Businesses have an abundance of options when it comes to advertising and marketing. Businesses can go with traditional advertising such as radio or television, offline marketing, or endless amounts of online advertising options. When the economy is booming, it is a no-brainer that businesses should invest at least some of their resources into marketing. But how should business owners treat advertising when recessions come?
Fears of a recession often begin to circulate every few years even though recessions only happen every 6 years or so. Since recessions tend to have a major impact on businesses, entrepreneurs and business owners should never take recessions lightly. In this article, we will look at how businesses should treat advertising during a recession.
Should You Advertise During a Recession?
Running a business during an economic recession may feel like a game of chance. Some companies survive the low points unscathed, while others collapse, which seems entirely unpredictable. Fortunately, it’s not. When an economic recession hits, your business isn’t “doomed” to fail. Instead, your business can thrive even when times are tough, and one of the best methods available to make it happen is the use of consistent advertising.
Business owners often mistake treating advertising and marketing expenses as discretionary costs. This line of thinking often leads to cutting costs in departments whose performance actually matters the most. Advertising allows you to connect and engage with your target audience, providing brand visibility for your company. In a recession, when other companies are limiting marketing budgets, you can take advantage of the spotlight left behind. Advertising might not only help you survive but may also help you increase sales during a recession.
Target Your Best Customers
It seems obvious that keeping customers happy is a critical aspect of running a business – but many small businesses fall short and fail to establish returning customers. Repeat buyers who come back after a great experience are the backbone of your income during economic hardship.
Acquiring new customers is essential, but fewer consumers are willing to spend during a recession. So, during this time, your focus should be on customer retention instead. The average success rate of selling to an existing customer is 60-70%, while the odds of acquiring a new one are just 5-20%. That’s a staggering difference, and it can be a game-changer. Long-term sales from repeat customers can help your business maintain its footing during the chaos.
Don’t Lower Your Advertising Budget
It may seem like a good call to cut as many costs in advertising as possible, but it’s a rookie mistake. If you can, you should continue advertising throughout the recession, even if it feels counterintuitive.
During a recession, companies that choose to continue advertising typically see a sales increase compared to their non-advertising counterparts. Here are two great examples of this principle in action.
McDonald’s vs. Taco Bell
In the recession from 1990-91, McDonald’s make significant cuts to its advertising and marketing budgets in response to the struggling market. Taco Bell took advantage of this opportunity and continued to push its ads. As a result, Taco Bell saw a 40% increase in sales, and McDonald’s sales declined by 28%.
Post vs. Kellogg’s
During the Great Depression of the 1920s, the breakfast cereal company Post lowered its advertising budget significantly. On the other hand, its rival, Kellogg’s, doubled its advertising budget and introduced a new product – the Rice Krispies we’ve all come to know and love. Because of their creative, adaptable marketing strategies, Kellogg’s quickly surpassed Post’s success and remained a leader in their industry.
Utilize Lower-Cost Advertising
Just because you aren’t reducing your ad budget doesn’t mean those ads have to be expensive. Using lower-cost advertising methods can save you money while still being effective. Here are some techniques that are easier on your budget:
- Social Media Content
- Giveaways & Sweepstakes
- Referral Programs
- Loyalty Incentives/Rewards Programs
- Branded Merchandise
- Video Content (like Webinars)
- Blog Content
Creating online content can generate customers rapidly, especially if you use SEO. SEO stands for “search engine optimization,” which uses keywords to prioritize your site on algorithmic systems like Google. You can learn to make your company website SEO-friendly at no cost, and it provides significant visibility through search engines.
Other companies will likely shy away from handing out free products, vouchers, and discounts during a recession due to fear of failure, and consumers are penny-pinching to the max. So it creates an excellent opportunity for you to get the attention of struggling consumers when the market has died down a little. Those promotional giveaways may seem small, but they put your brand near your customer at a time when free stuff looks most appealing.
Focus on the Long Term
During a recession, you may have to be willing to make small sacrifices to stay afloat. Lowering prices, for example, is a great way to gain the attention of customers who are also struggling. Although it’s less immediate income, consumers will remember your brand post-recession as understanding and adaptable.
Some aspects of your business may suffer more than others. For example, during a recession, consumers are cutting excess spending and reducing luxury purchases. If your business hinges on the sales of such items, you’ll need to create a backup plan for when times get tough. Planning ahead can save your business from failure.
Focusing on the long term is especially important if you run a type of business that performs poorly during a recession. For those types of businesses, surviving the recession should be celebrated. If you are in an industry that tends to be hit the hardest by recessions, outlasting the recession will create amazing opportunities due to the possibility of your competitors not surviving.
What You Can Do
The most important thing to remember as a business owner during a recession is that the big picture counts. Highs and lows are a natural part of the modern economy, and you’re responsible for learning to navigate them as a business owner. Use your business’s sales history and profit margins as resources to gauge upcoming patterns. Adaptability sets great companies apart and keeps them growing strong for decades.
Preparing your business for a recession before it happens can help prevent disaster along the way. Sometimes getting through a recession takes substantial reserves of patience and resilience, but it never hurts to go in with a strategy. Even when the economy is flourishing, take the time to sit down and consult your business plan regarding unpredicted events. It might save your company someday.