Despite signs of the UK returning to growth, it’s fair to say that we’re living through an economic downturn with investment in the UK down, slow growth and high inflation.
But it’s not all doom and gloom! As a professional services provider, we work across a multitude of industries and we see many UK businesses thriving. More often than not, though, it’s the result of historical marketing activity paying off, alongside a commitment to maintaining or even growing existing marketing budgets.
Of course, the temptation when you face flat or even falling revenue, is to cut your marketing spend. Why invest during a downturn when you should be battening down the hatches, after all?
Today, I want to explore the idea of why you should indeed be investing in a downturn and how it could in fact be more risky not to.
But first I want to tell you a little story about a certain company you may have heard of.
The Parable of Kellogg’s
Before the Great Depression of the 1930s, the cereal market in the US was dominated by two major players: Kellogg’s and Post. After the stock market crashed in 1929 many businesses went under and those that didn’t looked to cut costs wherever possible, especially in advertising and marketing.
Post did what many were doing at the time and drastically cut back on their advertising budget.
Kellogg’s, on the other hand, saw an opportunity.
Instead of following suit, they doubled down and increased their marketing budget, even introducing a new cereal to the market: Rice Krispies (heard of it? 😉).
Suffice to say, Kellogg’s aggressive marketing strategy during the worst financial crisis in modern history had a profound impact. As Post and other competitors became less visible in the market, Kellogg’s filled the vacated space these diminished marketing budgets left and became the more well known brand. Sales increased and, well… the rest is history!
Do the Maths
The story of Kellogg’s serves as a powerful lesson. While fiscal discipline and prudence are good business traits, so too are brinkmanship and ambition, whether or not you’re living through an economic downturn.
There are opportunities for those businesses willing to take calculated risks in a downturn. Accelerated growth, increased market share, brand awareness can be achieved, not despite being in a downturn, but because of it.
Let me explain…
Let’s say you spend £10k per month on marketing and your nearest competitor is spending £20k. The deficit between your two marketing budgets is therefore £10k. So far, so simple.
In a downturn the tendency is for businesses to pull back on marketing spend. So you and your competitor both reduce your marketing budgets by £5k. You’re both spending less, but the deficit of £10k remains.
Now imagine what would happen if your competitor reduced their marketing spend by £5k but you actually doubled yours to £20k. Suddenly your competitor is in the red and you’re outspending them by £5k a month.
Sustain this state of affairs for two years and you’ve established a £120k surplus in marketing spend over your nearest rival.
That’s £120k more brand presence, voice share and opportunity to build trust and steal business from said competitor.
Now imagine this multiplied across the vast majority of your competitors who are all choosing to reign in their marketing budgets. Your positioning amongst the competition, based on marketing spend, jumps massively.
As long as you’re doing marketing right and working with the right people, whether that be in-house, agency or a combination, then eventually this approach will start paying dividends. Whilst they may not be Kellogg’s scale, they are likely to be huge.
You just need to hold your nerve and see it through.
The Lipstick Effect
There are caveats to all of this, of course. Economic downturns tend to change the nature of the market you’re operating in, but often in unpredictable ways. If you sell luxury goods, logic may presume that you’re more likely to sell less, whilst cheaper ticket items may well see you in an advantageous position.
Often this is the case but certain luxury goods can and do become more popular in an economic downturn. We call this the lipstick effect and understanding it and how your market is changing around you is crucial.
This may seem a bit off topic but it’s important to realise that downturns can be unpredictable in terms of the businesses they hit and don’t hit.
Now imagine if your product fell into this ‘lipstick effect’ category without you knowing it and you decided to preemptively reign in your marketing spend before it started kicking in. The opportunity lost could be huge and you’d probably never know it until that horse had well and truly bolted.
Counting the Opportunities in a Downturn
I want to get a bit more granular now and break down for you some of the tangible and achievable opportunities and benefits that your business could see if you’re bold and brave enough to be investing when others are being short-sighted and reigning that shit in:
Maintaining Brand Presence: During a downturn consumers tend to have less disposable income and are more selective about where they spend their money. By maintaining a strong brand presence, you can remain top-of-mind, and search results, for when they do get their wallets out.
Reduced Competition: As discussed, your competitors will inevitably freeze or reduce their marketing spend during a downturn. This provides a golden opportunity to outspend them and gain a competitive advantage.
Cost-Effective Marketing: During economic downturns, advertising costs, especially for ad placements on platforms like Google, can decrease significantly due to reduced demand. This means you can get more value for your buck just as others are spending less.
Building Trust: Consistent marketing, especially around content that provides value and support to consumers during tough times, can build trust. Consumers are far more likely to remember businesses that were prominent and visible during difficult periods.
Preparing for the Upturn: Economic downturns are cyclical, and eventually, the economy will recover. Businesses that have invested in marketing will be better positioned to capitalise on the upswing, having maintained or grown their customer base.
Market Share Growth: History has shown that businesses that continue to market themselves during downturns not only protect their market share but also grow it. In the case of Kellogg’s they have cemented themselves as the dominant brand in their sector for nearly a century. When competitors cut back, it’s an opportunity to move in and fill the gap.
Long-term Vision: While the immediate future might look bleak during a downturn, businesses need to think long-term. Cutting back on marketing might offer short-term savings, but it can have long-term repercussions on brand health and market share.
Covid-19 and Digital Marketing
We’ve seen this before of course. Up close and personal, here at Superb Digital.
As Covid-19 swept the country and apocalyptic scenarios were painted on a daily basis (understandably so – it was pretty terrifying for a while there), we saw a sharp reduction in client spend and a few throw in the towel entirely.
Despite a couple of businesses operating in the hospitality sector (undeniably screwed by Covid 😢), after the dust settled we started to see this trend reverse with clients ‘unpausing’ their campaigns and many actually upping their spend.
With the severe restrictions placed on whole populations, the realisation had set in that the market hadn’t evaporated it had just moved online.
This seems obvious now in hindsight but at the time it didn’t. And it was those businesses that remained calm and took the long-view when it came to their marketing budgets that have come out of the Covid pandemic in an advantageous position with their digital presence.
Whilst we hope there won’t be another pandemic, economic downturns come and go. So ask yourself this, when you’re next chowing down on your Cornflakes before work; what would Kellogg’s do?
At Superb Digital, we have seen up close how commitment to maintaining and growing marketing budget over the long term, whatever the economic weather, pays dividends for all sorts of businesses.
Book a discovery call with us to find out how we can not only help you steer your business through an economic downturn but help you grow it.