The Cost-of-Living Crisis: Tighten your brand, not your belt
Playing on everybody’s mind, let alone every marketer’s mind, is the cost-of-living crisis. With inflation at a 40 year high and a recession likely on the horizon, CFOs across the country are preparing to tighten their purse strings. And what inevitably receives the first cut? You got it – the marketing budget. We are already starting to see high inflation squeeze marketing spending with the IPA reporting that main media marketing budgets have fallen for the first time since Q1 2021.
‘The Gangsta Move’
However, what seems to be a relatively sensible and straightforward approach to saving a few bucks can irrevocably damage a brand’s market share and long-term success. As the IPA quite rightly point out “If you go dark, others will be more visible”, leaving companies who pull back on marketing, in the shadows when the lights switch back on again.
It’s what Mark Ritson referred to as ‘The Gangsta Move’ back in 2020 when COVID hit; to go against the grain and invest MORE when everyone else is maintaining or decreasing spend pays off in ESOV (Extra Share of Voice) and therefore long-term profitability. The reasoning is quite simple; during recessions the number of advertisers decreases, allowing brands who play the game to gain stronger cut-through in a quieter marketplace, while also benefitting from cheaper media rates due to reduced competition.
However, we’re not talking about spending for spending’s sake. A 2009 report from Harvard Business Review discusses the need for an adapted approach to marketing during times of economic downturn. A move away from demographic audience segmentation and towards psychological segments enables businesses to adapt to the changing emotional needs of an audience in recession. Segmenting this way does identify some rather obvious demographic traits such as affluence and household dependents, but it also brings to light behaviours that cannot be attributed to a particular demo. For example, the “live-for-today” segment (identified by Harvard Business Review) are unlikely to change their spending unless they become unemployed – at most they may delay major purchases slightly.
The Consumer Is Always Right
What consumers consider to be essentials is generally universal; shelter, heating, food and clothing but this has adapted over the years to include access to the internet, technology and medical care. Our basic needs are increasing, further compounding today’s cost-of-living crisis. But beyond these needs, considerations for disposable income are highly idiosyncratic, therefore as marketers our job is to find our audience willing to spend in our category.
We also need to identify how consumers view the product or service we are promoting; is it considered an ‘essential’, or if not, is the product a desire or a need? Is the purchase an impulsive treat for some or a “postponable” indulgence for others? How does this perception change in relation to the state of the economy? We need to maintain flexibility in our marketing plans and react quickly to changing behaviours in the market.
Of course, when it comes to budget, as marketers we aren’t always in a position to argue – what use is marketing a product that the business doesn’t have the budget to produce? In these cases, where budgets are unavoidably cut there is a tendency to lean towards performance marketing to drive short-term revenue, when in reality it is the brands who put themselves front and centre through brand awareness tactics that win out;
“Building and maintaining strong brands—ones that customers recognize and trust—remains one of the best ways to reduce business risk. The stock prices of companies with strong brands, such as Colgate-Palmolive and Johnson & Johnson, have held up better in recessions than those of large consumer product companies with less well-known brands.” Harvard Business Review, 2009
None of this is new news; Biel and King identified in 1990 that those brands who increased their marketing budget during the 1980-1981 recession by >20% saw a 0.9% increase in market share. Fast forward 30 years and the fact remains the same; there are substantial long-term gains to maintaining (and even increasing) marketing budget during economic downturns. So, as we approach what is rapidly becoming inevitable, let’s keep banging the drum for marketing until those CFOs listen and set our brands up to be one of the winners coming out the other side.
· Mark Ritson, Marketing Week, 2020
·“Come back in a year and tell us if cutting your budget was a good idea”, IPA & Effworks, 2022
·“How to Market in a Downturn”, Harvard Business Review, 2009
· Biel and King, WPP Center for Research and Development, 1990
· IPA Bellwether Report Q3 2022
Written by Georgina Evenden, Client Partner at Walk-In Media