When macroenvironmental challenges (like a recession or a pandemic) occur, many companies immediately slash their marketing budgets. We saw this in the recession of 2008 to 2009. We are seeing it again in the coronavirus pandemic. The argument goes like this: 1) we are not generating as much sales revenue, 2) we need to cut costs, and 3) let’s just cut all costs.
If marketing dollars are included in these moves, they are being treated like an expense. Well-spent marketing dollars can and should generate sales levels that are multiples of the spend. When this happens they are like an investment with a positive ROI.
Research from the last few recessions confirms that simply slashing the budget is not the right move – firms that aggressively slash expenditures and retrench to protect their sales are the least likely to flourish after the challenge has ended.[1] Moreover, several brands have used economic challenges to move ahead of their competitors:
In the 1920’s Kellogg unseated rival Post by maintaining ad budgets and introducing Rice Krispies.
Toyota used the 1973-1975 recession, with a focus on increased gas mileage, to become the number imported car in 1976.
In the 1990 recession, Taco Bell and Pizza Hut increased their ad spend to take advantage of McDonald’s ad cuts, each growing their sales while McDonald’s declined.
Amazon used the 2008 recession to launch the Kindle, providing a lower-priced way for people to buy books.
The goal isn’t merely to increase marketing spend, but instead to find a healthy balance of reducing inefficiencies and supporting opportunities for growth. There are always inefficiencies in marketing spend. Now is the time to really look at your data. Which marketing efforts show a consistent positive return? Which efforts are clearly not working? And which ones can you not tell if they are working? Obviously, stop investing in the ones that aren’t working. You also may want to drop the ones that you cannot tell. Then, look more closely at the ones that are working. How can you expand them? That’s right – there may be some efforts you can invest in more. Not sure how to evaluate your marketing efforts? Revisit our post from the end of 2019 about auditing your marketing.
Once you get rid of the inefficiencies, you can look for growth opportunities. Right now, those growth opportunities are going to come from two sources: 1) supporting and serving “essential” businesses and 2) making it easier for people to work and play in their own homes. Essential businesses are those that will stay open no matter what the situation is: grocery stores and food production, pharmacies, health care, utilities, shipping, banking, other governmental services, law enforcement and emergency personnel. Under our new normal, which will keep evolving, people are likely to be working from home for some time. When they leave their homes, they want to feel safe. How can your product offering help them? You need to be able to get products to them at home or help them safely pick them up.
Consumers need more access to quality food without going into grocery stores. Indianapolis wholesaler Piazza Produce, which usually services restaurants, started offering produce boxes and meat boxes to consumers. Consumers call in and order the boxes and they bring them out to the car. As it seems safe enough, they’ll bring trucks into neighborhoods for pre-order pickup.
People want to stay in shape and be entertained too. Fitness equipment manufacturers Peloton and Nordic Track offered free shipping and free access to online activities. Yoga studios are holding online classes. Indy Racing has moved to online simulator races. Many, many museums are opening their exhibits online. Zoos are having animals out and about visiting other animals’ areas. How can your business help people play more, safely?
Consumers also want to feel safe when they are out and about. Startup Shinesty, which is known for having the most outlandish clothing available, quickly added outlandish masks to its offerings. No one wants to look like a bandit as they mask up. In fairness, several clothing brands have started making masks. All are trying to help people be themselves in a stressful situation. So keep brainstorming. How can you help people be more comfortable in their homes under our new normal? How can you solve pain points for them?
In our own research, we surveyed about 600 small firms (those with fewer than 100 employees) in 2008 and 2016. First, nearly 34% of those firms disappeared in that the eight years. That’s a scary percentage to us. So we understand that the threat is real. But more interesting, those that invested in expanding their products and markets in 2008 better met their strategic goals and saw higher growth between 2008 and 2016.
Every macroenvironmental challenge offers opportunities as well. Every startup needs to look for those opportunities and invest in securing them. We cover how to offer value to customers more fully in our book, The Titanic Effect. Check it out and chart a new course in our new normal.
[1]Gulati, Nohria and Whigezogen (2010), “Roaring Out of a Recession,” Harvard Business Review. https://hbr.org/2010/03/roaring-out-of-recession