As America heads into its second recession in less than three years, stories abound about companies pulling back on operations and hiring. Historically, many businesses will reduce or eliminate their marketing budgets to save money – cutting themselves off from the lifeblood of sales and profits, exacerbating the negative effects of a recession, and restricting their growth once the recession is over.
You wouldn’t shut off utilities to save money; why stop bringing in money during a recession?
The goal of marketing and branding is to be imprinted upon your target markets’ brains so that they will enter your sales funnel. Movie theaters have mastered this through a surround-sound strategy which includes high-quality speakers all around the theater which immerse you in the music, dialogue and background of any film. Viewers become consciously and subconsciously absorbed because of the precise way all of the elements are weaved together.
It’s impossible to imprint a brand on the minds of target markets if they don’t know that you exist. That’s why marketing and branding should be a 24/7/365 investment in good times and bad, in slow seasons and busy ones.
The Recession Opportunity
The best investors follow Warren Buffett’s philosophy on market conditions: When other people are panicking, that’s the time to buy. And for business owners, economic downturns are a great time to earn more market share while the competition is retreating or shutting down.
This philosophy helped wastewater treatment company Presby Environmental triple revenue and expand operations during and immediately after The Great Recession. Former CEO Lee Rashkin attributes the company’s success to aggressively investing in marketing and branding while the rest of the industry was in retreat.
“We were a regional business when the recession started,” said Rashkin, the company’s then-marketing lead. “But we had cash on hand, good profits, and competition which left whole market regions open as they cut back.”
Mistakes are magnified in a recession. But so are opportunities for those who are prepared. At the height of the COVID-19 pandemic, online marketing guru Neil Patel noted that digital ads were cheaper and getting more clicks. Statista observed that the average cost-per-click for a Facebook ad dropped by almost 20% between January and March 2020. And my father’s home service company increased its radio ad presence by 65% for free just by staying on the air.
By the time Rashkin guided Presby to a private sale in 2019, it had become the second-largest onsite wastewater treatment company in America. And he says a lot of that was due to its recession-era advantages.
“As a medium-sized business, we had a lot of room to grow into new markets. Additionally, we had strong margins which gave us the financial capabilities to market aggressively and make new hires. So, even as the industry was retracting, our market presence grew considerably.”
The Biggest Recession Risk Is Cutting Marketing
Recessions force companies to examine their entire operation. This examination may lead to streamlining processes, cutting deadweight, and reallocating resources to the most profitable and loyal customers. But just as the money saved by cutting utilities would cause more harm than good, no company can survive without sales and profits – the lifeblood of which is marketing and branding.
Jack White is an attorney with McGuireWoods who works with companies ranging from a few million dollars in annual revenue to over a billion dollars. He says his best clients increased their marketing and branding budgets during the pandemic-induced recession.
“Not surprisingly, my clients who saw the greatest success through the downturn had an interesting perspective on marketing,” said White. “Rather than dwelling on the risk of expanding their marketing budgets, they viewed it as more risky not to do so. The downturn would conclude at some point, and they wanted to be best positioned to expand their footprints afterwards.”
Prepared Companies Thrive During and After Recessions
Not every company can follow Presby Environmental’s path of growth during a recession. It may be all that your company can do to stay afloat as sales plummet. But by staying in the marketing and branding game, your company will continue to stay in front of target audiences – giving you a huge advantage for post-recession recovery because you’ve continued to imprint on people’s minds.
This requires preparation well before the recession. Rashkin, who has founded two companies since selling Presby, says that the most important preparation is on the balance sheet. “Recessions will come and go; and you may not know they’re coming. Focus on your core market, be careful with debt, and position your business to be greedy when others are fearful.”