It’s fairly obvious to business leaders that the COVID-19 pandemic has tested, and continues to test, the resolve, creativity and flexibility of marketing leaders and their organizations. Much like the virus itself, myths and conspiracies abound in terms of how marketers are (or should be) mitigating the impact. But one thing is for sure: this isn’t the first and won’t be the last time volatility forces marketers to be agile in the face of uncertainty
That’s why I’m sharing this multi-part blog series, based on my experience from the global recession in 2008 and now COVID-19. In many ways, these rules apply to both set of situations, and likely any tumultuous events in the future. Here is the first of five posts on The New Rules of Marketing in a Downturn.
Rule #1: Zig When Others Zag; Why It’s Imperative to Maintain Marketing Spend During Downturns
As we continue to cope with the aftermath of the COVID-19 outbreak, businesses and individuals alike are actively seeking ways to decrease expenses and stretch funds as far as possible.
With many businesses temporarily shutting down, and many people out of a job and striving to make ends meet, whether you’re a multinational, an SMB or a micro enterprise, chances are your marketing budget ranks high in the firing line due to the pandemic.
However, as surprising as it may seem, the opposite should be true. Multiple industry and academic studies over the last few decades have demonstrated time and time again that history has favored those businesses that approach marketing as a profit center, not a cost center, boosting retention and acquisition while their competition “drift”. Thus, a downturn can actually become a great opportunity to steal market share.
In 2009, the Journal of Advertising Research published a review of more than 40 empirical studies on the impact of marketing during and after a downturn. Researchers looked at studies from across the globe that covered every momentous recession since 1920, and concluded that:
“Most firms tend to cut back on advertising during a recession. This behavior reduces noise and increases the effectiveness of advertising of any single firm that advertises. Thus, the firm that increases advertising in this environment can enjoy higher sales and market share.”
This suggests that not only should you maintain your marketing budget in a crisis, but it is critical to continue or even amplify your marketing efforts.
Here are three reasons why short-term thinking and applying cutbacks to your marketing budget are likely to harm your business, while maintaining or stepping up your marketing game can give you a competitive advantage, in the long-run.
Rule 1a: Cheaper & More Effective – Take Advantage of Reduced Digital Advertising Rates
The level of “noise” in a company’s product category drops during downturns, when competitors typically cut back on their ad spend, and the lower rates create “buyer’s market” for brands. The lower noise level also allows advertisers to reposition a brand or introduce a new product. Along these lines, studies have shown that direct mail advertising, which can provide greater short-term sales growth, increases during a recession.
Similarly, during prior economic slumps, disciplined marketers took advantage of decreased digital advertising rates as competition relaxed across popular platforms. Seemingly, the COVID-19 pandemic is no different, with reported ad prices across Facebook and Instagram falling by 20% in March 2020.
Rule 1b: Never Take Your Foot Off the Gas – Preserve Brand Value
Strong brands tend to perform better in terms of value preservation and revenue generation during downturn periods – a further argument for maintaining or increasing marketing efforts. Brands can project an image of corporate stability during challenging times. By maintaining your position in your customer’s mind, you can give them a sense of normality when they might be experiencing turmoil in other areas of their lives – and, in doing so, they’ll come to perceive you as reliable, especially if your competition cuts back or even entirely halts their own marketing efforts. Conversely, if your competition chooses to increase its advertising, keeping up the pace becomes even more imperative.
Rule 1c: Preserve “Share-of-Mind”
When marketers cut back on their ad spending, the brand loses its “share of mind” with consumers and/or clients, with the potential of losing current – and likely future – sales. On the contrary, those companies that maintained or grew their ad spending increased sales and market share during “down” times and afterwards.
It is better to maintain share of voice (SOV) at or above share of market (SOM) during a downturn: the longer-term improvement in profitability is likely to greatly outweigh the short-term reduction. An increase in SOV typically leads to an increase in SOM, and if other brands are cutting budgets, the longer-term benefit of maintaining SOV at or above SOM will be even greater.
To sum up, marketing in any downturn requires challenging what you “think” you’re supposed to do and looking for the opportunities and not just the obvious challenges in front of you. We’ll explore the additional new rules of marketing in subsequent posts:
Rule #2: Redefining Organizational Agility
Rule #3: The New Ways of Selling and Closing Business
Rule #4: If You Didn’t Have a Digital Strategy Before, You Do Now
Rule #5: Marketing Resiliency: Preparing for The Next Threat