It’s easy to look at a marketing budget and wonder if it’s worth continuing to invest in one. Advertising costs can add up quickly and those numbers can give you serious sticker shock. Once you look a little closer though, it’s clear that investing in marketing is one of the wisest choices you can make as a business owner. Who will know your business exists if you don’t put some effort into getting it seen?

Not everyone understands the nature of marketing, the costs associated, and how risky it can be to pull the plug on advertising. Luckily, there’s tons of data out there to show us why marketing is so important!

Why Do Marketing Budgets Get Cut First?

Marketing budgets get cut first because they are often viewed as non-essential costs. When times get tough or a company is adjusting its business plan, they look at all their expenses from the last fiscal year. This gives them an understanding of where their dollars went, whether it was money well spent, and if they should consider increasing or decreasing their budget for the next year.

If it turns out certain marketing moves didn’t have return on their investment, a business may need to tighten their budget. This could also happen during a recession when businesses have greater concerns such as paying salaries, benefits, and other essential costs.

In the event a business must choose between paying for an essential cost or reducing advertising spend, they’re likely going to choose the latter over the former!

Why Businesses Shouldn’t Cut Marketing Budgets First

When a company completely cuts its marketing budget, it also reduces the chance of getting new customers. Cutting a marketing budget may reduce the amount of returning customers as well. In other words, it has the potential to end a business entirely because the well eventually runs dry.

When a company’s marketing endeavors completely stop, so does much of the communication between the business and its customers. This will leave customers wondering about the stability of the business, how much they care about customer retention, and eventually, they will forget about a brand altogether.

Here’s what could happen if you cut your marketing budget entirely:

  • Your competition could overshadow you.
  • You’re communicating a lack of corporate stability.
  • New customers won’t find your brand.
  • You’ll see a large decrease in business overall.
  • Eventually, your business could shut down.

How Does a Recession Affect Marketing?

Recessions have a huge impact on marketing. Many brands start offering deep discounts and getting rid of products that don’t make money. However, experts say these discounts can actually have a negative impact on stores. When one retailer sees a competitor offering discounts, they are inspired to do the same. This contagious effect can lead to the collapse of an entire industry.

Recessions have a huge impact on millions of lives, and brands who don’t adjust their marketing approach and instead take advantage of others come across as insensitive.

Source: WGN TV

For example, a car dealership in Illinois was in hot water for sending out a print advertisement that was inside an envelope labeled “COVID-19 Stimulus Assistance.” Those who received it thought it was their paper stimulus check when it was actually a promotion for the dealership. There was enormous backlash from the community, and though the company issued an apology, it’s safe to say their misstep was one that will be remembered for years.

The impact a recession has on a business’ marketing budget depends on a couple things:

  1. What the business sells and whether it is considered a necessity
  2. The annual revenue of the business
  3. Whether the business has set aside a rainy-day fund
  4. The profitability of an organization’s marketing efforts
  5. The long-term goals of a business

What Happens to Consumer Spending During a Recession?

During a recession, most consumers tighten their budgets and reduce spending. They have bigger concerns like paying their mortgage or making sure they can afford their car payment. When consumers are most concerned about making ends meet, this can have a negative impact on non-essential businesses and luxury brands.

Based on data from the Great Recession, consumer spending is usually impacted in the following ways:

  • Consumers spend less money than they did pre-recession, even after the economy starts to recover.
  • Americans use their existing vehicles for longer periods of time instead of buying new ones.
  • More people contribute to their savings account than in non-recession times.
  • Fewer families dine at restaurants and coffee shops during a recession.
  • During recessions, furniture sales drop as much as 25%.
  • The housing market is usually the slowest industry to recover after a recession.
  • Unemployment rates rise, having a significant impact on individual spending.

Should You Cut Your Marketing Budget During a Recession?

If you can afford it, you shouldn’t completely cut your marketing budget during a recession. Cost cutting when times are tough isn’t unreasonable, especially when you have salaries to pay. However, it’s important to not completely pull the plug on your marketing budget!

There are tons of people out there who are searching for what you’re selling. Even though they may not have the funds to purchase from you right now, you still want them to be able to find your product or service. This will keep you top-of-mind for when they do have the resources to purchase from you, and they’ll likely recommend you to others who are looking for what you sell.

In addition, think of all your competitors out there who are being reactive to their situation and stopping all advertising. If you’re advertising and they aren’t, you’re going to be the first choice when your customers are able to purchase from you again. Chances are that the cost of advertising is also much lower during a recession, so you might even get more bang for your buck!

How to Advertise During a Recession

You might think the only way to advertise your business is by spending boatloads of money in the process, but that couldn’t be further from the truth. During a recession, there are tons of low-cost methods of marketing your business.

Some of the most affordable advertising methods for a recession include:

  • Creating organic social media posts
  • Joining local Facebook groups
  • Sending emails to your client list
  • Going live on Facebook and Instagram
  • Writing helpful blog posts
  • Donating to a local non-profit

Create Organic Social Media Posts

Not all your social media marketing needs to be paid. You can easily post organic content to your social profiles so you don’t lose touch with your followers. Posting uplifting messages, including updates about your business hours, or even posting funny memes are all solid ways to keep your business profile active during difficult times.

Pro Tip: One of the latest Facebook trends is to post a simple text-only update to ensure your update gets seen in people’s news feeds. Try going with an open-ended question so your followers can respond and increase your page engagement.

Join Local Facebook Groups

Could your local community benefit from what your business sells? If so, do a quick Facebook search for your town name to see if any groups pop up. Group members regularly post questions such as, “Can anyone recommend a local plumber?” or “What’s the best food delivery in the area?” You can respond to inquiries like this to spread the word about your business.

Pro Tip: Be sure to check the rules for the Facebook group you’re joining. Some will remove you from the group if you advertise, while others are cool with it. Do your research to figure out which group is best for you!

Send Emails to Your Client List

Did you know 72% of consumers prefer email as their source of communication from businesses? This is a huge opportunity for you to reach your audience through their preferred communication channel! Whether it’s sharing information about an upcoming sale or a writing a monthly newsletter, you don’t want to miss the boat on email marketing to keep your customers engaged.

Pro Tip: Make sure the subject line in your emails is click-worthy. There’s nothing worse than seeing a boring email come through your inbox! By writing a creative subject line, you drastically increase your odds of your message getting read.

Go Live on Facebook and Instagram

It’s no secret that Facebook’s algorithms favor live videos. They have some of the highest engagement rates across all social media outlets! Going live to share updates about your business or promote an upcoming sale is a great way to keep your company top-of-mind, even when customers may not be in the buying mood.

Pro Tip: Posting a live video doesn’t have to be a huge production. All you need to do is make sure you have a clean background, that the lighting isn’t super dark, and that your phone’s battery is fully charged!

Write Helpful Blog Posts

If your business doesn’t have a blog, you’re missing out! Blog posts drive traffic to your site, provide value to your customers, and help your company get seen. You can post helpful guides about how to use your products, how to solve a problem your customers regularly face, or to provide updates about your company.

Pro Tip: Writing a blog post isn’t as simple as putting your thoughts down on paper and publishing it for the world to see. There are tons of Search Engine Optimization (SEO) strategies that come into play, so be sure to do some research!

Donate to a Local Non-Profit

If your business is doing well during a recession, you should consider giving back to the local community somehow. Whether it’s a financial donation or a donation of your time, there are tons of non-profits in your area that would appreciate the gesture. A side benefit of volunteering is you get to network while you’re there, which helps spread the word about your company.

Pro Tip: Ask around to see if your employees or colleagues have recommendations for a local charity. There might be a cause that is near and dear to their hearts, and when you show your team that you care in this way, it could mean a lot!

If you’re wondering if it’s possible to come out on top after a recession, just ask Amazon. Their sales grew by 28% during the Great Recession, a time when many other ecommerce companies were pulling back on their advertising initiatives.

Companies That Failed During the Recession

“Failure” is a strong word and is definitely open to interpretation. With that said, there were some companies who suffered more than others during the Great Recession.

Here’s a look at the industries who didn’t do well after the Great Recession of 2008:

  • Video rental stores
  • Auto manufacturers
  • Steel manufacturers
  • Financial institutions
  • Casinos

Video Rental Stores

Source: Washington Post

While the idea of renting a movie was already starting to become a thing of the past, the 2008 recession was the nail in the coffin for the industry. Netflix was partially responsible for this, as it launched its streaming model around the same time.

Auto Manufacturers

Source: Construction Week Online

Auto manufacturers were also seriously impacted by the recession. Most notably, Hummer vehicle sales started to tank because of the massive spike in oil prices. Hummers weren’t exactly known for their fuel efficiency!

Steel Manufacturers

Source: Press of Atlantic City

Recessions hit the construction industries particularly hard because of the halting of expensive projects. Kane Steel, a New Jersey steel distributor that had been in business for 54 years, was forced to close its doors because of the Great Recession.

Financial Institutions

Over 500 banks failed as a result of the Great Recession. Many of them allowed customers to take out loans for the full value of their home even if they couldn’t really afford it. While some completely closed their doors for good, others were acquired or received financial help from the government.

Casinos

While some casinos thrived during the recession, others were hit hard and were forced to lay off many of their employees. Americans were pinching their pennies more than ever before and didn’t have extra cash to be spending at casinos.

The 2008 recession resulted in some challenging times for businesses across the globe. Some were hit harder than others, but nearly every company was forced to make changes to how they conducted business.

Final Thoughts

Marketing is powerful! It’s the difference between a stale brand and a brand that wants to grow. During tough times, it’s important to not abandon this mentality. There are tons of ways to keep the ship sailing through rough waters. It just takes a little bit of creativity, resourcefulness, and brainstorming!

References

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Lansing, K. J. (2011, July 11). Gauging the Impact of the Great Recession. Retrieved from www.frbsf.org

Reagan, C. (2015, August 20). How the Recession Changed the Ways Americans Spend Money. Retrieved from https://www.nbcnews.com/business/economy/how-recession-changed-ways-americans-spend-money-n413386

Mendes, E. (2018, March 14). U.S. Monthly Consumer Spending Highest Since 2008. Retrieved April 30, 2020, from https://news.gallup.com/poll/162947/monthly-consumer-spending-highest-2008.aspx

Reed, S., & Crawford, M. (2014, June). How does consumer spending change during boom, recession, and recovery?

Newman, R. (2010, December 16). 20 Companies That Cratered in 2010. Retrieved April 30, 2020, from https://money.usnews.com/money/blogs/flowchart/2010/12/16/20-companies-that-cratered-in-2010

Mount, I. (2009, December 30). And 7 Businesses That Did Not Survive. Retrieved April 30, 2020, from https://www.nytimes.com/2009/12/31/business/smallbusiness/31deaths.html

Bambridge, J. (2015, July 09). GM recalls Hummers after vehicle fires burn three. Retrieved April 30, 2020, from https://www.constructionweekonline.com/article-34400-gm-recalls-hummers-after-vehicle-fires-burn-three

Ortiz, E. (2010, January 17). Kane family forced out of steel business. Retrieved April 30, 2020, from https://www.pressofatlanticcity.com/business/kane-family-forced-out-of-steel-business/article_e02e7ae9-897c-5f44-a60e-e0ca9016d72e.html

Park Lazette, M. (2017, December 18). The Crisis, the Fallout, the Change: A Great Recession Retrospective from the Cleveland Fed. Retrieved April 30, 2020, from https://www.clevelandfed.org/en/newsroom-and-events/multimedia-storytelling/recession-retrospective.aspx

Duggan, W. (2019, January 12). Casinos Among The Hardest-Hit Businesses During Economic Downturns. Retrieved April 30, 2020, from https://finance.yahoo.com/news/casinos-among-hardest-hit-businesses-203531184.html

Duarte, L. (2020, April 16). Suburban dealership sparks outrage after mailer goes out promising ‘COVID assistance’. Retrieved April 30, 2020, from https://wgntv.com/news/wgn-investigates/suburban-dealership-sparks-outrage-after-mailer-goes-out-promising-covid-assistance/

Nethercott, R. (2017, September 08). 10 Eye-Opening Email Marketing Stats You Need to Know. Retrieved April 30, 2020, from https://blogs.constantcontact.com/email-marketing-stats/

About the author

Kelsey Skager

Kelsey is a master of promotional products with over five years of marketing and industry experience. She is proud to have been featured on ABC 7 Chicago News and NPR.