RIBA Insight Monthly Briefing

Should you cut your marketing budget in a recession?

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Let's be clear: the reason people cut marketing budgets in recessions is a commercial one – they don't have the money to spend. But that's a not a marketing reason. From a marketing perspective, recessions are the ideal time to invest in persuasion.

  • In a recession, everyone questions their own buying habits. The pool of potential users of your product or service is therefore greater in a recession than at any other point in the business cycle.
  • Given little information about a market, most people gravitate towards the brand leader. The way they work out which brand is the leader is by identifying the one that shouts the loudest. Many of your competitors will be cutting their budgets in a recession. Now is the most affordable time to assert leadership.
  • It's extraordinarily difficult to break habits in the good times. In good times, people are comfortable doing what they're doing, and who they are. Recessions shake them up, and challenge their value systems. Recessions are therefore a good time to ask people to try out new ideas and new behaviours.
  • For many marketers, the point of advertising is to keep reminding their brand's users of the reason why they buy it. In a recession, users start to question all of their habitual buying decisions. This is when they need the reminders most. So a recession is exactly the wrong time to stop reminding them of why they use the product.
  • Econometric analysis says that marketers who slash their budget in a recession suffer the effects in terms of sales for another three to four years. A decision to slash spending in a recession has long term negative implications for your business.
  • In recessions, many people trade down. But if the number of people trading down to your brand is greater than the number of people leaving your brand for the one below it, your sales will go up.
  • It's disorganised no-hoper companies that go down in recessions. Now is the time to take their customers from them.
     

Reproduced with kind permission from Young & Rubicam.

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