Should You Cut Marketing Costs During a Recession?

Should you cut marketing costs during a recession? Most businesses reduce their marketing when times are tough. Businesses that maintain their marketing budgets while redistributing those funds to better reflect the current environment, on the other hand, outperform those that cut marketing expenditures, whether in product development, advertising, communication, or pricing.

Studies That Prove Cost Cutting During Recession Is Not a Good Idea

In his 1924 Harvard Master’s thesis, Roland Vaile divided 250 businesses into three groups: those who did not believe in advertising, those who reduced advertising during the Depression, and those who increased advertising. Businesses that increased their advertising spending during a recession saw a 20% increase in comparable sales compared to those that did not advertise and a 24% increase compared to those that reduced their advertising budgets after four years.

Additionally, a  study in other parts of the world such as the UK’s  shows that products introduced during a recession have a better chance of long-term survival and higher sales revenues.

During the depression of 1920-1921, companies that spent money on advertising saw an increase in sales and expansion. Unlike their competitors, who reduced advertising during the recession, these companies grew for several years afterward. Those companies that cut their marketing costs took years to bring themselves back into the spotlight.

According to a 2019 Bain study based on data from the 2008 recession, businesses that maintained their marketing budgets saw 17% annual compound growth, while those that reduced their marketing budgets saw no change in their rate of expansion.

So, what’s the solution?

Companies must distinguish between the necessary and the wasteful when it comes to marketing budgets to maintain their brand’s strength. In other words, cutting costs without a plan can harm your company’s market visibility, especially online. Changes in Google’s algorithm or a lack of new content can cause your organic rankings to fall over time, decreasing organic traffic to your site. Paid channels, such as digital advertising, necessitate a consistent budget to keep advertisements visible in search results.

Evaluate your current need for any external agencies. Decide if you would like to hire an employee or an independently contracted company. While the overhead costs of agencies can sometimes make them more cost-effective than in-house hires, if you’re not seeing any returns on your investment and they’re charging you a lot, it’s time to cut ties.

Get rid of any outdated or unnecessary equipment that is complicating the lives of your employees. Subscriptions that aren’t being used to their full potential should also be reviewed.

Concentrate on the channels already producing results and tending to your existing audiences. When times are tough, it’s wise to invest in quick bottom-of-the-funnel efforts that produce results. Concentrate your efforts on channels with a high return on investment, and optimize your targeting accordingly.

If you have the means to invest, widespread brand recognition is definitely worthwhile.

As competitors exit a volatile market, you will have a better chance of attracting customers at a lower cost. Your competition will also go down as your competitors decide to cut their marketing costs.

Final Words

During the recession, determining your best course of action is challenging. Invest this time in reorganizing your budget to meet your company’s needs and the desires of your customers but DO NOT CUT MARKETING. While it may be unavoidable to be more frugal, a well-coordinated team can maximize results while minimizing costs.

It may be time to restructure and reevaluate but you must remember how important your branding and SEO efforts are!!!

Always remember – Marketing is considered an investment in your business, not just an expense.

Different marketing outlets that are VERY IMPORTANT to consistently invest in:

SEO (Search Engine Optimization) – Move your business up to Googles top 3!!!

Social Media Management – Ensure your brand is noticed across the web!

Content Creation – Educate your clients! This also ramps up your SEO.