While other marketing departments and agencies around the world may be quaking in their boots right now (as they are usually the first expense to go in times of recession), we know better.
We believe that business growth and opportunity during times of recession are realities – for the smart and bold. And we can prove it.
Hold your nerve
In late 2022, Analytic Partners released its ROI Genome report, which focuses on the dangers of cutting marketing spend in a recession and the opportunities for marketers who maintain or increase advertising. Key report findings include the savvy advice to ‘hold your nerve: don’t cut marketing spend’.
Here, says Analytic Partners, is why:
- 63% of brands that increased their investment in marketing after the 2008 financial crisis saw a positive ROI
- Those brands that increased their media investment realised a 17% growth in incremental sales
- And 60% saw ROI growth in back-to-back years
By comparison, marketers who cut their ad spend (when their competitors don’t) risk losing 15% of their revenue during a recession.
The conclusions from Analytics Partners are far from unique. A 2002 report from McKinsey and Company, which encompassed results from the 1990-91 recession, found those companies who continued to invest in marketing at the time of the downturn came out on top.
And Global consultancy Bain & Company says that those companies who tried the slash-and-burn approach to getting through a recession came out worse off than those who focussed on cost containment but looked beyond cost to spend and hire before the markets rebounded.
Think retention and successful selling rates
You’ve all heard that the cost of acquisition is 5x higher than retention. It’s one of the truisms of marketing that doesn’t seem to change. Or does it?
In 1990, Harvard Business Review published an article Zero Defections: Quality Comes to Services which set off executives by the thousands to craft retention strategies. Why? They reported that increasing customer retention rates by 5% increases profits by 25% to 95%.
However, something the 5x truism doesn’t consider is that the cost to acquire a new customer is as variable as any other metric. (Calculate it for yourself: Customer acquisition cost = the cost of sales + the cost of marketing ÷ by new customers acquired.)
Regardless, (and rather than deep-dive down that potential rabbit hole), what is probably more important to you is the success rate of selling to a customer you already have (60-70%) compared with the success rate of selling to a new customer (at 5-20%).
So, when times are tough, it’s more profitable to cultivate and market to those carefully retained and loyal customers. Because if you don’t, you can guarantee your competitors are.
So, when times are tough, it’s more profitable to cultivate and market to those carefully retained and loyal customers. Because if you don’t, you can guarantee your competitors are.
Where are the opportunities?
Another truism is that business (or crime) doesn’t stop when times are tight.
Those responsible for IT don’t stop spending - or planning to spend - just because the purse strings have been tightened. Especially when the service or solution they want is business critical.
For example, the determination of Clare O’Neil, Minister for Cyber Security, to make Australia the most cyber-secure country in the world by 2030 through increased regulation and legislation is going to drive spending. Without fail.
And this is remembering that a recession doesn’t slow down the threat actors. They, too, have businesses to run and families and dubious habits to feed. So, you can bet your bottom dollar they will continue to work hard to maintain their obscene ‘profit’ levels.
CSO Online reports that, statistically, we can continue to expect upward spikes in attack levels during times of recession, staff layoffs, economic downturn and political uncertainty. Sadly, opportunity knocks equally hard on both sides of the fence.
Our final words? It’s important to stop a looming recession or shrinking economy from being a new business opportunity for your competitors. If you are going to invest in one marketing activity to the exclusion of all others, make it retention.
