The Harvard Business Review study ‘Roaring out of Recession’ looked at 4,700 businesses and three recessionary periods (1980-82, 1990-91 and 2000-02), examining performance in the three years pre-recession, the recession itself and the three-years following.
Of these companies, only 9% flourished, doing better than they had before, and outperforming their industry by at least 10% in sales and profit growth. The winners weren’t those who cut costs faster and deeper than their rivals. It was those that mastered the balance between cutting costs to survive today and investing their capital in the right areas to grow tomorrow.
Marketing is generally a highly effective use of capital during a recession for the majority of businesses. Where immediate business survival is not at risk, marketing should not be reduced. The analysis shows that while the reduction of fixed costs during a recession is desirable, the opposite is true of marketing costs. Marketing is a powerful lever, it enables brands to emerge in a stronger state, driving faster profit recovery when conditions return to normal. Focusing on the current pandemic, it’s clear that recovery will not be uniform across all sectors (tourism, hospitality and airlines will have slower recoveries). There is, however, a strong possibility of a fast V-shaped rebound across many sectors.
The power of marketing and brand building is that it fills the top of the sales funnel. Growing a brand’s share of voice [SoV) or brand visibility means that when your target audience comes into the market in the future (e.g. during the recovery from recession), more of the potential new customers will look for your brand; resulting in more traffic (e.g. website) and increased sales. The balance of investment between brand building and sales activation marketing should be at least 60:40 in favour of brand building.
Many retailers have now ramped up their online marketing and are reporting large increases in demand through online channels. E-commerce is being leveraged at a scale that we haven’t seen before. The brands which are performing best are using content focused on empathy, human connection, humility and humour.
Summary of marketing during a recession
- Don’t stop advertising
- Don’t accept decline as an outcome
- See recession as a growth opportunity
- Keep your brand and sales activation in balance
- Put budget behind proven strategies that you know work
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Source: Field / Brittain [abridged]
