The Government’s wrong to suggest that cutting marketing spend in order to cut prices elsewhere will have a positive impact. It’s not just us saying it, we’ve been looking at the numbers and in the long term, cutting marketing budgets will leave businesses struggling to get out of the slump.
A few weeks ago we lost out on a new client, we were pretty gutted as it was a fun fashion and lifestyle brand we’d have loved to get our teeth into. Following our pitch they told us they loved us but their marketing budget was now being cut due to the cost of living crisis. This is nothing new, every time the country hits an economic downturn marketing is one of the first things to go.
But what if, in trying to save your business some cash you’re actually damaging it? Here’s what we know about previous recessions and what businesses did with their marketing budgets.
Should I keep investing in marketing in a recession?
A 2019 Bain study based on the 2008 recession found that companies that continued to invest in marketing saw compound growth of 17% versus the companies that cut their marketing budget whose growth remained static.
It’s not a new trend, in his 1924 Harvard Master paper, Roland Vaile, looked at 250 companies, and found that they could be split into three groups; those that did not believe in advertising, those that reduced advertising during the Depression, and those that increased advertising. The study demonstrated that after 4 years, those firms which increased advertising during a recession generated 20% more in relative sales than firms that didn’t advertise and 24% more in relative sales than those that decreased advertising.
Whilst this data is a century old, there is no evidence that shows that these trends have changed.
To quote Guy Consterdine quoting Peter Fader of the Wharton School , “As companies slash advertising in a downturn, they leave empty space in consumers’ minds for aggressive marketers to make strong inroads.”
Guy says that during the 80s, analysis of 600 companies found that “those firms that had maintained or increased their advertising during the recession … boasted an average sales growth of 275% over the next five years.” Comparatively, companies who cut advertising only saw a recovery growth of 19%.
275% growth, that’s a pretty epic statistic.
Should I cut my marketing budget?
No! OK so yes we are a performance marketing agency so we would say that cutting your budget now is a mistake, right?
Crucially it’s not about cutting your budget at all, we’re talking about using it more strategically so you grow, while your competitors contract.
At MediaVision we are all about getting our clients the best ROI, we’ve built a predictive SEO model that allows us to spot trends 4 x faster that the rest of the market, we have tools that speed up the way we work so we can help you be fast and first, we have an extraordinary piece of tech that helps you balance your Organic v PPC so you never overspend where you don’t have to and we have behind-the-scenes category and merchandising tech and our crown jewel, our Share of Search tool so you can see how your brand’s share of search is growing as your competitors (who cut their marketing budget) shrink.
Still thinking about cutting your marketing budget? Get in touch to find out how we can help you Grow Every Day (even in a recession).