Don’t slash your marketing budget in a recession

A marketer’s guide to surviving a recession: don’t slash your budget

Don’t slash your marketing budget in a recession. It is going to make your slump worse and your recovery tougher. As many signs point to an economic downturn, here are some tips on how marketing managers can survive and thrive.


Don’t slash your marketing budget in a recession

When a downturn hits, the first instinct of many companies is to cut costs and lay off people. Often, the marketing department is among the first victims of those cuts. It is a reflection of the outdated belief that marketing (communication) is more of a “nice extra” than a strategic function. However, it is in a tough market that you need marketing’s vision on what, how, when and where to sell the most.

The negative effects of simply cutting human and other resources in the marketing (communications) department don’t take long to materialize. A smaller presence in a tough market is going to generate even less in sales. If only because it communicates to your customers and your competitors that you are struggling.


The negative long-term effects of a defensive approach

A defensive approach to recession management creates negative effects in the long run, too. Profit Impact of Marketing Strategy studies have shown that companies that do not slash their marketing budgets generally benefit down the road. A study published in Harvard Business Review concluded: “Few prevention-focused corporations do well after a recession, according to our study. They trail the other groups, with growth, on average, of 6% in sales and 4% in profits, compared with 13% and 12% for progressive companies. Whereas in the three years after the 2000 recession, sales for the 200 largest companies grew by an average of $12 billion over prerecession levels, the prevention-focused enterprises among them saw sales grow by an average of just $5 billion. Moreover, cost cutting didn’t lead to above-average growth in earnings. Postrecession profits for prevention-focused enterprises typically rose by only $600 million, whereas for progressive companies they increased by an average of $6.6 billion.”


More efficient, not less

Of course, most companies simply have to do with less in a downturn. But if marketing execs have to make cuts, then they should use a scalpel and not a butcher’s knife. In communications, there is always some waste. There is always some money spent on things that don’t generate the intended ROI. Or not anymore. Your customers have changed and so have the tools to reach them. What once worked might not be ideal anymore. So use a (looming) recession to review the effectiveness and efficiency of your communication approach and mix. Maybe you can go all digital instead of using print. Maybe you can shift more of your ad budget to online. There is a good chance you will find inefficiencies that would result in smart rather than blind cuts.


Plan ahead

The recession is not here yet, so there is time to come up with a plan. Don’t wait until stock prices plummet, investments decline and consumer spending slows. If you wait until the finance department tells you to make cuts, there probably isn’t time to do anything but just cut. But if you start working on a plan to increase your department’s effectiveness and efficiency now, you will be ready to implement it when you need to.


Look for opportunities

Keep in mind that a recession does not mean that people and companies will stop buying things altogether. They will just be more mindful of how they spend their money. In addition, the downturn might create new business opportunities: a new market segment, new ways to outsmart your competitors, a new type of customer, new customer needs, etc. The greatest value of marketers during a downturn is in identifying and capitalizing on those opportunities. Rather than giving into recession-induced angst and defensiveness, do what you were hired to do. Find the smartest way to help your company survive and thrive, in the tough times and the recovery that will follow.


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