Companies are always on the lookout for information on what to do if the economy takes a downturn, and for good reasons. Even for experts, it’s not easy to predict where the economy’s going to be in a few months time. That’s why it’s important to understand the best ways to allocate your budget and how to perform different functions, like advertising, in an unusual economy.
The National Bureau of Economic Research (NBER) has not stated that the U.S. is in a recession, but that doesn’t mean our current economy is perfect. As it was laid out in the New York Times earlier this month, “the U.S. economy is in a strange place right now”. We’re currently seeing a good uptick in capital goods, industrial production, and unemployment claims, as well as a positive regression in inflation. But inflation still isn’t great, and the unemployment rate, consumer spending, and hourly earnings growth are on the downturn.
So what does this mean for your business and its upcoming budget allocation? You’re probably already determining the most crucial areas of your business and what’s most important for your spending if the NBER does come out with a less-than-satisfactory declaration. Well, believe it or not, during an unusual economy, and especially during a recession, advertising and marketing are some of the best places to increase your spending.
Over the last few decades, economists and universities have conducted many studies on how spending money on marketing during a recession or unusual economy affects the future of your business. As an article by Harvard Business Review puts it, “…[cutting your advertising budget during an unusual economy] is today’s equivalent of bleeding – an old-fashioned but once widespread treatment that actually reduces the patient’s ability to fight disease”.
It makes sense that businesses would want to cut their budget during a poor economy in an attempt to optimize their long-term profitability. It’s also fairly common for businesses to cut from their advertising and marketing budgets before anything else. But this isn’t always the best option. One study argues, “…when companies cut back advertising expenditures, they become less visible to the public”. In fact, research has shown that advertisers who spent more aggressively during unusual economies increased their net income at a higher rate than other companies during and after the economic period.
Even though increasing your advertising spending is important for an unusual economy, it’s still helpful to focus those efforts and ensure your budget allocation is as effective as possible. There are three main areas of marketing you should focus your attention on:
As mentioned above, companies that cut back on advertising during a downturn economy risk becoming less visible to their target audience. Because of this, prospective buyers might turn to other companies they’re more aware of or who have maintained their visibility. Increasing your spending on marketing efforts that boost your brand awareness can keep your business on the forefront of people’s minds, which is key, given that most equipment purchases have long planning horizons.
In surveys conducted by Randall Reilly, 60% of fleets plan purchases 12 or more months in advance, 53% of contractors plan 8 or more months in advance, and 79% of farmers plan 6 or more months in advance. Advertising during an unusual economy ensures that you stay top-of-mind when buyers look for products or services like the ones you offer, which can allow you to come out of the economic hardship more confidently without losing ground.
Believe it or not, new products and services launched during an unusual economy or recession have a higher long-term survival chance and a higher sales revenue. Studies have shown that’s often because of two factors:
When faced with an unusual economy, a lot of businesses often make the mistake of raising their prices. Though the idea makes sense, this often has the opposite effect on consumers who already feel the pressure and stress of rising prices everywhere else. One of the best things you can do is maintain your current pricing and tell your customers about it.
Advertise your costs and show them that your business isn’t raising its prices amidst the threatening economic times. A great example of this is from a recent Mint Mobile campaign, who actually lowered all its pricing as part of a “deflation” initiative, while its competition raised their prices.
Not sure where to start? The marketing experts at Randall Reilly are here to help. We have a dedicated team of specialists who work with your company to understand its marketing needs and help you develop advertising strategies no matter the state of the economy. Contact us today to see how we can help you boost your brand awareness and develop promotional campaigns to attract your target audience.