When the UK first entered the latest recession, many businesses started thinking about cutting back in the short-term on what they considered ‘non-essential spending’ to lower overheads and keep profit margins acceptable. For many businesses the first victim was the marketing budget.
The UK is now in the longest recession since the war and many businesses that temporarily cut back on marketing spend in order to ride out the storm, are finding themselves getting left behind by those that continued to market in the downturn.
It’s a common mistake made by businesses in a recession. They believe that by cutting marketing spend they are saving money in the short-term and ensuring long-term survival.
It may seem counterintuitive to maintain or increase spending on marketing activities during turbulent times, but this is exactly what businesses should be doing to survive. In fact, the opportunities for businesses that increase their marketing spend during a recession when competitors are cutting back, are vast. Businesses that continue their marketing efforts throughout the recession can pick up market share from those that are reducing their activities. This is the time to take advantage of marketing to improve market share and return on investment at a lower cost than during good economic times.
The benefits of marketing in a recession
Not only is the key to business marketing in a recession to do more of it, but also to market smarter. The way that it is handled will of course be different in leaner times, and getting the budget can be a battle, but history has shown time and time again that if done right the spend more than justifies itself.
Furthermore, the marketplace has grown significantly, and businesses were already fighting harder for share. The UK’s business world is now almost three times the size it was during the last recession and competition has intensified. There is growing market saturation, promotional wars and thousands of new or repackaged products being launched each year. The challenge of standing out from the crowd has increased threefold and in order to meet it, businesses need to ensure constant and strong marketing activity. They cannot afford to make the mistake of cutting back on marketing.
In fact, this is the time when businesses are looking out for brands that actively engage with them with relevant messages and offers that meet their changing needs.
Mistakes to avoid
Another outcome of previous recessions is that too much focus is placed on customer acquisition at the expense of customer retention and this has resulted in increased churn. Drive value from existing customers, particularly the most profitable ones, by understating them and their needs. Investigate the key churn issues, use specialist insight and analysis to implement strategies that will mitigate them. It can be more practical and prudent to concentrate on existing customers than to go searching for new ones. And again by finding the right providers of services that enable businesses to do this and evaluating how a marketing budget can be adapted to do this, expenditure need not necessarily increase.
This brings us to the most important factor… understanding the customers. It is essential that marketers look at their clients in a new light. This means understanding what drives them, what they expect and what is important to them. During a recession the driving force behind a current or potential customer’s decision changes and value for money becomes far more important. They are more likely to negotiate harder, more willing to postpone purchases, trade down or buy less. Failing to engage with these customers could leave them open to the next business that can offer a cheaper product or service of the same quality.
Smart marketers, those that have had database marketing at the heart of their businesses for years, see the value of it and maintain their spending in this area during difficult times. Businesses that are new to database marketing often tend to be the ones that cut back, but many studies have continued to show that this is false economy.
During turbulent times, businesses do need to make changes, this is a certainty. Knowing the right course of action is often less obvious and the changes are frequently in the wrong places. Do not abandon the marketing strategy in a recession; adapt it in ways that will demonstrate a strong short-term return on investment and ensure success in the long-term.
