“When times are good you should advertise. When times are bad you must advertise.”
As we face an economic recession in the midst of a global pandemic, businesses are reviewing their budgets and annual plans to determine where to make cuts. While marketing is often trimmed ahead of other business initiatives, savvy business owners will see the COVID-19 overhang as an opportunity to increase marketplace awareness and create further separation from the competition by maintaining or even increasing marketing spend.
Using History as our Guide
If the Great Recession of 2008 is any guide, the businesses that maintained their marketing and advertising budgets came out the other side in a stronger position and owned a larger portion of their industry’s mindshare.
- 1981-1982 – Businesses that maintained or increased their advertising efforts saw higher sales growth during the recession and the 3 years after.
- 1985 – Those businesses who maintained their ad spend during the slowdown saw sales rise some 256%.
- 2001 – Studies demonstrate that companies more aggressive with advertising and marketing during the recession increased their market share by 2.5x.
- 2009 – Amazon innovated its Kindle product line, invested in growing marketing share and as a consequence, grew 28% during the Great Recession.
Finding and Keeping a Customer is Harder than Ever
Business owners must also keep in mind that during recessions, customers are at a scarcity – with sales pipelines being ravaged and client churn accelerating. Knowing this, the thought of minimizing marketing spend is counterintuitive. On the contrary, businesses should think of cutting other cost centers before setting their sights on the marketing budget. As a business owner myself, during these trying times I’m looking to increase the number of marketing levers I can pull to fill my customer pipeline – especially since my sales levers (i.e. trade shows, outside sales teams, sales representatives) have been shut down due to social distancing.
Decreased Competition Creates Opportunity
While you may not lower your marketing spend after reading the stats above, many of your competitors hopefully will. This void in the marketplace will create a great opportunity to increase market share without doing anything differently other than maintaining your historic marketing spend. Fewer competitors in the marketing arena equates to a decrease in competitive bidding for paid media channels, thus enabling companies that maintain spend to bid less than usual, amounting to a lowered cost per lead and higher ROI. Using a sports analogy, decreasing marketing spend during a downturn is like taking your team off the field when it begins to rain and being replaced by other teams who now have a much easier path to win the hearts and minds of the fans who remain in attendance. The smart organizations are the ones who keep playing during inclement weather, resulting in above-average marketing metrics, a lower cost per lead and a wider moat around their brands over the long-term.
In the Words of Peter Drucker
The words of legendary business icon Peter Drucker summed it up best. “Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.” So the next time your CFO or COO tells you it’s time to cut the marketing budget to save money, reference Peter Drucker and bring up all the other cost centers in the business that don’t revolve around the lifeblood of your business: attracting and keeping a customer.