Marketing during a recession can be a challenge. Economic uncertainty and consumer confidence is at an all-time low, so it is tempting for companies to cut their marketing budgets in an effort to save money. However, history has shown us that companies that increase their marketing spend during a downturn benefit the most, with reduced noise, competitors cutting marketing budgets, and the cost of advertising dropping with less demand – you can reach more people, and get more attention, at a lower cost.
Procter & Gamble is a great example of a company that increased its marketing spend during a recession. During the 2008 financial crisis, P&G increased its advertising budget by 10% and increased its market share in several key categories. The company’s CEO at the time, Bob McDonald, said that the decision to increase marketing spend was based on the belief that consumers would continue to buy essential products, even during a recession.
Another example is Amazon. The company started in 1994 during the dot-com recession when many companies were struggling to stay afloat. Amazon’s founder, Jeff Bezos, saw an opportunity to create an online bookstore and invested heavily in marketing to get the word out. Despite the recession, Amazon grew rapidly and went on to become one of the most successful companies in the world. In January 2023 Amazon cut 18,000 jobs and will be interesting to see what happens to their marketing budget during this time.
It’s not just established companies that can succeed in a recession. Many startups have also started and grown during economic downturns. For example, Airbnb was founded in 2008 during the financial crisis. The company saw an opportunity to offer affordable accommodation to people who were looking to save money and quickly gained traction. Others that started in, or just before a recession include giants such as Disney, Google, IBM, Microsoft, and Salesforce. You can grow in a recession.
Despite these success stories, finance departments’ go-to is to cut marketing budgets in a downturn. This is often seen as a short-term cost-cutting measure, but it can have long-term negative consequences. Cutting marketing spend can lead to reduced brand awareness, decreased customer acquisition, and ultimately, lower revenue. It’s also an opportunity for bolder competitors to take market share.
One reason for this is that many boardrooms still do not fully understand the value of marketing. Marketing is often seen as a cost center rather than a revenue generator, which makes it an easy target for budget cuts.
Finance always has a seat in the boardroom, marketing not so much. Without this influence, the argument is already lost by the time cuts begin to flow through the company.
Sadly marketing is seen by many as the department that makes presentations beautiful and creates some pretty little adverts, rather than the crucial role marketing plays in building brand awareness, driving customer acquisition, and ultimately, generating revenue.
History has shown that companies that increase their marketing spend during a recession can benefit the most. With reduced noise, competitors cutting marketing budgets, and the cost of advertising dropping with less demand, companies that invest in marketing during a downturn can gain a game-changing advantage. Will your organisation be willing to be bold and go for growth?