Tagged: covid-19
How to Recession-Proof Your Business
- by Alyson Shane
If you want to recession-proof your business and minimize the impact of COVID-19, you’re not alone. Companies across industries are scrambling to keep a recession that could be as bad as the Great Depression from seriously impacting their business.
As a result, we see a lot of short-term, reactionary behaviours in response to the pandemic. We’ve seen businesses furloughing or laying off their marketing teams. Other brands are cancelling advertising campaigns and taking a “wait and see” approach as things unfold.
Just like during the 2008 financial crisis, many businesses are putting their marketing plans on the chopping block to try and stay lean.
But is this the best strategy?
Studies show that companies who protect their marketing budgets during recessions tend to do much better during the recovery period.
In fact, companies that increased their marketing spending during a recession earned an average increase of 4.3% in profit.
The companies that cut back spending during an economic downturn? They saw an average fall in profits of 0.8%.
To put it more simply: companies that cut back on their marketing earned 3.5% less than the companies that increased it.
Now, ask yourself: which business would I rather be?
If your answer is “the profitable business” then it’s time to leave the short-term thinking behind and focus on the big picture.
Here’s why investing in your marketing right now helps recession-proof your brand:
Recessions don’t guarantee lower return-on-investment
We naturally assume that a recession will hurt every business, but brands that are adaptive can emerge stronger than ever, and with a higher return-on-investment (ROI) than before the downturn.
A 2018 report from ROI Genome found that in over 100 cases, more than half the brands studied saw improvements in ROI during the last recession.
Marketing during a downturn creates short and long-term ROI
On average, companies that increased their marketing investment earned an average of 17% growth in incremental sales, and more than half sad year-over-year improvements over the next two years.
Why? Because marketing increases brand equity.
“Brand equity” is a fancy way of saying: the more people who are familiar with your brand, the more they trust in the value of your products and services.
The more your customers see, hear, and interact with your brand - especially during times when they feel anxious, like during a recession - the more they’ll develop positive feelings towards your company, increasing the likelihood that they’ll buy from you in the future.
Cutting marketing guarantees losses during a recession
When you remove yourself from the conversation, people stop talking about you, thinking about you, and ultimately buying from you.
Leaving yourself out of the discussion also makes spaces for the competition to creep in and start converting your customers.
In fact, companies that cut their marketing investment suffer an 18% loss in incremental sales compared to those that didn’t.
Cutting marketing makes losses worse for struggling businesses
If you’re already operating on razor-thin margins, cutting your marketing may seem like a natural choice. But before you do, consider this:
Low consumer demand accounted for one-third of all losses in incremental sales during the last recession, while two-thirds of all losses in incremental sales were due to lower investments and the lack of market share.
It might seem prudent to cut back on marketing right now, but your business will have to make up for the lost time and try to compete in a marketplace that was more crowded than before.
How to recession-proof your brand: final thoughts
When companies allow short-term thinking to guide their decisions, they sacrifice not just brand equity, but also the long-term ROI of consistent marketing.
Agile businesses, on the other hand, take a data-driven approach to their business and develop strategies that balance short and long-term goals.
During times of uncertainty, it’s more important than ever to focus on making data-driven decisions. If you’re looking for a partner to help you make sense of the noise and keep your business top-of-mind for your customers, drop us a line.
