With a crazy past few years around the world, brands are facing economic unpredictability amidst a plethora of uncertainties (political, social, health, etc.). The market is down, inflation is up, and consumer behavior is shifting as many are unsure of what the future holds. But what does this mean for your company’s budget? Marketing and advertising spend is often the first to get cut by management when times get tough. And as a marketer who’s worked with companies who have cut their marketing spend in downturns, I can tell you from first-hand experience it’s the wrong play. Why? Well, as Peter Drucker once said, “Because the purpose of business is to create a customer, the business enterprise has two—and only two—basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”
A period of economic slowing is actually the time to invest in your brand and your marketing. Investing in your brand can increase customer demand and loyalty and, thereby, growth for overall enterprise value, even during economic uncertainty. And as a bonus, the hard costs of marketing, like media buys, are discounted during periods of slow economic growth as the competitive set reduces their spend.
A study conducted by the Strategic Planning Institute found that while reducing marketing and advertising spend during a recession does temporarily improve return on capital, it also concluded that those same companies grew less quickly following the economic downturn than companies that did not limit their marketing spend. In past downturns, if a company was able to increase their share of voice by maintaining or increasing their advertising spend, they ended up capturing market share from weaker rivals. Even better – it costs less than it would have during a booming economic era. Bottom line: An increase in marketing spend during a recession results in a better fiscal year following the recession. And firms that cut costs faster and deeper than rivals have the lowest probability (21%) of pulling ahead of the competition when times get better.
Companies should maintain, or better yet, increase their marketing budget during economic downturns.
Getting ahead of your competitors during economic uncertainty, doesn’t come without risks though. However, these can be managed through a strategic branding process that builds and communicates the brand in a way that aligns with the customer.
“Building and maintaining strong brands—ones that customers recognize and trust—remains one of the best ways to reduce business risk.” —Harvard Business Review
Take a look at companies with strong brands:
- Johnson & Johnson
These companies all have strong brands and have held up better in recessions than those of large consumer product companies with less well-known brands.
Without risk, there is no reward. But how do they do it?
Reevaluate Your Brand
In times of economic, social and political trouble, we seek out people who are calm, predictable, reliable, trustworthy, authentic, etc. and strong brands play a similar role in our lives. The four brands listed before have proven their brands to be thus. They have consistently marketed their brands while adapting to changing customer mindset and behavior and demonstrated that they have customers’ best interests in mind. Keeping customers’ best interests in mind is necessary because just as companies look at cutting back, customers are also reevaluating their spending habits during times of economic uncertainty. They are evaluating your brand at every level – and are more likely to jump ship to another brand that serves the same purpose but exudes more trust, has greater brand presence, and is proactive to market behaviors.
Now is the time to ensure you keep your customers by reinforcing your core brand positioning. If you don’t already have strong positioning, it would be wise to address your brand strategy sooner rather than later. Reminding customers of why your brand matters and how you address their concerns can add to the cushion provided by previous investments in building the brand and customer satisfaction. A brand is a collection of perceptions, and you want your audience to perceive you as the trustworthy, calm, predictable & authentic company they can count on moving forward.
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Address the Emotion
Think of an economic shift in terms of a historical event (because, in reality, it is). It shifts how customers engage, think and navigate the market. And if your brand doesn’t address how the customer feels on a psychological or emotional level, you will not keep them coming back. A brand message that conveys empathy reinforces an emotional connection that relates you to the customer (i.e., “we’re all in this together”) and keeps your brand relevant. Addressing the emotional connection appeals to your nervous buyers & lets them know you are there for them. Think back to recent events during the midst of the Coronavirus shutdowns. Which brands came out on top?
These are strong, universal brands—but they all have a common theme: emotional connection. Their brand connected with customers on their purpose, or their “why.” And more often than not, their “why” addressed the sentiments of the customer. They adjusted their branding strategy to meet the customer at an emotional level when they needed it the most.
“Brands that nurture emotional bonds with their customers tend to outperform top companies listed on the S&P 500 and Fortune 500 in both revenue and profit. They can also build higher levels of trust, which in turn breeds a more loyal customer base over time.” —Visual Capitalist
By increasing your loyal customer base, you also increase your overall brand value.
Come Out On Top
As we head into renewed economic uncertainty over the next few months and years, now is the time to build a brand strategy that reinforces your core brand positioning and connects with your audience at an emotional level. It can be simplified into three core steps:
- Maintain or increase your marketing budget
- Reevaluate your marketing strategy
- Strengthen your desired brand perceptions
Even if you have a strategy already, strengthen it. Because as soon as times get tough, any cracks in your foundation will show. Customers are looking for ways to cut back and save – don’t give them even the slightest reason to choose a competitor or devalue your brand. The discipline around marketing strategy and research developed during a recession—and the ability to respond quickly to changes in demand—will continue to serve you if the changes in behavior and attitude among your audience remain years after an economic downturn. Investing in your brand can only strengthen your company at its core and prepare you and your brand for whatever may come.