What the 31% stand to gain in a recession


Summary

  • 31% of marketing professionals in a WARC survey reported plans to invest in marketing in 2023.
  • Data from previous downturns suggests that investing in marketing in a downturn delivers positive results.
  • In answer to a potential downturn, our team recommends diversifying your digital channels, tuning into your customers, developing brand awareness strategies, utilising marketplaces and working smarter with automation technology.

Marketing during a recession

We’ve all heard the adage before that when a recession comes, businesses should double down on marketing rather than slashing budgets. In the midst of speculation of an economic downturn in 2023, it seems that some businesses have decided to follow this advice. One large global survey of marketing professionals by WARC found that 31% plan to increase their brand marketing in 2023 with the prospect of a recession looming. 

This 31% are seeing an opportunity where others are seeing caution, but what do they stand to gain? Read my article to learn more about what the data tells us about marketing investment during a recession.

“31% plan to increase their brand marketing in 2023 with the prospect of a recession looming”

The economic outlook for 2023

The possibility of a recession in 2023 has come to be a pressing matter for most businesses as they look ahead to the new year.  In a global survey of 1700 professionals by WARC, 95% said that a potential recession was affecting their marketing strategy.

The latest global report by the Organisation for Economic Co-operation and Development (OECD) has predicted a significant slowdown in the Irish economy in 2023, along with many other countries across the world. Businesses who have displayed resilience over the past few years in the face of lockdowns, staff shortages and rising energy costs will once again need to dig deep and strategise on ways to sustain growth and protect themselves.

Arguably one of the most important growth strategies for all businesses is their marketing activities. Historically marketing is one of the first areas to be cut during a downturn and this seems to remain the case for some as the WARC report indicates that 36% of those surveyed are planning to decrease their marketing spend. 

However it’s very interesting that 31% do not plan to decrease their spending, instead they plan to increase it.

What history tells us about those who invest in marketing during a recession

Analytics Partners has gathered data over the past 20 years measuring hundreds of billions in marketing spend across 50 countries. 

Their report published in August 2022 revealed that the brands who increased paid advertising also saw a 17% rise in incremental sales, while those who slashed spend risked losing 15% of their business to competitors who boosted theirs. The report suggests that businesses who cut marketing spend expose themselves to the risk of losing business to rivals who do not make cuts.

This pattern has become something close to a phenomenon as it appears to have happened repeatedly throughout the last few decades.

In a study of over 600 companies by McGraw Hill covering 1980-1985, they found that companies who continued to advertise during the two-year recession saw 256% higher sales than their counterparts post-recession. Those who chose not to advertise during the economic downturn lagged behind with a rise in sales of only 18% once the economy regained traction. 
Again during the Global Financial Crisis (GFC) of 2007-2009, Kantar found that in the year following the crisis strong brands recovered almost three times faster within two years.

“Brands who increased paid advertising also saw a 17% rise in incremental sales, while those who slashed spend risked losing 15% of their business to competitors who boosted theirs”

Anecdotally speaking, even the powerhouse brand McDonald’s got it wrong when they cut advertising rather than investing during the 1990-1991 recession. An article by Forbes notes that Pizza Hut increased sales by 61%, Taco Bell sales grew by 40% and McDonald’s sales declined by 28% as a result of this cut in the face of competitors who invested. 

Even at product level there is opportunity. Today’s retail giant Amazon made an imprint in our lives when they launched the must-have Christmas gift of 2007 during the financial crisis, the Kindle. Launching in November, the ebook sold out within hours on the marketplace.

These stories along with the wider studies demonstrate that cutting marketing investment for short term survival can mean missed opportunities, stagnation of growth and a longer recovery period post recession. However this does not mean that marketers who were successful during these challenging times simply ignored the economic realities and carried on as normal.

In the Analytics Partners study of marketing spend, they found that 60% of brands who increased their media investment during the recession saw ROI improvements. This means that 60% saw a direct return on their investment, while 40% did not. Carefully considering where you are going to spend your all important budget is key to the success of a marketing investment strategy during an economic downturn.

What the big guys are doing

In a recent survey of the top spenders on advertising in the UK  reported by The Guardian, the Incorporated Society of British Advertisers (ISBA) found that the biggest brands plan to cut spending on TV, radio, print and billboards while over 30% revealed that they intended to increase spend on formats such as paid search and social channels, podcasts and music streaming, and digital screens.
This is further backed by a report published by media investment and intelligence company Magna who predict that digital advertising sales will grow by +8% globally.

“Over 30% revealed that they intended to increase spend on formats such as paid search and social channels”

What your business can do

Here are five actionable tips for deciding your marketing strategy with a potential economic downturn looming.

Brand building during a downturn

Building confidence and clarity in a business’ brand comes up time and time again as the key to success during economic challenges.

Kantar carried out a meta-analysis of growth drivers and found that brands with strong clarity contribute 70% more to sales. They cite being meaningfully different as an advantage when it comes to brand marketing.

When it comes to digital marketing, businesses should purposefully allocate advertising spend on building brand awareness and not just on their products. This my look like:

  • Ensuring your ads look distinct from competitors – consider graphic design and/or photography styling
  • Create educational, helpful content around topics that are relevant to your brand and products
  • Use video content to really show customers who you are
  • Partner with influencers who can tell audiences more about your brand
  • Considering copy – is the tone and personality of your brand coming across in your organic and paid content?
  • Brand activation – don’t forget that hosting events both online and offline can bring your brand to life for customers.
  • Loyalty – a topic that is growing more and more momentum as customers become more careful about which brands they support, loyalty offers so many benefits when it comes to brand awareness, those who you reward will become your best brand advocates.

“Brands with strong clarity contribute 70% more to sales.”

Tune in to your customers

In an article published in 2009, the then Chief Global Analyst at Millward Brown encouraged brands who were competing in the challenging economic environment of that time to regain lost sales by understanding consumer mindsets and motivations. 
In the same year, Harvard Business Review published an article by a HBS Professor and Research Associate which urged retailers to “educate consumers on how to shop smart and save money”. The writers propose that marketers should stabilise the brand and look for ways to connect with changing sentiment with customers. They identify four product categories: essentials (perceived as necessary for survival), treats (justifiable indulgences), postponables (needs or desires that can be put off) and expendables (difficult to justify).

“Chief Global Analyst at Millward Brown encouraged brands…to regain lost sales by understanding consumer mindsets and motivations.”

Using this guide, it can be easier to articulate your products in line with how they might be feeling. Ask yourself, does your brand offer some kind of answer or substitute to where customers might have to cut down on spending?

You will see this has already started to happen due to inflation with big brand names such as Sainsbury’s launching ‘Feed Your Family for a Fiver’ campaign. The campaign resulted in a direct sales impact of £540m for Sainsbury’s, with a profit ROI of £5.55 for every £1 spent.

Reviewing your marketing messaging will be important not just now as you make your plans for the year but reassessments will need to be done throughout the year to ensure you are truly listening to your customers.

Diversify your channels

As we saw earlier from the ISBA survey of biggest ad spenders in the UK, top brands are opting for digital channels over traditional advertising in 2023. Digital channels offer much more flexibility to respond to what could be a very dynamic market. These channels also offer the opportunity to monitor return on investment at a much more granular level.

“Digital channels offer much more flexibility to respond to what could be a very dynamic market.”

Diversifying your channel advertising is backed by wider data by Partner Analytics who reported that brands who use multiple marketing channels can increase advertising impact by 35%.

Some of the key channels that businesses should be using to reach their customers include:

  • Email marketing
  • Social media paid advertising
  • Google ads
  • YouTube
  • As well as keeping an eye on platforms that are predicted to dominate more in the future such as TikTok, Pinterest, Twitch and more.

Marketplaces

Giant marketplaces such as Amazon may feel like an intimidating competitor especially for SMEs but there is an opportunity to leverage marketplaces too. 

According to Statista, in May 2022 Amazon.com had approximately 2.4 billion combined desktop and mobile visits. That’s a pretty large audience to ignore however it’s understandable for brands who don’t want to lose more margins to the ecommerce giant than they would with their existing resellers.

It’s worth considering that the marketplace model is universally applicable across industries B2B and B2C. Niche marketplaces such as Farfetch can give smaller sellers a competitive advantage by reaching more audiences and different margin opportunities.

Smart resourcing

There’s a number of ways that you can use your team’s time more efficiently which will ultimately affect your marketing output in a positive way. 

The first is utilising automations especially for repetitive tasks. Technology such as social media management tools, email management platforms and project management tools can give back precious time to your team.

Another way to resource effectively is by engaging with agencies who can offer specialist support on specific areas of your marketing that your core team don’t have time to learn about or manage. This can make scaling your marketing team much easier as well as delivering the best results.

How StudioForty9 can help

We offer a team of experts across every channel at StudioForty9 who can help you to optimise your spend on each channel for improved return on investment. 

We understand that ecommerce and marketing teams are busy keeping up with all the different facets of their marketing strategy and as a result, resourcing specialists across all these different areas is just not possible. 

Our Performance Marketing team at StudioForty9 are here to offer the deep sector expertise you need to optimise your performance across each channel. 

Talk to us about enhancing your business’ performance across email marketing, social media and PPC. Contact info@studioforty9.com for more information.

Photos by Roman Kraft | Eleni Afiontzi | Patrick Perkins on Unsplash

Louise Jennings
Louise Jennings |