From equipping employees to work remotely to changing product and service offerings, there are few aspects of running a business that haven’t been impacted by COVID-19. While cutting costs across the board may seem like the best way to ensure survival during this tumultuous time, research points to a different strategy. In fact, marketing during a down economy can not only be key to weathering the storm, but to thriving after COVID-19.
To help you choose the right strategy for your business or organization, Werkbot explores the current economic landscape of the United States, how businesses have survived previous recessions, and why cutting costs on marketing could ultimately do more harm than good.
Are We In A Recession?
If you’re still trying to determine if we’re in a recession, we can help you put an end to your internal deliberation. The National Bureau of Economic Research recently stated that, “the unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warrants the designation of this episode as a recession.”
Many economists believe we’re in the midst of the most severe economic crisis since the Great Depression. While it’s true that the unemployment rate is slowly dropping, the United States is still contending with a myriad of employment issues.
The International Monetary Fund (IMF) is also predicting real gross domestic product growth will decrease by 5.9 percent in 2020. To put this figure in perspective, during even the darkest year of the Great Recession (2009), the United States experienced a 2.54 percent drop in GDP growth. In other words, we’re going to experience a loss that is twice as bad.
Running a Business During a Recession
Let’s get the bad news out of the way first: Not every business will survive the recession. When Harvard Business Review (HBR) analyzed strategy selection and corporate performance during the past three recessions, their findings were disconcerting to say the least.
Seventeen percent of companies in their study couldn’t weather a recession. Some were acquired, a number of publicly-traded companies went private, and others simply went bankrupt.
Only nine percent of HBR’s sample group flourished during the economic downturn. But there are a few similarities between these recession-resistant companies that we can learn from.
These companies didn’t immediately start slashing expenses nor did they blindly start investing. They took a multipronged strategy that involved finding operational efficiencies and taking a comprehensive approach to marketing, research and development, and acquiring new assets. More specifically, when it comes to growing your business amid a recession, research shows that companies should:
1. Aim for Practical Change
Some executives decide that a recession is the perfect time to institute radical change in their company. However, as they aim to upgrade everything, they overlook the gravity of the situation and invest blindly in non-essential operations. These organizations believe that, as long as they continue to innovate, profits will increase. However, this isn’t necessarily the case.
Decision-makers need to consider the evolving spending habits of the market. For example, if you sell high-end workout equipment and sales are mirroring the economic downturn, adding expensive technology to your products that will inevitably raise your prices probably isn’t the best bet.
Instead, dedicate resources to find your enduring and emerging customer groups, and adjust your marketing to target these people. As you gain more data, you can dial in new product features, pricing, and promotional strategies.
2. Focus on Innovation, Not Just Cost Reduction
Cutting costs often comes with a serious price: less innovation, weaker corporate culture, lower quality products and services, and poorer customer service. According to HBR’s research, these “prevention-focused” companies rarely do well after the recession.
To give you a small, actionable example in the context of digital marketing, let’s say you’re a kitchenware company that’s been acquiring new customers through blog content. You’ll not only want to keep this marketing strategy going, but you’ll also want to find new channels through which to connect with customers. Consider adding email newsletters, social media campaigns, and gated content to your promotional initiatives.
3. Prioritize People and Their Needs In Every Aspect of Your Business
Companies that come out of a recession stronger are those that stay closely connected to customer needs. As HBR’s research suggests, increasing spending on marketing may only produce modest returns during the recession, but can substantially increase sales and profits afterward.
To meet consumer needs, companies need to adapt to growing trends. For instance, online shopping during COVID-19 exceeded 2019 holiday-season levels, and nearly 40 percent of those online purchases are made from a mobile device. For companies to be there for their target market, they need to ensure their online capabilities and presence are optimized and appealing.
Furthermore, recession buying patterns often shift from discretionary items to necessities. HBR’s research notes that retailers and service providers that reaffirmed their understanding of customers’ needs through their marketing fared better during previous recessions.
It should also be noted that businesses need to prioritize the people who work for them as well. Consumers are looking to see how companies are treating their employees. Edelman found that 71 percent of people agree that if they perceive that a brand is putting profit over people, they will lose trust in that brand forever. To increase brand trust, you should promote what your brand is doing during COVID and recession, emphasize its core values, and highlight how it's adapting, in conjunction with showcasing product and service offerings.
Businesses Are Pausing Instead of Pivoting
One of most significant problems when it comes to marketing is that many advertisers are halting their campaigns rather than adapting them. Roughly 45 percent of advertisers held back, stopped, paused, or cancelled campaigns due to COVID.
Yet, a study from the Advertising Specialty Institute found that recessions are one of the best opportunities to increase sales and build market share. One of the core reasons why marketing in a down economy is effective is because there is significantly less competition. In the context of digital marketing, advertising during a down economy can mean paying less money for more impressions, clicks, traffic, and conversions than you would in a saturated market.
Find The Right Agency
Between the pandemic and our country’s political, social, and economic unrest, it’s essential to have a nuanced approach to your promotional strategy. You need to align with a marketing agency that can help you reach your target audience while also ensuring your messaging doesn’t come off as insensitive or brazen. Additionally, you need to find an agency that can tailor a strategy to your company’s budget.
At Werkbot, we customize a marketing strategy around your specific needs and have a seasoned team of developers, marketers, and designers to see it through. If you would like to learn more about our services and how we help businesses succeed, visit our contact page today.