Marketing through economic crisis: strategy and spend

Unless you’re Gen Z, the impending recession won’t be your first. While a technical recession (two consecutive quarters of negative growth in real GDP) has been averted for now, economists have warned the recession may simply be delayed. In fact, the EY Item Club forecast warns that the UK is set for a deeper (but mercifully, shorter) recession than previously thought.

The immediate outlook is glum, we know, and this year, some businesses will undoubtedly struggle. Some industries have felt the pinch already, particularly retail which is further impacted by the cost-of-living crisis. According to a YouGov survey report last autumn, 85% of Britons have already cut their spending or expect to soon, and 73% expect the economy to get worse.

Here I evaluate how this affects marketing and explore what you could be doing differently to ensure your marketing strategy achieves healthy results.

How to market in hard times: the fundamentals

We can’t control the economy, but we can control our marketing fundamentals – measure everything and be prepared to change strategy. You need to know what value every marketing channel is driving so you can determine where you can (and can’t) afford to make reductions. Or, to justify that the marketing budget shouldn’t be cut at all. 

Measuring marketing activity comes down to good practices and using the right platforms. Digital marketing tends to be easier to measure, with most channels automatically tracking and being easy to review in Google Analytics. But the same can be applied to offline marketing too – for example, with UTM tracking, you can see when a user scans a QR code in Google Analytics. Ensure goals and events are set up in Google Analytics so you can analyse activity beyond vanity statistics like sessions and bounce rate. Finally, use CRM to measure the journey from lead creation to the sale being closed. This helps to track the sales value of each marketing channel, which is critical.

The more you know, the better decisions you and your business can make. 

Economic downturns can create opportunities

In theory, if all your competitors cut their marketing spend due to financial squeeze, that creates an opportunity for businesses that are prepared to continue. If competition is decreased, cost per click (or the cost to reach your audience) declines. In a less competitive market, you may see better ROI. 

However, this all depends on the sector. Online retailers aren’t going to cut their Google Shopping budget in 2023, for example. It’s a channel that delivers sales continually and is very transparent. If anything, with the cost-of-living crisis, there’s going to be more competition for consumer spend. In that scenario, we’d advise working to an allowable ROAS [return on ad spend] target. Have a ceiling that you’re prepared to work to, and don’t get sucked into chasing sales that aren’t profitable. 

Key marketing strategy: the customer is king

One common sense tactic during this period is to double down on customer service efforts. Spend time analysing the customer journey and identify where you’re winning and losing. Recommendations, referral and product reviews are massive. They always have been – as social beings, we’re naturally influenced by our friends and what they buy. Take advantage of this by ensuring you actually do what you say you do, and deliver on what your product or service promises. Positive outcomes will result in referrals and more sales. Again, this doesn’t deviate from the usual marketing advice, it just becomes more critical during economic decline as everyone fights for sales in a shrinking market. 

Another point to bear in mind is that not all trends are worth following – a recent one being making fun of customers on social media (a certain airline specialises in it). There’s a very fine line with things like this, you can very easily come across as a brand that doesn’t care. While there’s nothing wrong with humour in the right context, it probably shouldn’t be at the expense of the customer who pays the bills. 

A good time to innovate

The pandemic and previous recessions have changed consumer behaviour. Although these changes can sometimes be short term, they can also present opportunities to innovate. During the recession, online brands continued selling, with some seeing their best ever sales. More traditional businesses who couldn't adapt in time had to temporarily or permanently close. If there’s one lesson to learn here, it’s to not be a one-trick pony. If you rely solely on one channel or market, your business is vulnerable to change. That could be as devastating in a recession as it was during the pandemic. 

The Retail Institute’s annual report on the future of retail (November 2022) highlights that, to save money, consumers are gravitating to own label ranges, such as those in discount supermarkets. Therefore, companies that have invested in private label brands could be due to win in 2023. Conversely, consumers that are less affected by cost (or are more environmentally motivated) are shopping locally, for sustainability reasons. 

The Report also stated that, when asked about their shopping preferences, more than half (54%) of consumers said they prefer physical stores to online, with 51% agreeing that shopping feels like an escape. It’s pretty safe to say that brick-and-mortar stores aren’t dead, and shouldn’t be overlooked. 

Looking ahead

When it comes to marketing, the smart strategist who measures and analyses data is in the best place to win. Don’t cut the budget blindly – measure data and make informed decisions off the back of that. And be prepared to change plans quickly. 

Keep on top of trends, whether that’s in your industry or just generally in marketing, and especially in digital channels. Nothing stays stationary in the digital world - new channels, software updates and algorithm changes happen all the time and can impact everything from the effectiveness of your existing campaigns, to ways to reach new audience segments. 

What’s more, although automation and machine learning tools have been around for a while, they continue to improve and become more useful to marketers. These tools may have applications from email marketing and optimisation, to problem solving and even assisting with content creation through exciting new tools like ChatGPT. 

Is any of this different to marketing outside of a stable, healthy economy? We think not. It’s how we’ve always done things – you just need to be prepared to learn and adapt. 

Andy McCaul is co-founder and director at integrated marketing agency The Bigger Boat.