Should You Cut Your Marketing Budget During An Economic Downturn?

Mar 23, 2023 | Marketing

We think it’s fair to say that the last few years have been all over the place. What with Covid, record voluntary job changes, record consumer spending followed by a hike in inflation, and the cost of living crisis…

The latest reports from the Office of Budget Responsibility suggest the UK will not enter a recession this year (as of March 2023), which is good news. However, businesses and consumers are struggling to have much confidence when it comes to planning ahead.

Make sure to check out our list of 28 ways to boost your marketing in 2023, and 6 marketing trends to look out for in 2023.

Table of contents

Why cutting your marketing budget isn’t a good idea

Should you carry on as normal despite an economic downturn?

Stay visible

Keep your eye on the funnel

Nurture your existing customers

Remain steady on pricing

Review your tech stack

Cut what isn’t working

Set realistic goals

Build partnerships

Review your marketing support

Ask your team for help

Marketing is an investment, not an expense

Why cutting your marketing budget isn’t a good idea

When the economy takes a tumble, businesses often have to start looking at ways to reduce their outgoings. With overheads on the rise and the potential of reduced sales, business owners start looking at their bottom line, and marketing budgets can be an easy target.

When marketing spend is slashed, the savings for the business may be immediate. However, the negative repercussions of doing so, whilst possibly postponed, are very real. There’s plenty of evidence to suggest that businesses that come out of a recession strong tend to be the ones who have not reduced their marketing budget:

  • Companies that increased spending during a recession saw a 3% increase in profits compared to a 0.8% drop for those who cut spending.
  • Reckitt Benckiser raised their marketing spend by 25% during the 2009 economic downturn, growing its revenues by 8% and profits by 14% when competitors were reporting significant profit declines.
  • In the US in early 1990s, McDonald’s dropped its advertising and promotion budget leaving the door wide open for Pizza Hut and Taco Bell to step in, resulting in an increase in sales of 61% for Pizza Hut and 40% for Taco Hell, whilst McDonald’s suffered from a 28% decline.

The list goes on, and these case studies all point to one thing – reducing your marketing efforts during a downturn can compound the challenges you’re already facing. Significantly, according to estimates from Nielsen, you could be playing catch up for three to five years afterward so the long-term impact could be devastating for any business.

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Should you carry on as normal despite an economic downturn?

So, with strong evidence to suggest that cutting marketing budgets during an economic downturn is not a sensible move for businesses, does that mean you should just carry on as usual?

Not necessarily.

Making sure your marketing spend is working as hard as it can for you is a good rule to live by at any time, but particularly when budgets are being squeezed. It’s more important than ever to be strategic about where you are focussing your efforts.

We’ve put together a few tips to help you manage your marketing budget more effectively during hard times.

Tips for marketing during a downturn

Stay visible

If your competitors reduce their marketing, this can present a great opportunity for you to increase your market share.

It’s true that the spending habits of both businesses and consumers may change during a downturn, but someone out there will still be in the market for your product or service. If you have no market presence, how are they going to find you, or know to choose you over someone else?

By staying visible in a less crowded field, you will see a lasting positive impact on search results and remain relevant in the future.

Keep an eye on the full funnel

When budgets are under pressure, it can be tempting to focus on marketing tactics with a clear return on investment (ROI), like paid search and social activity.

But forget brand building at your peril – don’t neglect the long-term. It’s important to still spend some time and effort on building strong foundations for when things pick up again. For example, consider creating a hub of helpful content that focuses on delivering long-term value by being helpful to your audience. These efforts can help you become an authority that your prospects trust – when they are ready to buy, they will come to you. This is also a good way to stay on top of SEO: find out why SEO is essential, and how long it takes to see results!

Nurture your existing customers

Targeting your existing customers with tailored and specific communications can be a safer investment when times are tough. Make the most of their brand loyalty, make them feel valued, and offer them something relevant that they simply can’t resist! Knowing your customers is the key to any successful marketing.

Remain steady on pricing

With customers watching every penny, it can be tempting to cut your prices to try and win market share and stimulate sales. Whilst this can help in the short term, you need to be careful that it does not damage your brand reputation in the long run.

One alternative option is to offer tiered pricing options for your core products or services, for example, a value, mid-range, and premium offer. Short-term special offers that encourage a sense of urgency can also be more effective than longer-term price reductions.

Work on value-focused content to reinforce the value of your brand with recession-friendly messaging, rather than being solely price-led.

Review your tech stack

We’ve all been there. Tempted by a piece of software that promises you the world. Often, these promises fail to deliver, or you don’t invest the time in getting things set up properly and only use a couple of the features that attracted you in the first place.

Now is a good time to review all your software subscriptions and decide if they are really adding value to your business. If there are any that are not being used to their full potential, is there a cheaper alternative? Or can you do without it altogether? Regularly monitoring your website is a good way to always stay on top of what tech your business is actually using!

Cut what isn’t working

When trying to economize on your marketing, it can be tempting to spread budgets as thinly as possible across lots of channels, but that’s unlikely to be the best move. Instead, really focus on those channels that work well for you. If you’ve not crunched the data before, now is the time to do it.

Admittedly, it can be hard to track sales back to the sponsorship of your local football team, for example, and we’ve already highlighted the importance of keeping brand-building activities alive. But you should have a sense of where most leads come from and they should get the lion’s share of your budget. If you haven’t already, you should consider tracking online events and conversions using tools like Google analytics to work out where you should allocate your marketing budget.

Keep goals realistic

 Key to successful marketing is having clear goals, but it’s realistic to expect that some of your KPIs will take a dip during a downturn. Don’t beat yourself up over it – keeping afloat and retaining customers may be your priorities now, but keep some numbers in mind to measure your success.

Build partnerships

Can you build relationships with other organisations that have some kind of crossover with your business, or a similar audience? By working together, you could cross-promote each other’s products or services to audiences who are more likely to listen as they already trust the source.

Review your marketing support

When it comes to marketing your own business, don’t waste your own time trying to do things badly. Work out what you can afford and find the right partner to help you. Moving your marketing support away from big city agencies to smaller companies or freelancers could be a good move to save money whilst still benefitting from specialist skills and experience to help you get the most from your budget.

Ask your team to help

If you have employees, they can be a great (and free!) marketing channel! Encourage the team to get on their own LinkedIn profiles and shout about what your business has to offer. If they understand the value in helping, they are often more than willing to do so, but may need the support to do so with confidence.

Marketing should be viewed as an investment, not an expense

We’ve said it before and we’ll say it again! So, we urge you to think carefully before slashing your marketing budget. Whilst it may solve a short-term problem, it’s likely to be creating an even bigger long-term one that may be hard to come back from.

If you’d like some support to know you’re doing the right thing with your marketing budget at this tricky time, do get in touch. We’re happy to have an initial chat at no charge to help get you on track.

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