The thing about a crisis – economic recession, global pandemic – is that no two are the same, which makes it pretty difficult to know what to do. The only thing we can do is look to experience, and combine it with innovation – two principles that form the basis of any good Non Executive Director’s thinking. So while it seems counter intuitive, one of the key pieces of advice our CMOs are offering businesses, is not to stop marketing right now, but to look at how to increase your marketing return on investment (ROI).
As we type, we are several weeks into the COVID-19 health crisis. Depending on where we are in the world, we are at different stages of lockdown or post-lockdown life. While the first couple of weeks may have seen a sledgehammer approach to all spending in order to get our heads together, we are now in a space where we need to plan for the medium and long term future, what that might look like, the variables, the possible directions that our business operations may be able to go in. However you choose to move forwards, your marketing is going to be integral to communicating with customers and possible customers, so don’t simply cut the budget and hide under a rock until the storm passes.
Now’s the time to build a strong brand
Over the years, and a number of down economies, members of our team have experimented and have become more aggressive with marketing when the chips are down. The result, on balance, has seen those who continue to market, benefit from bigger market shares on the other side as business turns better.
It’s not just our own hypothesis either. Looking back at the last big recession in 2008, the Harvard Business Review said:
“During recessions it’s more important than ever to remember that loyal customers are the primary, enduring source of cash flow and organic growth. Marketing isn’t optional – it’s a “good cost,” essential to bringing in revenues from these key customers and others… In managing their marketing expenses, businesses must take care to distinguish between the necessary and the wasteful. Building and maintaining strong brands – ones that customers recognize and trust – remains one of the best ways to reduce business risk. The stock prices of companies with strong brands, such as Colgate-Palmolive and Johnson & Johnson, have held up better in recessions than those of large consumer product companies with less well-known brands.”
Meanwhile, in September last year, Forbes hit a prophetic note with their article ‘When A Recession Comes, Don’t Stop Advertising’. It noted that:
“There have been a number of studies going back nearly one century that point out the advantages of maintaining or even increasing ad budgets during a weaker economy. Those advertisers that maintained or grew their ad spending increased sales and market share during the recession and afterwards.”
Benefits of investing in marketing in a down economy
Some of the reasons cited were the increased ‘space’ in the market to get your message heard as others go quiet. The impression of stability that your brand presents by staying vocal helping to give consumers confidence. The cost of advertising tends to drop in recession, creating a buyer’s market. Crucially, marketing also prevents you from disappearing in the minds of your existing consumers.
For example, Forbes highlights the case of dry cereals after the 1929 crash. At the time, a brand called Post was the market leader. However, when recession hit, they significantly cut their advertising while competitor Kellogg’s doubled its advertising, particularly when it came to their new cereal, Rice Krispies, which they introduced at the time. Kellogg’s profits grew by 30%, and which one do you still know of today?
Invest, yes. But think about it carefully
All of that said, it doesn’t mean that marketing should just keep calm and carry on as normal. As with all marketing, it should be used efficiently, effectively and strategically, tailoring the approach and the subsequent messaging throughout the organisation to be considered, planned, cohesive, sensitive and with a clear directive in the minds of leadership and the team.
One of the particular characteristics of this crisis, is that for certain sectors, like travel and hospitality, it is literally impossible to maintain the normal business model for a period of time. So business and associated marketing strategy needs to take into consideration any pivoting in the short term and plans for recovery and moving forward in the longer term.
There is sometimes a misconception that marketing is a luxury; a frill for businesses to indulge in when times are good. The real value of marketing however, is in controlling the narrative when you need it the most. That might be staying at the top of the market in good times or driving business in the face of a strong headwind – after all, if you’re not communicating with your customers, then even when the crisis is over, where is your cash flow going to come from?
Ask us for a free one-hour consultation to help identify ways to increase your marketing ROI