Marketing Minute: Marketing in a downturn - December 2022

By Paul Friederichsen

Are we in a recession, or are we starting a recession? Some say that not since the lockdowns to “flatten the curve” were instituted for Covid-19 has business been so sluggish. A few have even likened their sales to “falling off a cliff” as we head into 2023. No matter which side of the fence you’re on, one thing is for sure-every recession eventually ends, and what you do now will impact your bottom line on the other side.

TO CUT OR NOT TO CUT?
The natural tendency in a downturn is to cut costs, with advertising at the top of the hit list in most cases. But there are strong arguments for maintaining your marketing posture, even if sales are off.

A McGraw Hill study looked at 600 companies, some of which maintained or increased their advertising spending while others cut or reduced theirs. Companies that continued advertising during a two-year recession in the 1980s saw 256% higher sales than their counterparts in the post-recession. Those that chose not to advertise during the economic slump saw a virtually 0% marketshare increase and a rise in sales of only 18% once the economy regained traction. Studying media spends during the last recession, Analytic Partners reported that 60% of brands that increased their media spend saw greater return on investment, and those that spent more on paid advertising saw a 17% increase in incremental sales.

In the Harvard Business Review article “Don’t Cut Your Marketing in a Recession,” authors Nirmalya Kumar and Koen Pauwels state, “Marketing in a recession will never be easy, largely because it often involves going against instincts and standard operating norms. … In this environment, you must accompany your customers on their new, different journey, shifting your message and re-engineering your value proposition. This is a time not to stop spending money but to change how you spend it. … It is also an opportunity because firms willing to be what customers need in a recession get to keep many of the new customers they get-and cement the loyalty of those they already had.”

Marketing supports your brand, and your brand has value. For example, you and I are willing to pay more for a brand we are loyal to or to give the brand the benefit of a doubt when it makes a mistake. Not consistently supporting a brand is like denying it oxygen, not to mention lost opportunities to gain share when your competitors cut back on their marketing spend.

In his article “Advertising in a Recession-Long, Short, or Dark,” Peter Field observes, “Does brand building at such a time make any more sense? Can continued brand advertising signal important reassurance? With appropriate sensitivity to the fearful state of most people, brand building may, in fact, be the best approach.”

EMPLOYING THE P&G EXAMPLE
A favorite case study cited by marketers is that of Proctor & Gamble (P&G) during the Great Depression of the 1930s. Among the many economic downturn-proof needs is soap, the execs at P&G reasoned. So, while competitors instinctively cut their marketing and ad budgets, P&G increased its own and took careful aim at housewives with a new radio concept that later became known as soap operas. P&G became one of the largest and most successful companies in the world and, to this day, is revered as one of the top packaged goods companies of all time. While others panicked and pulled in their ad budgets, this maker of dozens of leading household brands did just the opposite-and won big.

While the P&G example is often used by marketers attempting to pry marketing dollars out of the clenched fists of management, it could be argued that flooring is an apples-to-oranges comparison. “Flooring is a discretionary purchase; it is ‘postponable’ and not the same as rent, food or toothpaste,” those execs may say. Indeed, as we learned during the Great Recession of ’08, purchasing new floors can and will be delayed, and, as a result, many flooring plants were shuttered during that period. However, flooring manufacturers or suppliers should focus more on marketing during a downturn since it is a discretionary, infrequent purchase. As in the P&G example, your competitors may cede the spotlight. Are you bold enough to make the counter-intuitive move and start laying the groundwork for the economic comeback? That’s a strategy for playing to win long term instead of playing not to lose short term.

ADAPTING TO SURVIVE AND PROSPER
Whether you are a manufacturer, retailer, supplier or contractor, your marketplace is in constant flux, both in good times and bad. Innovations appear, attitudes shift, economics stoke anxiety, competitors come and go, and demographics change, just to name a few factors. You cannot control these external factors, but you can adapt. While advertising expenditures may be challenging when sales are off, staying visible while sharpening your brand should remain standard operating procedure.

Part of P&G’s success in growing dominance and marketshare even in the Depression stemmed from its thorough understanding of its target demographic and their media consumption habits. Yes, it was bold, but it was also smart. P&G’s use of popular media (radio at the time and, later, TV) and its development of programming for the networks (think “content” in today’s world) made its marketing investment during a downturn pay off. The company’s allegiance to the homemaker of its day (and to the grocers at the time) was P&G’s “truth.”

Possessing the truth about your brand is most apparent when you are easily differentiated from your competitors. The secret to brand differentiation is finding or cultivating an authentic, unique way your brand relates to its customers, whether it’s relieving pain points, promoting a healthy lifestyle, a heritage of service, or simply treating people like human beings. (More on that in my January 2022 “Marketing Minute.”) This becomes even more essential during a downturn, and empathy with your customer is even more critical. Consider how your brand relates to its customers in its own unique fashion, then remind and reassure them of that while your competitors are sitting on their hands. You will be positioned for success when the economy comes back.

CRAFTING A PRACTICAL APPROACH
Let’s say you’re a marketer who totally gets the need to support your brand’s marketing plan during an economic downturn or slump-what do you do? Since your advertising budget may be risky, you must adapt your plan to the new reality.

• Get down to specifics by doing your research homework. Depending on your business, don’t settle for the “things are bad, so we cut” approach. Get a handle on sales performance and the needs of your customers, their markets (if you’re a manufacturer), your marketing area (if you’re a retailer), and look for opportunities now and post-downturn. Recommend accordingly.

• Measurable media in your mix becomes even more critical, especially if you employ promotions or incentives. Formulate a plan to account for a return on investment that demonstrates reach, click-through rates, website traffic and sales.

• Revisit your brand positioning. Is it hitting the right notes with your customer? For example, during the Great Recession, Dell ran headlines for its computer brand like, “Depend on Dell for simple solutions during tough times,” “The ideal laptop that works anywhere, in any economy,” and “Weak economy, powerful you.”

• See the world through the eyes of your management. That could be your CFO, CEO or owner. During a downturn, their priority is to protect the bottom line and profitability. Your priority is to grow it. Work together for an answer, and you will find one better than you could separately.

Copyright 2022 Floor Focus

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