How Marketing During an Economic Downtime Reaps Results

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By 1920, Post was the leading cereal brand in the US. When the Great Depression hit in 1929, the cereal brand famous for Raisin Bran and Shredded Wheat, both frosted and regular, thought it wise to cut back on advertising significantly. Being number one, they assumed reputation was enough. At the same time, rival company Kellogg’s doubled their advertising budget with a heavy focus on radio. Kellogg’s profits grew by 30 percent.

It seems like common sense to cut down costs when needed during an economic downturn, but the counterintuitive reaction to such crises can reap some unexpected benefits.

Today we face a new potential recession, with news outlets speculating wildly about the latest effects of the COVID-19 pandemic. That economic uncertainty has been on the minds of every advertising firm. Advertising budgets are, typically, the first to go when companies begin tightening their belts.

Historically, however, past recessions have shown that brands who continue their marketing campaigns in a downturn have often fared better than their competitors. Kellogg’s is only one example. During the 17-month recession from 1973 to 1975, Toyota adopted a similar strategy and managed to surpass Volkswagon.

The Spending Game

The most important thing to keep in mind is that, even during a recession, people are still spending money. In fact, the demand for traditional goods and services often increases. Spending, according to Harvard Business Review, is, in part, a psychological response, as it is about having disposable income. When people’s confidence is high, they are more open to purchasing things they don’t need.

The key to advertising during a recession is the message you’re trying to send. We’ve seen negative reactions to films like Tenet being released exclusively in theatres at a time when medical professionals advised against visiting theatres. The reason director Christopher Nolan’s venture hurt his reputation was a perceived lack of empathy. Marketing is all about living up to customer expectations and perceptions. It is interesting to note that those brands during COVID-19 may fare better that have resorted to having themes emphasizing solidarity and social cohesion in their advertising. The World Advertising Research Center reviewed 880 case studies and found that ads focused on emotional engagement turned more profit than those promoting transactional messages.

It’s about WHAT You Cut

While it’s understandable that companies may need to cut down their advertising budget, it’s important to know where to make those cuts. This means paying attention to every ad dollar spent and being able to track and quantify. If you can’t measure or quantify the impact of an ad through a particular channel, then it isn’t valuable to use that channel. A business can divide its ad spend in two categories: luxury and necessity. One can likely imagine which one matters more during a downturning economy.Having a clear sense of your ad campaign and trusted sales data means you can confidently continue to invest.

Many businesses assume that they can cut advertising during  hard times to focus more money on operations. However, the benefits of investing in only the here-and-now are going to be short-term.

Marketing during a recession may seem like a gamble. Changing customer behavior, less disposable income, and an uncertain future  might signal advertising to be a luxury. But going against your intuition, in this instance, has been historically proven to be an opportunity, not a risk.

Kenny Hedges | Contributing Writer

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