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Why You Shouldn’t Cut Your Marketing Budget in Times of Crisis

During times of crisis, much like the global pandemic we are facing with COVID-19, it becomes extremely easy for businesses to panic and the result of this is usually a knee-jerk reaction of cancelling any and all marketing activity. In the aftermath of the 2008 recession, advertising spend in the US dropped by 13%. Whilst cutting these costs quickly may seem like a solution to potential financial trouble, it can actually leave you worse off when the world returns to normal.

Why You Shouldn’t Cut Your Marketing Budget

Cutting your marketing spend in anticipation of, or during, a recession can potentially be more damaging to your business than the crisis itself. An IPA (Institute of Practitioners in Advertising, UK) study actually found that when businesses cut their marketing spend by 50% it then took them 3 years to catch up to their competitors who had not made any reductions to their marketing spend whilst the crisis is happening.

Maintaining your marketing activity can help you to project an image of corporate stability to consumers and retain customer loyalty which can lead to even more success when spending picks back up. It’s extremely important to remember that loyal consumers are the primary source of cash flow for any business and postponing any marketing can result in your business being forgotten by them.

All businesses should keep their main focus on having a solid business in the post-crisis period, and history has proven that those who do just this are those who continue their business activities as though nothing has changed. In fact, some of the biggest companies in the world were actually startups during recessions, including Disney, Microsoft and Adobe. This goes to show that businesses are still able to achieve success even in times of financial uncertainty.

The 1920s

The Great Depression

One of the best examples of a company prospering during a recession is from The Great Depression. In the 1920s, Post was the leader in the cereal market, but during the Great Depression they cut back on their marketing significantly. Meanwhile, their rival Kellog’s, doubled their advertising spend and saw their profits increase by 30%! Kellog’s were soon the category leader, which is something they have maintained for a century.

Roland S. Vaile tracked 200 companies through the recession of 1923, and he reported that the companies who had continued to advertise during the crisis were 20% ahead of where they were before the recession. The companies who reduced their marketing were still in the recession – 7% behind where they were in 1920.

The 1970s

The 1973-1975 Recession

It was an energy crisis that triggered the 17-month recession in 1973-1975. At the time, Toyota Corolla was second to Honda Civic in the first government issued miles-per-gallon report. When the recession hit, Toyota resisted the temptation to drop their marketing budget. This turned out to be the correct decision, as by 1976 Toyota was the top imported carmaker in the U.S.

The 1990s

The 1990-1991 Recession

During the recession in 1990-1991, McDonald’s made the decision to reduce their marketing spend and promotion budget. Pizza Hut and Taco Bell took advantage of this, by retaining their own respective marketing activities, and as a result they both saw increased sales. Pizza Hut saw a 61% increase in sales, and Taco Bell’s sales increased by 40% – however, McDonald’s saw their sales decline by 28%. A study done by MarketSense also showed brands like Jif experienced sales growth of 57% after increasing their marketing during the recession.

The 2000s

The 2008-2009 Recession

During the ‘great recession’ of 2008-2009, Amazon grew their sales by 28% by continuing to innovate with new products such as the Kindle. This helped them to grow their market share, and on Christmas Day 2009 Amazon customers bought more e-books than printed books. This helped to enforce Amazon as a trusted and valued company in the minds of their customers, who saw them introducing a low-cost alternative for customers who may have been struggling during the recession.

How TRUSTist Can Help

History has shown us that the best thing any business can do in a crisis is to continue as normal, and this includes ensuring they are marketing their product/service as much as they were before.

TRUSTist helps businesses by getting them stars in natural search results. This helps to make the listings more attractive and causes them to stand out from the competition around them. As a result of working with us, one particular franchise client saw 7,900 more clicks to their website from natural search results in a 3-month period. This cost the client just 2.8p per click as a result of them working with us – which is far less than the average £1 per click usually spent on Pay-Per-Click advertising!

NextAdvisor have also written a guide to help businesses during the pandemic, including:

  • Insight on where new entrepreneurs can find funding in a tough economy
  • Information on the most commonly used financing options during tough economic times
  • Seven top tips for recession-proofing your business

Book a Demo

If you want to know how the TRUSTist platform could benefit your business then please book a demo.

Sources and Useful Information

https://www.thehouseofmarketing.be/blog/should-we-reduce-marketing-budgets-to-survive-this-bloody-crisis

https://www.forbes.com/sites/bradadgate/2019/09/05/when-a-recession-comes-dont-stop-advertising/#74b02f5f4608

https://www.asicentral.com/html/open/ProductsAndServices/supp/pdfs/Advertising_in_a_recession.pdf

https://www.imediaconnection.com/articles/ported-articles/red-dot-articles/2008/oct/how-brands-thrived-during-the-great-depression/

https://hbr.org/2009/04/how-to-market-in-a-downturn-2

Updated on May 12, 2020

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