Unlock the Power of Marketing: Conquer the Top 3 Business Challenges of a Recession

In today’s uncertain economic climate, it’s more important than ever for marketers to help businesses during a recession. Though the marketing function is often one of the first to feel the effects of an economic downturn, by understanding and addressing businesses’ top three concerns during a recession, marketers can help businesses not only survive but also thrive in challenging economic times.

A recession is inevitable

In the latest quarterly Ernst & Young’s longitudinal survey of 1,200 CEOs in 10 countries and across six industries, US CEOs firmly believe we’ll hit a recession this year and are already planning for it. “With an all-but-unanimous 99% expecting an economic downturn, and roughly half saying the recession will be mild domestically, CEOs are factoring this gathering storm into their strategic models and keeping their options open.”

Top 3 business concerns that marketers can help overcome

#1: Macroeconomic conditions

Businesses are concerned with the overall state of the economy. Average inflation in the US for a decade (2011-2021) was 1.9%, whereas it has risen to 3.5% as of October 2022 (Figure 2). Across the global inflation has risen as well to 6.5% (vs. 4.1% just ten years ago in 2012) (Figure 3) [source: International Monetary Fund]. For many businesses, the recent disruptions in their supply chain and potential shifts in government policies may impact future growth, especially during a recession.

As marketers, you should be the voice of the customer and use market research to understand the true needs of your customers during the recession. Help the business determine what truly matters to your customers, identify products and services that address your customers’ needs, and then design marketing campaigns to communicate your business value. For example, with inflation being so high and top-of-mind for so many customers, re-evaluate your product or service price points. If you can’t lower them, communicate to your customers why they should still engage with your product or service. Showcase how you business truly adds value to your customers’ lives during this time.

#2: Financial Impact

During a recession, businesses are worried about a decrease in sales, especially as customers tighten their belts and focus on purchases that are necessary. As a result, businesses will have less capital to work with and finance teams will focus on keeping their cash flow positive (you know, to keep the business lights on, pay the workforce, pay suppliers/vendors, pay off debt, etc.). One of the first things businesses might do is to cut back on marketing, whether it’s investments or people.

Marketing is the major growth engine of businesses. Dentsu studied the impact on long-term sales (or revenues) with the reduction of marketing during the 2008 recession, and found that regardless of industry, the short-term gain in cost savings was overshadowed by the massive losses in sales in future years (Figure 4). Similarly, McGraw-Hill Research analyzed 600 companies covering 16 different SIC industries from 1980 through 1985 (Figure 5), and found “firms that maintained or increased their advertising expenditures during the 1981-1982 recession averaged significantly higher sales growth, both during the recession and for the following three years, than those that eliminated or decreased advertising” [source: MacTech].

This means, as marketers, you must remind leaders how they can grow during a recession:

• Focus your communications and messaging on how your business can address the needs of your customers during this time. This means being strategic about which products and services to market.
• Don’t cede share-of-voice or mindshare to your competitors. Remind your leaders and finance partners what they will lose (e.g. long-term sales) vs. what they’ll temporarily gain (e.g. short-term cost savings). Don’t know how to convince them? Don’t fret. Check out the Finance cheatsheet to learn how, and the recession-era sales-driving case studies to get inspired.
• Optimize marketing investment towards channels and targeting strategies that are most effective (e.g. gets your scale and cost-efficiencies). For example, identify whether you should focus on retaining existing customers or acquiring new customers. Use calculations like long-term value (LTV) and cost-of-acquired-customer (CAC) to help you make decisions. Or, if you see your competitors pulling back in marketing, you can invest more heavily in channels where you can acquire those customers (e.g. conquesting) at a lower CAC.

#3: Brand & Product Mismatches

As businesses decide on various cost-cutting measures, from reducing the workforce, changing suppliers, to increasing prices, customers will react differently to the brand and the product offerings. As marketers, you should embrace this as an opportunity to focus your brand value proposition and messaging as well as innovate. Work with PR to ensure news coverage during this time about your business is clear to customers why you’re doing what you’re doing. This could also be an opportunity to innovate. Launch new products that address your customers needs. Take advantage of cheaper advertising costs to market your new product. As companies pull back their advertising investments, demand for share-of-voice goes down, and thus with over-supply of ad inventory and low demand, prices of those ads will come down as well.