There is no denying that 2020 has been a tough year in many respects, and the rest of the year is not predicted to be any better. The global economy is struggling, and experts tell us that the outlook for the near future is not good.
Businesses and individuals all over the world, from the world’s richest countries to its poorest, are suffering. Sales and profits are down as consumers simply have less money to spend, while problems with supply chains and other logistical issues are driving up business costs.
In times like these, businesses would be forgiven for cutting back on their spending, including and perhaps particularly in areas such as marketing.
However, this would be a big mistake, and means business will miss out on the perfect opportunity to increase their market share. On the other hand, investing in marketing during tough times puts businesses in a much stronger position once the downturn has passed.
How Companies Often React in Tough Times
During recession and economic downturn, it is common for businesses to slash their marketing budget. This is understandable: as expenses rise and revenue falls, businesses look for opportunities to cut their spending. In fact, cuts may be necessary in order for the business to survive during challenging times.
In this context, marketing is one of the first areas that businesses cut, because it can seem like a luxury, and perhaps a luxury they cannot afford. However, in reality, businesses cannot afford not to invest in marketing. By cutting their marketing budget at this time, businesses will lose out on vital sales and will see long-term effects on their market share.
We’ll see why in the following sections.
The Benefits of Investing in Marketing
When your revenue is down and sales are under threat, cutting your marketing spend is probably the worst thing you can do. At this time, marketing is more important than ever. You need excellent marketing in order to promote your business, attract new customers, and strengthen your relationship with your existing customers.
During a global recession or similar crisis, you will see sales fall as your customers have less disposable income. If you want to build those sales back up, you’ll need to attract more customers – this is simple maths! Creative marketing tools allow you to reach new market segments and build your customer base. This could make the difference between surviving and thriving during a recession.
Not only this, but marketing could allow you to take this time of struggle and turn it into an opportunity. At times like these, not only is your business facing challenges, but everyone is struggling. This includes your competitors, and also means that your competitors are going through the same thought processes we described above.
That is to say, at this time many of your competitors are cutting back on their marketing budgets. Therefore, this is a golden opportunity for you to outshine your competitors with superior marketing, and even take over some of their market share. This not only makes sense in theory, but there is also historical evidence for this, as we’ll see in the next section.
What History Tells Us
The current situation may be unprecedented in many ways, at least in most people’s living memory, but this is far from the first global economic recession that the world has seen. The last major global recession was back in 2008, with many other significant downturns, recessions, and depressions before that.
Looking back on some of these periods of history can give us insight into what will likely happen during the impending recession. Furthermore, looking at strategies and results in the past tells us which strategies we should adopt now for the best results.
Analysis of the 2008 recession showed that businesses that cut their marketing spend during the recession saw some improvement to their capital at the time, but delivered inferior results following the recession compared to their competitors who had maintained their marketing spend. Furthermore, the same research demonstrated the companies that invested in marketing during the recession increased their market share.
Following the recession, these businesses saw an increase in their market share by 1.3 per cent. By investing in marketing and advertising while their competitors cut back in the same areas, they gained a greater share of voice (SOV) in the market, which translated into a share of market (SOM) down the track.
Going even further back, research on business performance during the depression of 1920 and 1921 showed that companies that invested in advertising during the depression saw increased sales and profits as the outperformed their competitors. What we should note about this research is that if you are to receive these benefits and increased marketing share, you need to invest in marketing now, during the tough times.
Use this Time to Increase Your Market Share
Even though you may be tempted to cut back on your marketing budget when times are tough, doing the opposite and maintaining your marketing spend will pay off now and in the future.
The important thing is to take action now, during the tough times, in order to see the benefits down the track. You may or may not see huge returns on your marketing investment now. However, historical evidence shows that investing in marketing will pay off once the economy strengthens once again with an increase in your marketing share.
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