Business survival: How marketing through a downturn yields 256% sales growth!

 

The world seemed upended to many in 2016. Events that did not seem logical or probable became very much a reality. The effects of those events typically take time to manifest themselves but 2017 is set to be a very turbulent year for business indeed. Business owners and marketers need to be ready for chaotic market conditions and sharp changes in consumer confidence.

 

R3, the association of Insolvency Practitioners in the UK have reported that 16% of all businesses, equivalent to 283,000 businesses, say the vote has already had a negative financial impact on them, compared to just 5% of businesses (85,000) who say the outcome of the referendum has had a positive financial impact. However, Three-in-four UK businesses (74%) say they have yet to feel any financial impact – positive or negative – from the 23rd of June’s UK vote to leave the EU.

 

As of November 2016, the UK Chancellor before his Autumn statement has sounded the UK inflation claxon for 2017 warning households that price rises are to be expected. With the performance of the UK currency being one of the worst worldwide currency performers of 2016 it is hardly surprising the warning bells are going off.

 

This means that potentially shit is about to get ugly again, think 2008 credit crunch ugly, but potentially worse. Of course there are always those on the other side of a viewpoint who will argue the other way, but as a SME business or marketer, it certainly won’t kill you to have a plan in place for your marketing strategy for how to react if we do in fact find ourselves sailing into very choppy business waters in the year or few ahead. In fact a healthy dose of paranoia is actually a survival instinct to be listened to.

 

OK, thats the reality check, now onto some fun bite chunks about marketing in a recession. Folks, feel free to use these for presentations or saving your job when a clueless exec says stop spending on marketing 🙂

 

  • 86 per cent of decision makers believed that those firms advertising in a sluggish economy were engendering a positive sign about their service / product commitment
  • Coca Cola dropped from 3rd most recognised global brand to 8th after it cut spending on brand advertising in 2015. If a global mega brand can lose traction, what do you think happens to an SME?
  • Changing your message works better than not communicating.
  • Maintaining or increasing ad spend in a recession grows your market share faster as competitors throttle back. Enjoy a 256% sales increase once economy recovers versus brands that stop marketing

 

In a recession, customers cut back on their spending, sales fall and many businesses assume that they need to cut back on their marketing and advertising budgets in order to survive. Studies show that in Q1 of 2009, advertising spend in the USA plummeted by 10 per cent. However, evidence suggests that this is a counterproductive step and that those firms who actually invest more heavily in a downturn will see higher profits. The fact is that companies should actually invest more heavily and more intelligently in their marketing activity during periods of adversity. Intelligent investment includes targeted services such as SEO and digital marketing with the objective of gaining market share.

 

86% of decision makers see advertising as a sign of positive commitment

 

Marketing budgets are often cut as soon as a downturn appears on the economic horizon. They are incorrectly seen as being ‘non-essential’. However, the reality is that you will find yourself watching competitors move into your space; seeing your customers migrate to other more visible brands; and missing out on valuable opportunities for marketing wins. The Periodical Publisher’s Association of Ireland found that 86 per cent of decision makers believed that those firms advertising in a sluggish economy were engendering a positive sign about their service / product commitment.

 

So why do businesses cut the marketing budget first?

 

Falling revenues and static or rising costs lead to difficult decisions. But why does the marketing and advertising budget get hit so fast? Frankly, it is often misunderstood and seen as a secondary function to sales and other operational functions. Either that or business owners/decision makers just panic and try to slash all outgoings without much real thought. Brand is also perceived to be static by non-marketers, who also tend to believe – erroneously – that customers will remain loyal. However, as all marketers know, cease delivery of your marketing strategy, particularly in the digital age, and the conversation and spend goes to your competitors.

 

Here’s an interesting take-away to prove the point. Coca Cola, one of the world’s largest, most iconic brands, appeared in the Global Top 10 list every year since BrandZ started compiling its report in 2006. But last year it slid down to 8th place from 3rd, being overtaken by GE and Microsoft. Why? It simply hadn’t kept up with brand activities. If a global giant such as Coca Cola can get it wrong, it’s safe to say that your business can too!

 

What does the research say?

 

There is some serious research to back up this conclusion.

 

McGraw-Hill Research’s Laboratory of Advertising Performance (LAP) researched 600 businesses during Britain’s major recession between 1980 and 1985. It found that those B2B firms that maintained or grew their advertising spend during this period managed to achieve significantly higher levels of sales growth. This was true not just during the recession period, but for the subsequent three years, compared with those firms that either slashed or removed their advertising budget. By the end of that recession in 1985, those aggressive advertisers were also enjoying a 256 per cent increase in sales.

 

Penton/Coopers/BSI (2003) Penton Research Service, Coopers & Lybrand, and Business Science International also assessed the recession of 1990. They discovered that the strongest performing firms had implemented powerful marketing programmes, allowing them to strengthen their customer base and steal business from competitors with less coherent and aggressive marketing programmes. Additionally, these same forward-thinking companies were able to strongly position their business for sustainable growth during the subsequent period of economic recovery.

 

Finally, here’s a concrete example that really brings the situation home. Thinking about trimming a little spend from your website? Your e-commerce functionality is working just fine, right? Think again – Dynatrace, a performance management agency, found that a load time difference of just 0.5 seconds (literally, half a second) can result in a 10 per cent sales differential for online retailers. If that doesn’t make you sit up and listen…

 

Even the Government agrees…

 

Interestingly, even the Government believes that marketing spend is vital. Just look at these publicly funded grants which are available in the uncertain post-Brexit world: http://www.enterprisemarketing.co.uk/velocity-grant/

 

Why upping your spend works

 

In simpleton terms you can grow your market share in a downturn by communicating in a smart way whilst aggressively spending whilst your competitors might flounder. Those companies that are bold enough to continue advertising and marketing hard in a recession will find that their brand is kept fresh in their customers’ minds. So, when they are inclined to spend again, they will naturally turn to those brands that they are aware of and have been building a relationship with. Just remind yourself of the 256% uplift statistic above.

 

The fact is, brands to need to work harder in an economic downturn in order to maintain customer engagement and to better encourage loyalty, as a greater proportion of customers will become price sensitive and start to seek out the cheapest options. This means taking steps to capitalise on those competitors who cut their prices or who drop their ad spend budgets.

 

It’s vital to maintain core brand values

 

If you continue to market to your customers in a downturn, they will continue to act with the behaviours you want to see. Other than market size, marketing creative has been found to be the most powerful multiplier of profit by a study carried out by Admap in 2009. The study accessed a variety of marketing channels, brands and categories and discovered that creative treatment had a 500 per cent greater impact on resulting company profits than did allocation of budgets.

 

Smaller luxury items thrive

 

In recession markets, small and luxury goods tend to thrive because they become increasingly affordable and attractive as small ‘pick me ups’ in troubled times for consumers who can’t afford to make lavish purchases. This is sometimes called the lipstick effect, as sales of make-up items often spike in a downturn. Brands which sell these products can capitalise on opportunities by increasing their advertising spend and marketing more heavily to increase market share.

 

Another risk of cutting budget

 

It’s also worth considering the fact that a budget cut to your marketing spend will also mean that there’s no contingency fund to act quickly when something really takes off. Look at Pokemon Go as an example. The game came out of nowhere and immediately went viral on a global scale. Imagine if your product or service experienced even a fraction of this success at short notice. With the instant world of digital marketing and communication, the pace of viral is incredibly fast. If you have some marketing budget available, you can cash in on any trend and rapidly implement measures that make the most of rising interest.

 

However, you can’t do the same old things…

 

You may need to do things differently in a stale climate. Advertising techniques and messages will invariably differ from those pumped out in the boom times. You’ll be reaching out to customers who are being particularly mindful of their spending, and your approaches may need to adjust accordingly.

 

You can do this by refining the values that you promote. In 2008, Nissan moved away from its focus on big road trips and started to talk about its excellent mileage per gallon to appeal to newly budget conscious buyers. Of course, a long term focus on discounts and low prices is a risky strategy, so you may otherwise want to focus on collectivism and community during the downturn, appealing to a sense of ‘working together to survive this’.

 

Your taglines and messaging will also change. Remember the old LG slogan of ‘Life’s Good’? Towards the end of the last decade this began to grate with customers who were experiencing rising unemployment and constrained budgets. Compare LG with Wal-Mart which tapped into the national feeling in the US with the slogan ‘Save Money, Live Better’. It captured the zeitgeist perfectly.

 

Advertising methods must be considered to achieve value. Mass media efforts are likely to be too expensive and generate too few opportunities. Digital investment is likely to be your first focus, buying in SEM expertise, social media campaign development and other digital methods to get closer to your customers and boost sales without breaking the bank.

 

But what if you do end up with a smaller budget…

 

Of course, you’re going to have a challenge at business review time to hold onto your marketing budget. So how can you do more with less if the worst does happen? You know you’ll still be required to meet your targets so creative approaches will be needed. It’s time to interrogate your analytics to see which channels are giving your ROI and conversions, and which are simply generating traffic.

 

Look at which campaigns or materials you can re-use or quickly update in a minor way before ‘upcycling’ again. Digital channels allow you to share old print and offline ideas in a fresh way, using a new channel to breathe new life into things which worked well previously.

 

You’ll need to prioritise overall value rather than cost. Zero based budgeting is a good technique to carry out a line item review and assess its place in your plan. Content creation is an example of an area which may be deemed to be expensive, but if it is supporting your SEO strategy with the achievement of targets, then it is well worth keeping. Remember, content is king, and all the more so as conversations become increasingly crucial with your customers in a downturn. Instead, look to renegotiate contracts and make procurement efficiencies to stretch the budget.

 

Work with other departments too to see where you can both collaborate on campaigns to give you both value and to achieve your respective targets. For example, can you collaborate with sales? Could you link with IT to build an app in-house? Could your CSR team help with a social campaign that offers broader benefits and powerful consumer messages?

 

Remember too to get social if you aren’t already. Now is the time to be visible and active on the social media channels that your customers are using. You might want to focus on guerrilla techniques to disrupt the market at this stage. Positive controversy can allow your brand to jump out from the pack for the right reasons – and without a big spend. Always think strategically and measure the results of everything you are doing. Ultimately, you will need to become a better marketer in order to deliver the same results but with a smaller budget – the hallmark of a real professional.

 

The takeaway

 

As a business, you must invest constantly in the right marketing activities. Increasingly this means investing in SEM such as SEO, PPC and social advertising. You must talk to your customers regularly with the intelligent use of email marketing, social marketing and other activities. Equally, you must seek out enhanced marketing activities such as new promotions, introducing incentives for loyalty building and implementing a quality referral scheme to encourage your brand advocates to work for you and boost the sales pipeline. Look inwards too. Work hard to strip out operational inefficiencies; outsource skilled services where it makes sense to do so; use technology to improve your customer service; and ensure that your online experience is completely slick, simple to use and visible for your customers.
The reality is that marketing is a long-term investment that requires commitment. And if you take advantage of those companies that lose their nerve and cut their spend, you can enjoy healthy profits in a recession. Brexit? Bring it.