Resumé’s recent article discussing the mistakes made by marketing managers during the last recession, and how advertisers should behave differently this time around (see full article here) is really spot on. We need to understand how marketing can be used as a strategic tool to balance the effect of the recession.
The Konjunkturinstitutet has announced that Sweden is already in a low-growth period, due to factors like an economically expansive policy during the pandemic, broken supply chains, Russia’s invasion of Ukraine, and falling asset prices. With interest rates also on the rise, it’s no wonder that consumers are becoming more cautious with their spending. The economic forecasts have been revised multiple times in recent months, but the institute still predicts that the low-growth period will continue through 2023.
It is not just consumers who are experiencing a new reality. You may have worked in marketing for ten years without experiencing anything but good times. The same is true for marketing managers and other members of the management team.
When the good times turn bad, it is often two areas where the noose tightens quickly – marketing budget and personnel costs.
This is a reality most marketing managers now need to face. At the same time, a number of studies have shown that companies that maintain their marketing spending – especially long-term investments in marketing – during a recession ultimately come out ahead with increased profitability.
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When Anders Ericson, the former CEO of Sveriges Annonsörer, was asked by company executives whether they should scale down their operations in order to improve the company’s financial standing, his answer was a resounding “no”. In fact, he argued that this is precisely the wrong thing to do – that if a company wants to grow, increase its visibility and market share, a recession is an excellent opportunity to start doing just that.
In an attempt to achieve short-term results, many advertisers gas their product advertising campaigns, even though the buying power is decreasing. This is generally a bad idea, especially if you don’t have a superior product.
There is a risk of developing a brand debt that will undermine the effects of pure sales-driven communication, as Staffan Slörner, former CEO of the trade organization, said when Dagens Media looked back on this period three years ago.
Advertisers believed that they were saving money, but it has since been shown that it’s not as profitable to go as far as they did.
In a recession, brand loyalty is only a question of how strong it is. “Many are open to trying new things in a recession in a way that they wouldn’t have in good times,” says Erik Modig, an economics PhD candidate in marketing at the Stockholm School of Economics.
5 tips on how to meet the recession as a marketing manager
As price sensitivity goes up, brand loyalty goes down. This means brands with strong identity will be better positioned for a recession, and those that start building their brand NOW can get competitive advantages already in 6 months.
Marketing is a business strategic tool, not something you do for fun. As a marketing manager you need to be able to argue for your marketings strategic importance, the business consequences for the company and have data that shows what business value you create with marketing.
If you have to cut your budgets – be smart about it! Don’t spread the budget cuts across all media, too little in too many channels will not create any effect. It might be better to remove one channel and increase in another instead. But don’t get too short sighted and only focus on conversion marketing in a time when purchase power goes down.
Play the budget game, don’t leave the table. It might be tempting to give up tough budget negotiations when the other don’t understand the value you provide, but leaving the table means someone else will make the decisions.
Expect the worst, hope for the best. We are in a completely different position compared to previous recessions, the labour market is still strong and the economic situation is much better than in the 90’s.
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