Outsmarting recession: The only way to protect marketing is to be data-driven

As the cost of living crisis deepens, research from Retail Economics conducted in collaboration with HyperJar predicts that £12bn of discretionary spend will be wiped from household budgets, with low to middle-income households the most impacted. Disposable cash after paying for essentials will fall for the average family by almost 6.5%, having a direct impact on both demand and choice.

The challenging economic situation, global conflicts, inflation and the still-felt aftermath of the pandemic have thrown many businesses into recessionary mode, cycling through replanning, budget reallocations and close monitoring of revenue trends. It’s understandable. The first instinct in periods of economic downturn is often to question unnecessary spending. And whilst great headway has been made in understanding advertising’s role as it relates to profitability in recent years, marketing and advertising budgets are still seen as discretionary in many cases.

However, it’s also increasingly well-publicised that reducing spend in a downturn can not only jeopardise the long-term success of an organisation, but also reduce overall brand presence, leaving the door open to competitors to steal share of voice and market share. So why are businesses still falling into this trap, and what should marketers factor into recessionary thinking?

Learning from the past to overcome short-term anxiety

When Wal-Mart founder Sam Walton was asked what he thought about the prospect of recession in the early 1990s, his fabled response was: “I thought about it and decided not to take part.”

A significant amount of historic data from past downturns shows brands that reduce spending or go dark have an expensive recovery and continue to suffer once markets start to recover, whereas brands who maintain spend to stay front of mind remain relevant and experience significant future sales growth. Walmart is a classic example. Through investing in a data-driven approach to ensure its campaigns resonated, the brand maintained growth during successive recessions by understanding what is most valuable to customers during periods of restricted financial freedom.

When considering reducing marketing budgets, the first move is often to cut brand spend and move this into the lower end of the funnel to target more immediate sales, but this can be a flawed approach – especially when not done with any focus. In the context of reduced discretionary spending, it is important to note that we are not seeing a long-term attitudinal shift. Consumers are not unwilling to buy; they are unable to. Reactive and unfocussed short-termism in marketing approaches is often limiting and inefficient when consumers can’t spend, because brands do need them to maintain recall for when their finances are less constrained.

To stay front of mind when it’s needed the most, insight-led approaches that resonate with changing customer needs are important. However, so is thinking beyond the current climate and considering how strategic decisions made around marketing spend today relate to the longer-term success and visibility of the business, and establishing share of voice tomorrow. The gradual commodifying impact of sales promotion on brand equity is, thankfully, becoming more widely understood, and serves as the perfect example. As Mark Ritson’s recent article points out, short-term differentiation for your brand over the competition comes with the much greater hangover of “financial disaster to bottom-line profitability” that can only be overcome with further discounting.

Continuing to spend through the funnel where you can, in the right places, can make all the difference to recovery and longer-term business health, mitigate the risk of reduced growth, and reduce the overall negative impact in the period of recession.

Success comes from what you do and don’t do

When we move beyond the idealism of maintaining or even boosting marketing spend, the reality is that most brands are working with much tighter budgets and trying to achieve more with less. Being smarter about where and when you spend is key to results rather than being wasteful.

So the age-old adage that the past no longer looks like the future can be viewed positively. The benefit of this recession for marketing, compared to previous ones, is how far technology and marketing platforms have evolved. Developments in programmatic, smart TV and other digital channels mean that, in today’s data-enabled environment of relevant, personalised and targeted messaging at a segment level, a big advantage is possible, enabling budgets to be optimised to reach the right audience, at the right time and in the right ways.

This provides the ability to be more specific and precise about where your brand should feature, and where it shouldn’t. Considering customer journeys and the proliferation of channels, it’s important to think about having the most impact, and where prospects are most likely to be engaged in a way that emotionally and pragmatically resonates with their spending habits and personal needs. Consider how to use data that you already have available to you to choose which customers are most valuable to engage with at that point. Right audience, right message, right time, right place has never been more relevant.

Cut-through from creativity is key

Maintaining a strong brand identity consistently can drive a 10-20% increase in overall growth. Based on the lessons from previous recessions, renowned consultant Peter Field advises that brands should continue to invest in brand for the long term, requiring – at minimum – defending the brand’s share of voice; but there may also be an opportunity to increase excess share of voice (ESOV) at little extra cost. In 2008, brands that boosted SOV delivered more large business effects, for example share growth and longer-term profit.

Connecting with consumers in an empathetic and insight-driven way – with content that is sensitive to their circumstances and the platforms it’s displayed on – is key. Research from Field also advocates featuring humanity and generosity, capitalising on the proven benefits of emotion to prime longer-term purchase, minimise price sensitivity and reduce pressures on pricing. Which brand assets are working? Which are not? Reflecting on creative look, feel and messaging – considering consumers’ core spending necessities – can provide the best opportunity for cut-through when decisions are being made around essentials versus nice-to-haves.

Get the fundamentals in place

Perhaps the hardest mind-set change within the C-suite is adapting to seeing results over a longer period and being more flexible with strategies – particularly against pressures caused by downward revenue patterns that may be seen in the short term as temporary adjustments to consumer spending habits.

All teams need to align behind a co-ordinated and consistent set of KPIs around what activity needs to achieve, so there is a shared understanding of how each channel deployed will contribute towards overall success. This doesn’t have to be complicated, but it does have to focus everyone on the same business goals to ensure efficiency of spend, whilst remaining agile enough to pivot away from activity which doesn’t deliver these centralised outcomes.

To support these conversations, and to effectively manage marketing spend in a less stable period, you must consider the following:

1. Remain focused on the long term whilst showing strategic short-term agility. Maintain marketing and advertising budget consistency in the face of inconsistent consumer spending, to remain relevant and bolster medium- to long-term growth whilst also reducing overall competitor advantage.
2. Know your customer. They are one of your most powerful assets for growth. Understand what is most valuable to them by being smart with technology, taking a data-driven approach and optimising budgets to the right audience, in the right place, at the right time with your best customer as the target.
3. Align all business goals. Pivot away from non-focused outcomes to ensure that where acquisition budgets are reduced, they are elevated to hone in on delivering the essential outcomes.
4. Maintain a strong brand identity whilst pivoting your messaging to reflect changes in human circumstance that require a deeper, sensitive connection to circumstance to connect accurately with their core spending necessities. Creativity is key.
5. Measure and test continually. This will allow you to shift focus where required, upholding retention where acquisition may become too demanding, reinforcing the need for short-term agility keeping your eye clearly on the long-term goal.

Hanna Wade is media science director at Jaywing.

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