Have businesses faced a more unpredictable time in living memory? Whatever your personal feelings regarding the political and economic climate, the current uncertainty makes planning and decision-making tougher. With consumers experiencing the same volatility, it means many are reducing their spending. Whether the result is a downturn or recession, businesses need to be planning how to cope.
The temptation is to cut back and save on anything deemed non-essential. For example, UK advertising growth slowed to 4.2% in the first quarter of 2019. In the event of a no-deal Brexit, Enders Analysis predicts a £1.36bn cut in ad spending before the year is out. But years of research and examples demonstrate that this is a false economy. Businesses which review, optimise and continue to spend during economic downturns consistently emerge most successful.
- A McGraw-Hill study of 600 businesses in the UK recession between 1980-1985 saw advertisers who either maintained or increased their advertising budget grow sales by 256%
- 14% of companies increased growth during the last 4 economic downturns in the U.S with revenue growth accounting for nearly 50% of their shareholder returns (Harvard Business Review)
- A 1990 WPP study saw those companies which cut their advertising and expenditure in a recession lose as much in profitability as those who increase their spending. Which means short-term savings don’t work to hold onto revenue.
- “It is better to maintain SOV (share of voice) at or above SOM (share of the market) during a downturn: the longer-term improvement in profitability is likely to greatly outweigh the short-term reduction,” the IPA’s 2008 report on marketing during downturns states. “If other brands are cutting budgets, the longer-term benefit of maintaining SOV at or above SOM will be even greater.”
Convincing an executive board or client to keep spending in economic uncertainty can be tough. But a thorough review and optimisation plan showing direct revenue results can certainly help your budget survive, or even grow.
Online advertising has consistently grown over recent years and will account for 62% of UK advertising in 2020. The reasons include a lower comparative cost, the huge growth in scale, and the easier accountability and tracking to demonstrate the impact on revenue. A downturn or recession will continue the transition from offline to online ad spends, with direct response and direct-to-consumer most likely to thrive as brand marketing comes under fire.
How to optimise advertising in a downturn or recession:
- Plan for the medium and long-term
- Focus on core brand strengths
- Improve the functional elements of your advertising
- Investigate new opportunities and markets
- Double down on effectiveness
- Ensure everything is tied to the right objectives, reporting and KPIs to demonstrate profitability
A Nielsen study of advertising effectiveness highlights the importance of creativity and reach even above brand. The digital attributes of targeting and recency are the next areas to follow in sales contribution, with the ability to drive almost three times more sales if you advertise a weekend purchase on the preceding Thursday or Friday.
Meanwhile, a 2009 Admap study showed that creative treatment had a bigger impact on company profits than budget. But you may need to change the message itself to align with the times, focusing more on the value and utility you offer.
Are you using the right channels for a recession?
In a boom, it’s relatively easy to throw money at every available advertising and marketing channel. But as budget is reduced and scrutiny increases, which are the fundamental tactics to form the basis of your recession strategy?
Search Engine Optimisation is a key long-term marketing channel, which also integrates well with advertising. Prioritising keywords related to the customer journey will attract relevant traffic while improving on-page content can improve conversions.
It’s also flexible, allowing you to change content on-page to highlight value for money over more aspirational approaches. And the benefits can last potentially indefinitely depending on the competition in your industry.
- Review the basic SEO status of your site, ensuring basic technical issues are resolved
- Look at your keyword/phrase targets to focus on the right products and terms in a downturn
- Ensure an integrated approach to inform your content, social media and advertising
Google Shopping and CSS ads
Possibly the most underutilised opportunity in advertising, Google Comparison Shopping Services offer a way to increase sales and revenue without upping your advertising spend. Due to the EU requiring Google to open up their Shopping platform to third parties, the independent suppliers get the same level of access but don’t charge the same 20% bid cost margin.
Some, like RedBrain even operate on a CPA basis, operate their own websites and channels with large scale audiences, and will handle the work of targeting and optimisation. You can also use multiple providers, running your own Google Shopping campaign, and working with a Premium CSS provider at the same time. Best of all, if using a CSS provider on a pure CPA basis you are only paying for sales generated. Being creative with CPA commissions could prove to be an extremely smart move and unlock vast incremental sales volumes, even in a downturn.
Google Shopping adverts are increasingly prominent on relevant search results, particularly on mobile devices.
- Set up and optimise your Product Data Feed
- Choose a Premium CSS Provider – save your budget with a CPA commission-based option, and not paying any fees
- Use the data to adapt your pricing, or to offer sales promotions in a highly visible space on relevant search results pages
Every marketer is probably aware that the cost comparison between a new and existing customer is approximately five times the expense. You also have a much higher probability of making sales to a retained consumer (60-70%) than someone new (5-20%). Which makes email a sensible option at any time for direct digital marketing. But it’s particularly useful during a downturn or recession.
It provides more accountability than brand-awareness campaigns, heightens relevance if it’s done correctly, and offers relatively low costs.
- Ensure your existing email lists are clean, up-to-date and GDPR compliant
- Don’t be tempted to bombard your customers with endless offers to shore up short-term profits at the risk of losing subscriptions
- Focus on rewarding valuable existing customers for their loyalty, increasing personalisation and segmentation as far as possible
Ultimately it’s more than possible to grow your business during a downturn or recession by optimising your advertising and marketing, rather than cutting your budget. And the growth in market share will provide dividends long after the economy has recovered.
But even if your ad spend is restricted in the short term, you can still deliver results by focusing on the key channels which are most effective.