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August 31, 2022 // Claudia Vargas  //       //  Opinion

3 Things to Consider Before Cutting Your Marketing Budget in a Recession

Between supply chain disruption, layoffs and rising costs that continue to squeeze wallets, consumers are on the edge of their seats waiting for confirmation that we’re *officially* in a recession. At the same time, businesses are taking a hard look at their FY23 plans with an eye towards trimming unnecessary spending. What’s top of the list for cuts? Usually that marketing budget. 

But hold on there, Edward Scissorhands. Before you slash that budget across the board, consider this: brands that cut their marketing spend during a recession leave themselves at a long-term disadvantage according to research by Analytic Partners. Instead, brands that are consistent or increase their marketing spend often come out of recessions the least scathed. The secret? Adapting your marketing mix to be flexible and account for changing consumer needs.  

So, before you enter budget conversations this Fall, consider these three things to guide strategic discussions. 

1. How is my target audience likely to react to a recession? 

In an older-but-still-relevant HBR article from the last recession, authors John Quelch and Katherine E. Jacz, advise marketers to consider their target consumer’s psychology during a downtown, noting that consumers typically fall into one of four groups:  

  • The “slam-on-the brakes” segment, which feels the hardest hit financially 
  • The “pained-but-patient” segment which remains optimistic about recovery in the long term, but adjusts their standard of living in the immediate term 
  • The “comfortably well-off” segment, which feels secure about riding out the downturn and consumes at a near-prerecession level 
  • And the “live-for-today” segment which carries on throughout a recession as usual  

Understanding the segment within which your target consumer typically sits allows you to adjust marketing tactics accordingly. For example, if the majority of your target consumer are the “slam-on-the-brakes” variety, and your product offering is often viewed as a “treat,” then you might consider leaning into creative that reinforces why consumers “deserve” an indulgence during challenging times. Yet, as always, listening to social media conversation and understanding the landscape will continue to be important to avoid sounding “tone deaf.” Knowing your customer’s psychology allows you to make better, more informed decisions about how your marketing budget is deployed throughout economically challenging times. 

2. What does data tell me about how to adjust my marketing mix? 

Rather than slashing marketing budgets, instead take a hard look at your marketing mix to understand what part of your channel strategy is most essential, and what could use some adjustment. Allison+Partners’ head of Performance+Insights, Brent Diggins, advises embracing analytics to better stretch marketing dollars and ensure you are consistently drawing insights to inform your strategy during a recession.  

It’s worth noting that not all channels are created equally. Use data to take a holistic view of channels and how they deliver your message to target audiences – then allow this data to guide your decision-making about where to adjust the marketing mix accordingly. And this could be the time to focus on where you have an unfair advantage. Maybe it’s time to focus those dollars on enhancing relationships with loyal customers in fewer channels as opposed to launching new products across all of them.  Maybe you have particular channels that get people to the store or website consistently. If you adjust your strategy, measure the result, and let that insight inform your next move.  

3. Am I maintaining an eye towards long-term growth?  

While it may be tempting to focus marketing activities on tactics that drive results in the immediate term, it’s important to ensure the actions you are taking don’t impact your prospects for long-term growth. 

For example, focusing on upper-funnel activities that raise brand awareness and uncover new customers doesn’t immediately show impact if you take a short-term view – however if you look at the long-term ROI, it actually contributes to growth upwards of 50%, according to Analytic Partners. 

So don’t funnel the entirety of the TV or PR budget towards direct marketing and display ads – unless you want to claw your way back into consumers’ psyche post-recession. 

While uncertain times influence different brands in unique ways, keeping in mind your target consumer, driving decision-making with data, and keeping an eye on long-term growth can help you adjust your marketing strategy without making drastic cuts – so you can best position your brand for success on the other side.  

For more marketing counsel, check out our 5 questions to ask to determine if your brand is ready for a recession. 

Claudia Vargas serves as VP of Client Service Operations on the Marketing Innovation Team bringing a wealth of knowledge in strategy and account management. With experience in paid media, brand ambassador programs, content development, multicultural campaigns and social media community management, Claudia supports integrated projects for the agency connecting the dots to drive results for clients. 

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