If you are like most businesses, you probably feel the heat of the recession. The price of the things we need continues to rise; From groceries to fuel. As if the economic hardships of an epidemic were not enough, we now have new trending pain points; Inflation and recession. At times like these businesses start looking for ways to hit the openings and get through the storm. This often means spending cuts on anything seemingly not essential, and often the marketing budget is the first to snatch a hit. But did you know that this is actually the perfect time to increase your marketing budget? Do not believe us? How about a small history lesson.
The struggle of doing business in recession
We know what you think; You just invested all that money in sales and marketing, but you do not see the results you would like. You may be blaming your sales process, the state of the industry or both. The easy answer seems to be to reduce these expenses until the ROI justifies a return to routine. It is natural that the first instinct of the business is to protect itself from a slump in the market, by trying to limit the financial damage it is taking. But at this central junction, there is no room for error. It is imperative to make the right calls that will keep your business on track and ready for any crooked ball the economy imposes on it. It is time that we can learn from the past; How other companies have faced recessions and recessions before us. In our worst times who made the best moves?
History Lesson: Kellogg’s VS Post Cereal
In the late 1920s, two companies dominated the packaged grain market; Wise and post. At this point, ready-to-eat packaged cereals have been around for some time, but have not yet been perceived by Americans as an ongoing alternative to other breakfast options like oatmeal. When the Great Depression occurred, someone could have guessed what effect consumer demand for such a product would have. Post made the obvious choice to reduce spending and reduce advertising. Alternatively, Kellogg has doubled her ad budget, by aggressively switching to radio advertising and heavily pushing her new grain, Rice Crispy. A bold move to make at a time when Americans have gone as far as growing their food and reusing leftovers to pinch pennies. But, it worked. By 1933, when the economy was shrinking, Kellogg’s profits had risen by almost 30% and they had become what they are to this day; The dominant brand in their industry.
Sam’s story
All of this reminds us of the story of Sam, a customer and friend who approached us during a difficult time for his business. Do not get me wrong; He is a solid businessman in the top 1%, with over 100 people on his sales team earning millions in revenue every year. However, in a check-in conversation with him recently I discovered that he has a big problem. Sam seems overly focused on cost reduction, in the face of a rocky recession. This focus in itself is not entirely wrong, but it was clear that he was in a state of fear instead of a state of execution. And actions out of fear rarely see success.
His exact words were, “We see a softening in demand in our market and for our customers. And for that reason I am very concerned about reducing costs.”
Correct main performance metrics
It was a red flag, because it reminded us of what happened to Kellogg and Post. Of course, when the economy takes a hit, saving money is a smart move; There is no denying it. But what is no less important is how you save that money. Because if you do not make the right moves, your business may get into a worse situation than it was before the crisis. When everything exists, mistakes are fine because the margin of error is greater. During a recession, this interval closes considerably, and your moves require a higher level of intent with a focus on side risk. Everything has to be specially calculated, and unfortunately, Sam did not calculate much at all. His marketing and lead generation was not systematic and he did not have good KPIs. This leads to lower quality leads, over-spending on these leads, and ultimately lower profits for the business owner.
Sam did not have a leader who measured sales activity, such as lead-related conversions and sales stages that move buyers through their sales process. He only measured the final results and not the work that led to it. Activity is no less important than the end result. Without a leader who measures the effectiveness of the sales team, Sam made irrational decisions based on fear and thus set himself up for failure. Instead of assuming less advertising and reducing costs there, he should have done a sales audit. This can help you focus on what works and what doesn’t, and redirect your focus accordingly. Transfer these expenses (instead of cutting them) to efforts that gain you market share.
What to do during a recession
During a recession, it is important that your brand stands out among a sea of other brands that are trying to lie. It’s time to invest in marketing, not downsize. Studies show that these times are economic opportunities to strengthen your brand by going against the flow. But not everyone has the cash on hand to increase any budget during a recession, which is why it is important to be strategic about what exactly you are focusing on. As we said above, focusing on the wrong moves without the supporting data can lead to disaster. Many studies have been done on the hot topic of recession marketing, and the findings have been controversial in some cases. Some studies have found lower sensitivity to long-term advertising in a recession, which requires reducing spending, while others have found the complete opposite.
The research behind marketing during a recession
These contradictory findings are not surprising if you look at what sets an ideal advertising budget: 1) Contribution margin per unit, 2) Expected sales and 3) Advertising flexibility. Lower expected sales in a recession will justify a budget cut, but it is not always clear in which direction advertising flexibility is changing. Flexibility may increase if competitors cut back on their advertising, making it easier to reach the same audience with less money. Also, the cost of advertising may decrease due to lower demand for advertising space, which will lead to a higher return on investment. Finally, a brand’s value proposition may be particularly attractive in a recession, leading to higher flexibility compared to your competitors.
Therefore, the optimal expenditure in a recession depends on the extent to which an increase in brand advertising flexibility can offset an expected decline in demand. One lesson here is that in times of recession, people are looking for bargains and deals. This is your opportunity to attract new customers through aggressive marketing, although marketing is very targeted and supported by data. So do not be afraid to spend a little more About Recession Marketing – This could be the best decision you will ever make.
We survived so you can thrive
We know the shoes you’re in now, because we’ve worn them ourselves. MyOutDesk started during the 2008 global financial crisis. Hell time to start a non-essential business. But we have learned that we are essential; For other businesses. Small, medium and large businesses; Such just like yours. Businesses affected by an event beyond their control are trying to find ways to survive strategically and return to some form of normalcy when the dust settles. The goal of MyOutDesk is not to survive but to thrive. Our virtual assistants have made this possible in the past, by allowing businesses to step up their marketing efforts without breaking the bank on new employees. Higher quality of more targeted, data-driven marketing by experienced professionals. Marketing efforts are well-directed to play according to your strengths at a time when it could be the difference between here today and tomorrow disappearing.
Inflation will not wait for your business, so why is your business waiting? Schedule a consultation today and see what we can do for you. This is a free call, where we will answer any questions you may have about the service we provide. We would normally say “you have nothing to lose”, but that is not true at the moment. Time is what you lose, every day you do not make the right moves for your business. And time is money, so let us help you save both.
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