Marketing Insights During Recessions

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Marketing Insights During Recessions

Insights surrounding the marketing impacts and tactics employed during previous recessions include cutting ad spending, focusing on customer acquisition and sales/marketing alignment, online marketing, aligning strategies with consumption patterns, maintaining a strong brand image, and launching price promotions.

Overall Decrease of Ad Spending

  • During the Great Recession, in 2009, ad spending in the United States was down 12%. Globally, ad spending was down 9%.
  • The decrease in this ad spending was related to cuts made to the marketing budgets across 60% of companies.
  • Because economic recessions result in lower consumer spending, advertisers tend to decrease their advertising efforts in order to compensate for the lost revenue.

Companies Focus on Customer Acquisition and Sales/Marketing Alignment

  • According to a marketing outlook survey, near the end of the Great Recession, the majority of companies reported focusing on customer acquisition (61%), as opposed to customer retention, brand awareness and other marketing goals.
  • A study conducted by Northern Illinois University found that "companies with a strong alignment between the sales and marketing department were much better off during the economic recession. They had more new clients, better revenue, a higher customer retention, [and] a better average order value per client."
  • Companies that operated with a high level of alignment between their sales and marketing had 19% higher chance of seeing revenue growth, and did 5% better in terms of customer acquisition.

Companies Focus on Online Marketing

  • According to a marketing outlook survey, near the end of the Great Recession, the majority of companies were focusing on developing new ad campaigns for their online channels (73%), as opposed to direct mail (38%), events (25%), print (20%), and telemarketing (20%). In regard to online marketing, website, email, search and social media marketing all ranked highly, with 71%, 68%, 62% and 60% respectively.
  • An academic paper in the Journal of Business Research notes that online marketing budgets tend to expand during recessions. The paper notes that the shift away from traditional marketing towards e-marketing during the Great Recession was among the most significant change to the marketing environment during this period. In February 2010, there was a reported 12.2% increase in online marketing activities across all industries.
  • In 2019, digital marketing is considered to be relatively recession-proof by many marketers, due to the fact that it's comparatively inexpensive, it's highly flexible and adaptable, it's easy to measure, and it provides data that allows customer retention tactics to be more sticky.

Aligning Strategies with Consumption Patterns

  • According to insights published by Harvard Business Review, consumer priorities become more strict during recessions, as they reduce their spending. Companies that fail to examine ad adapt to the changing needs of these consumers can suffer long term negative effects on their overall performance levels.
  • HBR further notes that "companies that put customer needs under the microscope, take a scalpel rather than a cleaver to the marketing budget, and nimbly adjust strategies, tactics, and product offerings in response to shifting demand are more likely than others to flourish both during and after a recession."
  • During the 2008 recession, McKinsey found that consumers in some industries were opting for lower-priced brands (18%), and a large number of consumers reported feeling satisfied with the performance of the lower-priced brands and 41% said they felt premium brands were no longer worth their cost. While 18% may not sound like a majority of consumers, McKinsey notes that "industries where consumer shifts as small as 1 percent can severely dent the profitability of brands."
  • To combat these shifts, McKinsey recommends that companies work to understand why these shifts are occurring in terms of economic theory order to help inform their decision-making.

Maintaining a Strong Brand Image

  • According to insights published by Harvard Business Review, during times of recession, working to build and maintain a strong brand image is a key way for businesses to reduce risk. This is evidenced in the way that companies with strong brands (e.g. Colgate, Johnson & Johnson) tend to have stock prices that fair better during recessions than companies in the same industry with lesser-known brands.
  • An academic paper published during the Great Recession notes that brand imperatives must change over time in order to "reflect new customer demands, competitive realities and even new media." The paper further notes that marketing actions which are deemed to be good and politically fair tend to strengthen brands and help maintain customer loyalty during economic downturns.

Price Promotions

  • An academic paper published in the Journal of Business Research notes that, during recessions, companies tend to "shift their focus towards point of purchase and price promotions."
  • An academic paper published during the Great Recession notes how key players in the market had devolved into price wars with one another at this time. Temporary price reductions are seen as a way to attract customers, especially as consumers become more price-conscious during downturns.
  • Despite the fact that these price wars are considered good for consumers, who are able to take advantage of increasingly low prices, this strategy also works against the companies themselves by reducing their profit margins, threatening their survival.