survive-recession
Even cash-poor firms would be wise to commit a substantial portion of their marketing resources to reinforcing the core brand proposition.

The very nature of economic cycles means that every market, from Australia to Antigua and beyond, will go through times of expansion (growth) and contraction (yes, the dreaded ‘R’ word – recession).

For small business owners, natural instinct will most likely urge you to batten down the hatches, cut spending in all areas, and ride out the trough until better times roll in.

On the contrary, market downturns or ‘recessions’ in fact present unique opportunities for smart operators who can match their marketing message with the consumer climate of the time.

“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,” an article in the Harvard Business Review explains.

“As sales start to drop, businesses typically cut costs, reduce prices, and postpone new investments,” the article, published by Harvard Business School's John A. Quelch and Katherine E. Jocz continues.

“Marketing expenditures in areas from communications to research are often slashed across the board, but such indiscriminate cost cutting is a mistake.”

DDB Matrix advertising agency European director Les Binet believes that most marketers assume that consumers cut their spending when recession bites, when in fact, total consumer spending rarely falls in nominal terms, it just grows at a slower rate and fails to keep up with inflation.

With this in mind he warns businesses who are in a position where they have to make cost cuts, to make sure that you cut the right ones.

“Firms that cut manufacturing and administrative costs tend to do well, as do firms that cut spare capacity. But firms that reduce product quality or cut budgets for marketing tend to underperform” Binet said.

In their Harvard Business Review article, Quelch and Jocz's contend that during market contractions, it’s more important than ever to remember that loyal customers are the primary, enduring source of cash flow and organic growth.

“Marketing isn’t optional, it’s a good cost, essential to bringing in revenues from these key customers and others,” they write.

“Their best course is to stabilize the brand. Even cash-poor firms would be wise to commit a substantial portion of their marketing resources to reinforcing the core brand proposition.”

According to Les Binet, research shows that firms that cut ad spend during a (downturn) typically see sales and income fall by 20-30 per cent over the following two years as a direct result.

“The worst-case scenario is a marketer lowers an ad budget while a competitor increases his,” he says.

“The literature is full of examples of brands that have perished this way. But the flip side is that a recession can be a marvellous opportunity to deal competitors a killer blow.”

“The combination of low media prices and weak competition (during a downturn) gives companies a unique opportunity to buy market share on the cheap,” said Binet.

Related Products

View more products