If there’s one thing we’ve learned from 2008’s financial crash and the coronavirus pandemic, it’s this: businesses that hold their nerve as others falter will bounce back quicker.
Confronted by a recession and cost-of-living crisis, it’s understandable that companies are feeling the temptation to batten down the hatches and cut back on budgets. It’s our survival instinct. The voice of reason. Except, it’s the wrong voice to be reasoning with.
Because when it comes to steering a brand through an economic downturn, your share of voice must not fall below your share of market. To do so is to risk long-term recovery.
Let’s not sugar-coat things: times are tough for a lot of people right now. The cost of everyday essentials such as food and utilities continue to rise at a rate that is outstripping wage growth. Households across the country are nervously pinching the purse strings, which means disposable incomes are being scaled back.
Meanwhile, inflation is also hitting businesses. With Brexit already dealing a body blow to some, increases in energy costs, rising fuel prices and chinks in supply chains are exacerbating an already testing set of circumstances. All of this combined will inevitably lead – as we saw during the 2008 crash and pandemic – to some companies either tightening their marketing budgets, or focusing on reactionary, short-term sales boosts.
Let’s explore the damaging impact of each response.
So, you’ve invested in a concerted brand-building campaign that has amplified your share of voice, which in turn, has driven a growth in market share. Sales have consequently increased and you’re thinking about scaling up.
A recession hits and you decide it’s the marketing budget that’s most expendable. You go dark, hoping to ride out the storm and ramp things up again when the clouds disperse.
Watch the spark you’ve nurtured so carefully fritter away as savvier, perseverant competitors drown it out.
Because as research by Binet & Field underlines, the truth is maintaining or, better yet, growing your share of voice during a crisis is vitally important for your brand’s longer-term outlook.
According to their study, ‘The Long and Short of it”, brands must focus on long-term brand building when confronted by an economic downturn. Why? Well, typically, short-term demand is lower, reducing the effectiveness of sales activation (more on that in a moment). The real value, therefore, can be found in protecting and expanding your share of voice, which – provided the quality of your marketing material holds up – tends to translate into a larger market share that can be capitalised on once demand increases again.
As Steve Forbes puts it, “your brand is the single most important investment you can make in your business”. By going silent, you’re tearing chunks off its value, inviting other market players to muscle in on the SOV/SOM you’ve put time and money into securing. At best, you’re taking one step forward and two steps back.
Fundamentally, it costs a lot less to build your share of voice during a recession than it does the recovery. And make no mistake: markets will darken. Companies will go quiet. This creates an opportunity that – as history demonstrates – forward-thinking businesses will be quick to exploit.
None of this necessarily means putting more money into your existing marketing budget, either; you could, for example, leverage data to become more targeted in your approach, engaging certain demographics or locations to make your money go further.
Recessions invariably hit demand. There’s nothing anyone can do about that. But what we can do as business owners and marketing directors is resist the urge to fall into the short-termism trap. All too often, companies panic and set out on a race to the bottom, reducing prices and running promotions that depreciate the value of a product or service. This isn’t sustainable amidst a stumbling economy.
Aside from sustainability, there’s also the suggestion that consumers do not necessarily equate price with good value – a point reinforced by Mintel research. In fact, price reductions can affect quality perception, and this feeds back to your brand.
Sure, discounts and promotions may shift some units in the short-term. You might enjoy a small spike in sales, but this creates an issue: consumers will expect pricing to remain low if it’s what they become used to, which will hurt your business in the recovery. There is always a space for activation as part of a well-rounded, cohesive marketing strategy. Yet re-routing all your focus to this area alone will do nothing to build your brand – and ultimately, it’s brands that people buy into.
And when it comes to people’s perceptions of brands, honesty and consistency always win out. Consumers generally do not want you begging for their money amidst financial difficulties; they want camaraderie, reassurance and familiarity. This is why heritage brands always tend to emerge from a crisis in better nick – they’ve built loyalty through years of brand-building, through the good times and bad.
Of course, being reactive to new challenges can be a good thing. But it’s how you go about your response that matters. Field suggests that, instead of fixating on price and activation, a better short-term strategy in times of economic hardship is to focus on innovation. Can your business find new means of adding value, perhaps through partnerships? Are there novel ways you can engage your audience, with new touchpoints laying waste to the now-archaic purchase “funnel”?
The good news is this doesn’t have to mean spending more money. Good old-fashioned creative thinking goes a long way.
The IPA’s Bellwether Q2 2022 report reveals that 24.2% of 300 companies surveyed are increasing their marketing budgets in the second half of this year – despite the current economic climate – compared to 13.4% that plan to cut their budgets. This comes despite 40% of respondents feeling pessimistic about the financial outlook for the months ahead, against 13.6% who feel optimistic.
A separate report by GroupM forecasts that ad spend is set to grow year-on-year across all media over the rest of 2022, with digital the chief driver here, but out-of-home, TV, print and radio also showing strongly.
So, all things considered, the signs are encouraging. Businesses have seemingly taken heed of the lessons learned during the pandemic and 2008 crash. They’ve cottoned on to the effectiveness of brand-building during a crisis and are positioning themselves to seize on any competitor complacency. Don’t allow your business to fall victim.
While the overarching message is the same, how you approach brand-building during the current conditions will depend on your business, market and, perhaps most crucially, your target audience. Not all demographics are being impacted in the same way, so understanding your audience and the context behind any shifts in behaviour will prove key in developing effective campaigns.
Events over the past fourteen years demonstrate how quickly things can change. Ensuring your company is agile enough to twist and weave through a recession is imperative – but no amount of flexibility will save a business that doesn’t have a strong, confident brand at its heart.
If you’d like to find out more about effective brand-building, or to discuss possible options for your business over the months ahead, contact our team for a chat today.