If you cut marketing budgets in a recession, you are sacrificing the long term profitability of your company and its brand

I’m sure there are many chief execs out there who are being told by their marketing staff or their agency that in a recession they should be maintaining their marketing spend and in some cases, increasing it.

Budget cuts

Many will think that this is just a plea of desperation to ensure that they are still in a job next month but it is actually true – I am saying it and I am neither your client nor do I work for you.

The fact is, when times are tough, consumers want a brand to justify every penny they spend on your brand that little bit more. In a land where everyone is economising and looking to cut down spend, why should they continue to buy your product when there are cheaper alternatives out there?

Take a hairdressers for example; I may get my hair cut at a rather expensive salon that, in reality, isn’t really a necessity. I could go to a barbers and pay £5 to get my hair cut instead of £40 at a central London salon. Likewise, women could choose to stop colouring their hair or grow it long to cut down on their costs. For this reason, that salon now has to convince you that it is worth making sacrifices in other areas in order to continue to fund an expensive haircut that you could get much cheaper elsewhere; something they probably never had to do before. One slip in service, one unwanted cost cut, and that customer will go elsewhere. They will need to explicitly communicate (in their brand and through their staff) that they are worth the extra money and that you, as a person, need them.

This is the same in many other industries. Everything from butter to smoothies, clothes to credit cards all need to convince people that their product is better than everyone else’s and that they should cut corners in other areas in order to continue to pay for their products.

Research has proven that share of voice is far more important that share of market in an economic downturn and that any short term cuts will effect long term profit, but yet, companies continue to cut their budgets.

I can understand that brands want to see ROI on every penny they spend (echoing the point above) but making huge cuts isn’t the way forward. Cutting back on high profile sponsorship deals is acceptable but cutting budgets across the board really isn’t that wise.

At times like these, a brand should be reassuring customers, empathising with them and offering marketing initiatives aimed at letting them know that they are there to help. A supermarket reducing the costs of basic goods is a prime example of how to help customers out without cheapening their brand. This will of course need to be communicated through marketing channels.

Its going to take balls for a company to say they are going to maintain their marketing budget despite the downturn, but as marketers will tell you at every seminar you will ever go to ‘when everybody zigs, zag’.


~ by Simon Bocko on February 6, 2009.

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