaches. It’s as important as the product or service on offer… you wouldn’t sacrifice that, would you? 

To see how Magenta can help with your marketing strategy, check out our services page.

Jo Sutherland