Thanks to rapid inflation, labour shortages, and ever-increasing interest rates, the word “recession” has been mentioned much more than usual. Individuals and companies have been anxiously fearing a recession, and it looks like it may just come true.
Economists at the Royal Bank of Canada have stated that Canada is headed for a recession. They are predicting that it will be a moderate recession, but that it will be relatively short-lived. Nevertheless, a recession can significantly impact both consumers and companies.
A Recession: What To Expect
During a recession, a country’s economy experiences negative growth. Unemployment rates increase, and consumer spending decreases. In other words, fewer people have jobs, so they spend less money. When consumers want to make purchases, they tend to be more price sensitive, opting for more affordable options.
From a business perspective, a recession can be especially difficult for small businesses and budding companies. Big businesses and store brands have already established themselves in the market. A recession can be hard for small businesses to gain more consumers, especially if their prices are a bit higher than large companies.
Marketing During A Recession
Marketing has always been an important tool in attracting more consumers and helping your company grow. It is especially important during a recession, but it can be complicated; the decrease in spending and increased competition make the market volatile for new companies. Many will feel the need to cut costs and restructure their processes, like digital marketing.
This article explains everything you need to know about marketing during a recession. We explain the must-dos and necessary preparations for marketing at this time. We also share some fundamentals for a great digital marketing strategy, helping you dominate the advertising space—even during a recession.
Must-Do's For An Effective Marketing Strategy
First, our experienced marketers have found that there are three things you must do to have an effective marketing strategy during a recession. These can make or break your sales, growth, and consumer relationships.
1. Do Not Immediately Cut Your Marketing Budget
Although other businesses will impulsively start slashing their advertising budgets as soon as they hear the word “recession,” we suggest you wait.
Many small businesses fail to consider that reducing your marketing budget can significantly impact the revenue and growth of your company because how can you sell more products or services if you do not get the word out about said products or services with marketing?
In short, cutting your online marketing budget conflicts with your business objectives. It is imperative that you wait to cut your budget until there is no other choice. You will have an increased sales opportunity if you maintain your traditional and digital marketing budget for as long as possible.
When cutting your budget is necessary, do not eliminate your marketing budget altogether. Simply reduce your marketing investments into areas where your marketers have seen great success.
2. Focus On Retaining Existing Customers
Marketing departments have two main goals: generate more leads and maintain relationships with existing customers. Generating more leads helps with business growth, whereas keeping a relationship with existing customers helps maintain sales. But, during a recession, marketers may have to adjust their strategies away from growth to focus on retaining their existing customers.
It can be hard to convince new customers to buy your goods or services during a recession. Consumer confidence declines when they have less to spend; spending money on a product or service you do not know the quality of seems like a gamble many may not be willing to take.
In contrast, customers are more likely to make repeat purchases from companies that they trust. As a result, marketers need to shift their focus to advertising to consumers to have already invested in their products or services.
Customers who have already developed trust and a relationship with your brand are more likely to purchase from your company again—even during poor market conditions like a recession. So while your company may not be generating many new consumers, you can still generate some sales through existing consumers.
3. Remain Consistent
The key to online marketing is being consistent. Colours, voice, and images should be consistent because they are key identifiers of your company’s brand, the thing that distinguishes your company from its competitors.
When a drop in business occurs, many companies may take that as a sign that their marketing is not working. Marketers may feel like they need to change their advertising and marketing tactics. But, a decrease in sales is inevitable during a recession.
Marketers should avoid changing their digital marketing strategy during the middle of a recession. If advertising and marketing change dramatically, it may cause consumer confidence to decrease. Some loyal customers may not connect with the new marketing strategies, and, in some cases, they may not recognize your brand altogether.
A recession is not the time to play around with your marketing or brand. It is critical that your marketing remains consistent in order to maintain trust and familiarity with your core customers.
How To Prepare Your Marketing Strategy For An Economic Downturn
Now that you know what you must do to make your marketing effective, you need to prepare for the economic downturn.
Marketing during a recession requires careful planning and strategy to ensure it is a success. Our experts have compiled a list of things you can do to prepare your marketing investments for a recession.
1. Save Money By Cutting Your Capital
When an economic downturn is on the horizon, you must prepare to save money. Consumer spending drops during recessions, meaning your business will have less money to spend. As a result, you will need to be critical of what you would like to spend your money on.
Some businesses may think their marketing should be one of the first things to go because retail spending has decreased, but this is not a smart idea. If you limit your marketing spending, your marketing efforts will not go as far; you will not reach as many potential customers as possible, thus limiting your ability to make money even more.
We recommend that you cut costs in the form of capital. Take a hard look at your company’s assets and determine whether you could eliminate some of them. Is there a software subscription that you are still paying for but don’t use? Is your business still paying rent on an office when most work is done remotely?
When you find capital to cut, you can maintain your marketing spending. As a result, your marketing activities can continue unaffected, allowing your business to come out stronger than those who stopped marketing during a recession.
2. Get Help From A Marketing Company
Since you are still spending money on marketing during a recession, you need to ensure that money is being put to good use. If your marketing campaigns are not optimized for the best performance, your marketing expenditures are being wasted.
Collaborate with a marketing company to audit your current marketing campaigns. Marketing professionals will have the knowledge and experience to identify strengths and weaknesses in your marketing strategy. They can also recommend pivots to help direct your marketing budget to the right areas. For example, they may suggest that your company spends less on social media advertising and more on search marketing.
3. Be Aware Of Your Situation
You will need to be prepared for how a recession may impact your business; the best way to be prepared is to be aware of your situation.
A recession can be make or break for a business. As we have seen from previous recessions, some industries are hit harder by the economic downturn than others. For example, in the 2008 recession, industries like home furnishings, automotive dealers, construction and building material dealers, book publishers, stationery stores, and hospitality were affected more by the economic downturn than other industries.
Complete some market research to determine whether your industry is more affected by recessions than others. Consumers tend to act the same during recessions, so you can assume that any industries that were negatively impacted in previous recessions will similarly be negatively affected in a current or future recession.
If market research shows that your industry will likely be affected more than others, come up with a business plan with an expected loss of revenue. Keep your marketing budget at a consistent 7% despite the loss in revenue. A healthy, consistent advertising budget will ensure that you still reach your target audience throughout the recession.
Businesses that outsource their marketing to marketing companies should discuss their situation with their marketers. Be honest that your sales or services may be significantly affected by the economic slowdown. Many marketers will devise an advertising plan to help you reach as many prospective customers as possible before the recession is in full swing.
4. Evaluate Your Current Marketing ROI
As previously mentioned, the marketing strategies you utilize during a recession must be effective. If you invest most of your budget into a strategy that is not effective, you are wasting precious resources.
You can determine whether your marketing strategies are effective by investigating your marketing ROI, also known as return on investments. ROI is a ratio that compares how much money you invest in something (in this case, marketing) versus how much you get in return. It is a helpful calculation that can help you determine how effective your online advertising is.
When investigating your ROI, determine where you are getting the highest returns on your investment. For example, you may notice increased sales with content marketing rather than paid social media or Google ads. Use that information to reallocate your funds to the facets where you receive the highest ROI.
Digital Marketing Strategies For A Recession
As your competitors cut their advertising spending, you can come out on top with an effective strategy.
It can seem difficult to create a strategy for marketing during a recession, especially if you have never dealt with it before. We have compiled a list of strategies that you should include when building out your plan for a recession.
If you are still unsure about exactly how to approach marketing during a recession, we recommend working together with professional marketers for some help. They can help you create and implement a strategy.
1. Don't Skimp Out On Your Facebook And Google Advertising Spending
Facebook Advertising and Google Advertising are powerful advertising platforms that make reaching consumers easy.
Google Ads are considered active user intent, showing your ad based on a user’s previous searches and activity. In contrast, Facebook ads are more passive, appearing in the user’s newsfeed based on targeting determined by Facebook’s pixel. This cookie will track a user’s activity on a specific website.
Both Facebook and Google are great marketing platforms for companies and can result in many sales. That is why we recommend you run a healthy budget on both Google and Facebook ad spend budgets during a recession.
The best part is that when other companies reduce their advertising spending, you will have a lower cost per lead (CPL). There will be less competition trying to reach your target market.
CEO and co-founder of Merged Media Jason Hunt explains, “The less marketers on Meta (Facebook and Instagram), the more people you will reach with your budget. This means the lowest conversion costs for marketers. We saw this when the pandemic first started and will likely see this again.”
2. Have A Website Ready
Internet advertising is the way of the future. The internet is integrated into many people’s daily lives and processes, including shopping or contracting services.
According to a study by Episerver, 92% of consumers will visit a company’s website for the first time to do something other than purchase. Approximately 45% are looking for service or product categories, 26% are comparing prices to other companies, and 11% are gathering information like hours and locations.
If you do not have a website, you risk missing out on many potential customers. Many people will be dissuaded by the fact that you do not have a website to consult before they can make a purchase, so they will likely turn to other companies.
If you do have a website, but it is old, slow, and not up to date, it will likely scare away many customers. Episerver found that 98% of consumers were dissuaded from completing a purchase because of incorrect or incomplete content on a website. Other studies have similarly shown that slow load times have stopped people from purchasing online.
As you can already tell, a fast, complete, and visually appealing website is a must-have in this market. That is why it is wise to invest some of your money in website development before a recession hits.
Professional website development or updates will put you in a good position before the recession. You will have a sleek, functional website that will provide customers with everything they need to know and encourage them to buy. Plus, when your website makes sales frictionless, it increases customer satisfaction and builds trust and loyalty.
3. Make Your Advertising Fit The Environment
You know that the market is barrelling towards a recession, and so do your customers. So why would you try to avoid the looming economic situation in your marketing strategy? Avoiding it is like not talking about the elephant in the room, even though the elephant is squishing both you and your customers.
Consumers gain confidence and trust in businesses that acknowledge current world events. Take Nike’s ad campaign with former NFL quarterback Colin Kaepernick, for example.
In 2018, Nike released an ad campaign featuring Colin Kaepernick, an NFL quarterback who is known for kneeling during the national anthem before NFL games. When he first addressed his protests in 2016, he explained, “I am not going to stand up to show pride in a flag for a country that oppresses black people and people of color. To me, this is bigger than football, and it would be selfish on my part to look the other way. There are bodies in the street and people getting paid leave and getting away with murder.”
When Nike launched an ad campaign with Kaepernick in 2018, bringing attention to police violence against black people, the company saw sales increase by 31%. Clearly, Nike’s market appreciated the company’s willingness to use its brand voice to speak up about current political and social issues.
Similar patterns can be seen with companies that released statements about the collective hardships of the pandemic, encouraging people to practice social distancing and wear masks.
Overall, companies should use their brand voices and advertisements to highlight the ongoing events in the world. However, while it is a good idea to highlight the current situation in your advertisements, don’t dwell on the recession too much. Your team will need to fine-tune your ads to touch on the current market and extend empathy to your consumers without making them feel afraid to spend money on your products or services.
4. Start Your SEO Program Right Away
Search engine optimization (SEO), also known as search marketing, is a marketing strategy that involves improving your search engine ranking and website traffic through link building, authority, keywords, and website optimization.
SEO is an incredibly useful strategy to help your business stand out from local competitors, but it does take time. It can take anywhere from 4 to 12 months for your website to rise in search rankings because Google and other search engines need to crawl and index your website. Google then uses this information to influence your website’s ranking in search results.
We recommend you start your SEO program as soon as possible. The earlier you start your SEO program, the better position you will be in during a recession. If you decide to start SEO during a recession, then you are likely not going to reap its benefits until later in the recession or even until after the recession is over and the economy is thriving again.
Have A Plan For The Economic Recession
While many companies may want to go dormant and wait until the economy recovers, that is not the right way to approach a recession. Businesses that cut their marketing budgets and stop advertising tend to miss out on sales and experience more negative growth than their competitors. Others who change their strategies during the recession are also likely to see their sales drop.
The best way to approach recession marketing is to plan early. It would be best if you had a well-thought-out plan for your budget, advertisements, and strategies.
Despite what many people may say, it is not impossible to come out of a recession in a good position. In fact, some companies grow during recessions. Yours could be one of them if you prepare early.