The Risks of Reducing Digital Marketing in a Recession

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The economic conditions around the world are clearly challenging to everyone.

There’s a cost of living crisis and increasing interest rates are affecting both people and businesses, causing them to consider tightening their purse strings (if they haven’t already begun to do so).

This creates two dilemmas:

  1. People are buying less, leading to a drop in sales and revenue.
  2. Businesses are trading with each other less, leading to a drop in sales and revenue.

When a recession comes along, as they have a habit of doing (triggered by pandemics or not), a person or business will immediately stop, review, and sever all non-essential expenditure.

The problem deepens when the essentials and requirements for exposure and growth (like advertising and marketing) come under the shadow of the cost-cutting knife too.

It’s a risky dilemma.

Do you reduce your marketing and hope sales keep on coming?

Or, do you increase your marketing budget, hope that sales increase, and use that revenue to pay for the marketing?

But, what if the sales don’t come?

By the end of this blog post, I’ll have hopefully shown you enough convincing evidence that you not only need to protect the marketing you’re doing to survive the recession but that you can thrive because of one.

If you’d prefer to watch me explain instead, please watch the following video.

If not, join me in the next section.

 

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How to Prepare Your Digital Marketing for a Recession

What should we do with our digital marketing in a recession? And how do we prepare for one? What learnings can we apply from past recessions?

Removing COVID-19-induced recessions, there aren’t many recessions where the number of digital marketing tools we use today were available, giving us very little to work with. However, we can look at how marketing channels in general behaved and were used, as the principles of marketing should remain the same (or at least comparable).

We can look at:

  • How the marketing channels changed.
  • How consumer behaviour changed.
  • Whether the decisions marketers made were good or bad.

For the moment, let’s focus on customer behaviour.

How Recessions Impact Customers

How does a recession impact consumers? Well, no one recession or downturn is like another, but they do share one commonality:

Customer confidence drops, which leads to customers tightening their belts and reducing their spending.

They may still use some of their disposable income, but it is heavily reduced, and they only spend with brands they trust or expect to get the highest perceived value from.

Someone working from home — by choice, not as enforced by a pandemic — may cut several of their monthly subscriptions but will choose to maintain their roasted coffee delivery because they know the quality is high and taking a moment to make good coffee adds a positive moment to their day.

Unemployment usually goes up. Credit gets more difficult to obtain.

The business, which is a customer of someone too, makes reductions as well.

Pizza Friday is suspended, leaving a local pizzeria with a big weekly payday missing from their books. Everyone’s told not to print anything unless absolutely necessary, significantly reducing the monthly office supplies order and leaving a big hole in the supplying vendor’s income too.

There’s less cash to go around, and less of it is flowing between customers and businesses and from business to business.

The cycle of people spending less, businesses cutting costs, reducing prices, and stopping all investment goes round and round. Nothing improves, people spend even less, and businesses start by cutting costs again. And when businesses start cutting, it’s often marketing and advertising budgets that, mistakenly, take the hit first.

It seems logical to the C-suite: keep outgoings low so they can keep the roof above everyone’s head, the power on, and remove the risk of layoffs.

Reduced income? Reduce outgoings.

Simple, right?

It may seem so at first, but it’s the complete opposite action a business should be taking, according to research by the Harvard Business Review, published after the last recession.

According to the research:

In past downturns, consumer goods companies that were able to increase share of voice by maintaining or increasing their advertising spending captured market share from weaker rivals.

If your competitors are feeling the pressure and cutting back on their digital marketing, your space becomes less competitive. There are only a few businesses bidding on ads, bringing the cost per ad auction down. Plus, whereas before, a consumer might have seen ads for three or four companies about the same product or service and be forced to choose between them, their choice is simplified when they’re only seeing one or two brands.

Your customer acquisition cost will be cheaper.

 

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Data gathered by TotalRetail found that the cost-per-click of Google Ads dropped dramatically in the earliest days of the COVID-19 pandemic. Retailers took immediate action to reduce their outgoings and shore up the ship. Reduce risk. Protect the business.

Only later, and too late for many, did businesses realise that digital marketing was the solution they’d needed from the beginning.

By the time some resumed their campaigns, the space had become more competitive than before, as other businesses had continued their digital marketing and increased their market share.

 

The same goes for search engine optimisation, social media marketing, and video marketing. Businesses that paused their campaigns or reduced budgets lost search rankings or became dwarfed by their competitors’ growing channels.

There’s a famous quote by Warren Buffet from his 1986 shareholders’ letter that I think applies to this and all recessions:

Our goal is more modest: we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.

One strong example of businesses being greedy when others are fearful is from the 1990-91 recession. Both Pizza Hut and Taco Bell took advantage of McDonald’s decision to reduce its advertising, resulting in a 61% increase in sales for Pizza Hut and a 40% increase in sales for Taco Bell, whilst McDonald’s sales dropped by 28%.

McDonald’s, a huge business that didn’t get to its late 1980s height by making marketing and advertising mistakes, made an error that lost market share. And market share isn’t so simply taken back. It’s expensive.

The decisions we make today about our marketing influence the future of our businesses and our market share years down the line. We can’t afford to be on the wrong side of the situation.

But I expect you know this.

What can (and should) we be doing?

What’s the action plan?

I’m gonna get to that in just a moment…

 

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Did you know that there was a drop in fertility rates during the Great Recession of 2007-08?

Infographic by the International Monetary Fund about fertility rates after the 2008 Great Recession.

Image via imf.org

What does that have to do with anything?

Every recession or economic downturn results in lasting effects that aren’t always plain to see.

People felt less secure about the future and, therefore, chose against the cost of bringing another child into the world who would have to be dressed and fed.

After the Great Recession, house prices crashed. Politics took a shift leftwards.

After the 2000s dot-com bubble burst, how internet-dependent businesses got their start, generated investment, and were run had to change.

Before taking any action, you’ll first have to decide how close you and your customers are to the eye of the storm.

If you worked within the real estate industry in the Great Recession, something far bigger was going on that would have made it incredibly difficult to do marketing (not impossible, but very difficult).

If you’re (relatively) safe, you can start to think about:

  1. How your business and marketing should be positioned.
  2. How your customer’s behaviours have changed.

Before we begin understanding changing customer behaviours, I just want to highlight that, if you’re unsure about your digital marketing and how your competitors might be reacting, you can always request our free website and digital marketing review.

Our team will review your website and identify the best strategy for your business and the optimal channels (and strategies) that’ll secure you the leads and sales you need.

 

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Understanding Changing Customer Behaviours

The first thing you will need to do is re-profile your customers.

You may already have a rough guesstimation of your ideal customer profile, or you may have a full breakdown of age, salary, interests, and so on. You may have focused on psychographics too.

Buying habits change for both B2C and B2B customers, so you’ll need to research and understand these.

To help us, I’ll reference the earlier linked article by the Harvard Business Review.

There are four possible consumer groupings:

  1. Slam on the Breaks
  2. Pained but Patient
  3. Comfortably Well Off
  4. Live for Today.

Consumer Segments' Changing Behavior chart by Harvard Business Review.

1. Slam on the Breaks

This group is hit the hardest. They “hit the breaks” and limit their spending dramatically. They often tend to be on the lowest incomes (although there are some exceptions).

These people tend to reduce their spending and fall back on reliable brands, yet they might only do so when an advert catches their eye triggers nostalgia for a more stable and reliable time.

One example is budget supermarkets, which do better in downtimes, pivoting their marketing message to promote cost-savings and deals, and how much cheaper a weekly shop is in their supermarket versus their competitors (a common ploy, but more prolific during downtimes).

Supporting you through thick and thin“.

Making your money go further“.

The cheapest national average weekly shop“.

Get more, for less“.

Graphic explaining the definition of a "Slam on the Breaks" customer segment.

2. Pained but Patient

This group are optimistic about the future and that things will be okay overall, but they’re less confident than they usually would be with their spending. They’ll spend less aggressively but won’t drastically cut their expenditure altogether.

These people are still open to advertising and marketing, but the message might have to be that these products or services can offer the stability their life needs right now. Another angle may be that, in a time of strain, [insert product here] is perfect for calming nerves and feeling a little bit more normal.

Mid-range supermarkets might start to prioritise treats in their deals, and price reductions on luxury items to drive people into their local stores, hoping, they will do their weekly shop while they’re there.

They might also be persuaded to continue with the occasional out-of-house treat, such as a restaurant meal or a night in a nice wine bar, so smart hospitality companies will keep their premises front-of-mind with the right message and marketing.

For that one night out you’ve deserved all week“.

Graphic with the definition of the "Pained but Patient" customer segment.

3. Comfortably Well Off

This group is comfortably well-off. They feel secure in their immediate and long-term future. They’ll keep consuming but perhaps be a little more selective with their purchases and probably not quite as showy either.

These people can be marketed to almost as in non-recession periods, with the exception being that they’ll cling to reliable brands they trust and might only be swayed by another brand after a lot of long-term brand trust-building.

The messaging here will need to be focused on the reassurance that what they choose to spend their money on is the best available.

Established brand loyalties will need to be broken, so the messaging should be about the overwhelmingly positive benefits of your superior product that, until now, they might not have considered.

Definition of the "Comfortably Well-off" customer segment.

4. Live for Today

To this group, things are as usual. They’re totally unconcerned by the prospect of a recession. It couldn’t possibly affect them, and if it did, no problem.

They tend to be young, probably urban-living, and quite carefree. They’re here to live life, and that’s it. Money security is a future problem, not a today problem.

They’ll be out enjoying city life, enjoying the hubbub of coffee shops and art galleries in the daytime and club life until dawn the next morning.

If your product or service suits this buyer group, you and your competitors don’t need to make many marketing changes at all.

The marketing message is about escape and experiences.

The best message might be to tap into the thrill of being carefree in such a gloomy period. Everyone else is in the dumps because of a recession? Not you; you’re jet-skiing across lakes and base-jumping off cliffs.

The message should be that the world is grey, but your world isn’t.

This is the thrill-seeking moment you’ve been looking for“.

Grey day? No thanks!

 

 

Everyone is out of their comfort zone right now, and your business must utilise your brand to bring a self of reassurance and calm. People are searching for reassurance, so help them find it if you can.

Reassurance might just be using the right tone of voice with the right message. It may be a discount or offer on an essential that gives just the slightest amount of financial support. You may be focused on the quality that sets your products or services apart, but whatever approach you take, you have to do your research and check that you’re still talking to the same consumer group as before.

Graphic with the definition of the "Live for Today" customer segment.

Recession Winners

Does anyone win in a recession?

Inevitably, yes. There’s always someone succeeding whilst others are not.

As Buffett said, “be greedy when others are fearful“. Those who are, succeed.

And over the last 100+ years of recessions and downturns, businesses have repeatedly succeeded and become some of the most well-known global brands known today.

General Electric, GM, IBM, HP, Microsoft, Electronic Arts, Airbnb, and Uber all started during recessions. Google, Facebook, and Salesforce all started just prior to some.

They understood that what it takes to survive is to be adaptable to changing circumstances; to fully understand their customers, their changing habits, sense of security, and changing behaviours; and to be persistent with their marketing even when nerves and fears may start seeping in.

That’s how businesses grow during periods of recession. That’s how they increase their marketing share.

They zig when everyone else is zagging.

They’re greedy when everyone else is fearful.

This Is a Cycle

It’s a cycle. Recessions come and go. There’s a recession every two to eight years. That’s why we have to prepare for the storm before it arrives.

Above everything, we need to be financially secure. Keeping a rainy day fund to cover six months or longer of recurring expenditures is a must. I suggest keeping a larger fund if you can.

However, a business doesn’t need to wait for that security to take immediate action today.

Push forward with your marketing. If you don’t, someone else will.

But don’t rely upon the marketing you’ve always done. Review and reposition.

These are not normal times, so behave abnormally.

Don’t do “what you’ve always done”.

Review what’s changed in your space, review how your customers might have changed their buying habits, and then adapt your strategy and message accordingly.

Will there be some marketing changes we can do little to counter? Absolutely, but there are over a dozen marketing channels available and dozens of strategies to try.

It’s highly likely there’s a position your business can take that matches the changing dynamics of your marketing and the economy.

And don’t panic.

These things don’t last forever.

According to CNBC, the average recession since 1900 lasted 15 months in total. 15 months. You can survive it. We can survive it together.

Here are a few articles I hope you’ll find helpful whilst you review your marketing:

If you have any questions, please feel free to comment below, and either the team or I will try our best to reply with actionable information.

Not forgetting that you can always request a free review of your website and digital marketing. Our marketing consultancy team will record a 15-minute video outlining how your business can get the highest ROI from your marketing budget, including some tips on things you can immediately change to improve your website’s conversion rate.

I’ll end with a quote I’ve been thinking about a lot these past few weeks, which may originally come from Sam Walton, founder of the mega-giant Walmart (although I’ve not been able to verify that).

It goes: “I was asked what I thought about the recession. I thought about it, and I’ve decided not to take part”.

— Tim Cameron-Kitchen

Is your digital marketing
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About the Author
Tim Cameron-Kitchen
Tim Cameron-Kitchen is a Digital Marketing expert and Head Ninja at Exposure Ninja. Exposure Ninja works and consults with businesses in every imaginable market around...

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