When times are good you should advertise. When times are bad you must advertise.

In a recession, the marketing budget is often the first to be tightened, but is that really the right way to go? Yes, if in the long term you want to reduce your brand awareness, customer loyalty and lose market share to competitors.

Here are some reasons to increase the company’s marketing budget during a recession and why you should invest in content marketing – but first three examples from the other side of the Atlantic.

In the USA during the 1920s, the breakfast cereal manufacturer “Post” was the market leader in the breakfast cereal category. At the end of the decade, the Great Depression hit and Post significantly reduced its advertising budget, while competitor Kellogg’s did just the opposite and doubled its advertising spending. In addition, Kellogg’s invested heavily in radio and introduced a new type of cereal, Rice Krispies – “Snap,” “Crackle,” and “Pop” for those of you who remember. As the U.S. economy recovered, Kellogg’s aggressive marketing strategy paid off – the company’s profits increased by 30 percent and it became the category leader.

In a study conducted from 1980 to 1985, McGraw-Hill Research analyzed 600 companies covering 16 different industries. The result: the B2B companies that maintained or increased their advertising expenditures during the recession of 1981-1982 had, on average, significantly higher sales growth, both during the recession and in the following three years, than those that reduced their advertising expenditures. By 1985, the companies that were aggressive advertisers during the recession had increased 256 percent compared to those that cut back heavily on their marketing.

Another example. In the early 90’s there was another recession and McDonald’s chose to reduce its advertising and marketing budget while Pizza Hut and Taco Bell did the opposite. As a result, Pizza Hut increased its sales by 61 percent, Taco Bell’s sales increased by 40 percent – McDonald’s sales decreased – by 28 percent.

History is littered with similar examples of companies that have come out the other side as winners with maintained or increased marketing budgets.

Five reasons according to Forbes why you should accelerate, rather than hit the breaks
  • A weaker economy often leads to infidelity between brands, as the consumer becomes more price sensitive and thus more open to change. This is something advertisers can take advantage of and thus gain market share.
  • If the brand continues to be visible in its marketing even during tougher times, consumers’ image of the brand will be strengthened and the company will be perceived as stable. It is important for both short-term sales and long-term branding.
  • Media noise in a product category may decrease when competitors cut back on their advertising. It enables companies to reposition a brand or even introduce a new product. As Kellogg’s did for example.
  • The cost of advertising (both production costs and media buys) often falls during recessions. The lower prices create increased opportunities for brands to be seen. It will simply be cheaper.
  • When marketers cut back on advertising spending, the brand loses its position with consumers, risking the loss of both short-term and long-term sales. Retrieving market share after a recession is often expensive and difficult – take the cereal brand Post as an example.
We are only human

Even though we live in a society where all information is available to us just a click away, the concept of “lag”, i.e. delay, is important to take into account. In short, it means that once consumers perceive that a recession is over, the macro economy has already recovered for a period. We are thus a little behind in our perception of what the economy actually looks like – both mentally and practically. This means that if those who make decisions about advertising are as late as the consumer in perceiving the swings in the business cycle, those who invested in marketing through the recession will win the battle for the consumer. Another reason not to slow down your marketing efforts – when you think it’s time to accelerate again, it’s already too late.

This is how you can reason
  • Act quickly and think long-term.
  • Listen to what consumers say and adapt the company’s offer to what is currently in demand.
  • How do you think consumption behaviors will change? Can you customize your offer?
  • Review channel strategies and analyze actual and expected impact.
  • According to the news site Finanstid, it is important to search engine optimize all communications in order to increase accuracy and ranking on Google.
  • Keep the Google ranking! It’s expensive to catch up on lost rankings.
  • Measure, adjust, analyze, change and measure again. Be active in the analysis work.
Why Content marketing?

Content marketing has proven over time to be a very effective way for companies to communicate and here are four reasons (there are many more) according to Forbes, why you should invest in it.

  • Content marketing is 62 percent more cost-effective than other marketing strategies.
  • Using content marketing as a strategy leads to sales and is a valuable tool for lead generation.
  • Regular communication builds trust with consumers and this leads to both increased brand awareness and long-term sales.
  • Your competitors do. An increased proportion of companies have invested in content marketing in 2022 and it is a stable upward trend.

Do you want to know more about how your business could reason about communication during tougher times? CONTACT US AT STARLINGS!