Much has been written about the need to continue to spend on marketing during an economic downturn. According to Zeta*, “during the recession of 1991, the businesses that found a way to maintain or increase their marketing budget saw as much as a 70% increase in sales by the time the recession ended. Those who continue to invest outperform their counterparts who cut spending in the long term.

It’s the long-term bit we need to focus on

A stark warning heeded by the IPA** recently. Many organisations are hampered by the need to meet short-term targets. This can cause a real problem in a downturn as management scrambles to cut costs to hit targets.

Senior management that views marketing as a cost centre are the first to make these cuts and the damage goes beyond revenue performance. Brand equity is lost, as customers lose sight of the brand. Not just in a lack of advertising presence, but also in other activities that build brand engagement and advocacy. Cutting back on community initiatives not only takes the brand out of sight, but can have a negative impact as people reliant on this support suffer.

Reputation is at stake

In the good times, purpose became the word du jour. Global organisations committed to ‘making the world a better place’, but how many of those initiatives that turn purpose from an ideal to reality are being cut and how big is the ripple effect on the societies these brands were so keen to serve?

Cutting marketing budget also has a negative impact on the marketing team. Teams are asked to do more for less. Budget cuts imply marketing is not valued as a growth driver within the business. What does this say to those teams slogging away trying to keep the home fires burning?

We’ve all seen the fight for talent over the past two years. Good talent is hard to come by, and the cost of replacing talent isn’t cheap. Especially when your brand reputation is on the floor. Is this factored into those knee-jerk cost-cutting exercises?

Economic downturn is uncomfortable for every business. And sometimes, cutting budgets is the only way to survive. But for those with a healthy balance sheet, management must look past the short-term target pressures, realise the value of brand equity, the impact and commitment they have to their customers and society, and stay on course. Marketing is a growth driver, and now more than ever is the time to make it work hard to deliver sustainable growth.

For more on this topic read How marketing can help businesses ride out a recession.***

Teresa Allan, Partner at The Magnus Club

References:

https://zetaglobal.com/blog/what-history-says-about-cutting-marketing-spend/

** https://www.linkedin.com/feed/update/urn:li:activity:6965316785608781824/

*** https://themagnusclub.com//how-marketing-can-help-businesses-ride-out-a-recession/