During economic downturns, the immediate response from businesses is cost-cutting. This inevitably means that marketing budgets are reduced. Here are five reasons why this is the wrong move:
1. The Evidence
The evidence is overwhelmingly in favour of maintaining or increasing marketing expenditure. A McGraw-Hill research study which assessed 600 companies in an economic downturn found that business that maintained or increased marketing expenditure increased base revenue significantly once the economy had recovered1.
2. Share-of-Voice
Brands grow when Share-of-Voice is larger than Share-of-Market. Evidence provided by Les Binet and Peter Field suggests that when Share-of-Voice is larger than Share-of-Market, brands grow2. This is particularly true for business banking. Intuitively, this makes sense, particularly in an economic downturn; spending when your competitors are cutting back enables greater potential impact of a given campaign.
3. Value preservation
Strong brands perform better in terms of value preservation and revenue generation during recessionary periods. A further argument for maintaining or increasing marketing activities.
4. Cheap and Impactful
Brand-building marketing investment is not only cheaper in a downturn, but will be more impactful on the memories of customers. Marketing activities aimed at businesses should be a mixture of rational (product based) and emotional (brand building). During the prevailing tough economic times, business decision makers are in a heightened emotional and influencable state. Additional benefits on increased marketing spend include the projection of stability to consumers.
5. Never take your foot off the gas
Never take your foot off the gas. As the saying goes “If you don’t manage your brand and reputation, you get the one that turns up”. The results of positive actions from marketers is the potential for brands to improve their reputation as they help society recover from the impact of Covid-19.