[Read time: 8 minutes]
Yes, 2022 has been a challenging year from an economic perspective. We’ve seen other market slowdowns in 1980, 1990, 2007 and 2008. And yes, like previous years, companies are looking for ways to cut expenses and increase operational efficiencies in order to preserve their profit margins.
Amazon, Tesla and Netflix are speaking in terms of “overstaffing” and TikTok, Twitter and Meta are freezing hiring already. Google and Facebook cut their advertising budgets to focus on other areas.
Reducing staff or cutting down on ad spend are the most probable areas for how companies cut costs. Yet, unlike the previous recessions, this time is different.
Rather than cut advertising, Channel Bakers suggests brands look to the past. Learnings from previous slow downs and recessions have taught us a few important lessons that will not only ensure that you survive but even thrive.
Don’t cut your ad spend. But DO spend differently
The best time to focus on your ad spend is NOW. A stable flow in ad spend ensures that your brand stays top of mind and continues to enjoy share of voice. Pulling the plug on ad spend now means you’ll be left behind. At a time when the consumer is clamping down on his own budgets, you need to preserve your share of voice and stay in front of your customer.
Source: IPA 2008
*Source: emarketer June 2022
While a slash into the ad spend might provide some short-term relief to profitability (because costs are cut), the subsequent loss of market share that follows will be extremely difficult and expensive to regain during the recovery. Thus, the long-term impact on profitability will be highly damaging. It is better to take the short-term profitability hit to maintain Share of Voice and defend the brand. An increase in “share of voice” leads to an increase in “share of market.” An increase in market share results in an increase in profits for your brand. Use this to your advantage. While your competitors are pulling back, you should push forward.
BUT unlike previous recessions you have new choices and options when it comes to marketing spend. Most companies choose to cut back on upper funnel awareness marketing and spend on performance based tactics. It’s now possible to go from watching TV in your living room to purchasing a product in a single click. Invest in awareness advertising to get added to the shopping cart.
Bottom Line: To be a post-recession leader, continue investing in growth
Focus on your Shopper… and his Journey
Your customer is just as aware of today’s market conditions as you are. While his reactions might be a reflection of your actions within the market, it is important that you position your brand based on your customer’s journey. This is more true during an economic downturn than in any other time.
Knowing where your shopper is in his shopping journey will allow you to position your brand accordingly. By focusing on the upper and mid level funnel ensures you continue to grow even during lean periods such as today’s. Thanks to the magic of Amazon first party data, Single Sign-In, Connected Home, Amazon Attribution and Amazon Marketing Cloud, we can now measure higher funnel performance, reach Gen Z and millennials and optimize media spend based on the shopper journey.
By leaning into the top of the funnel, your impact on the brand’s market share and its bottom line have a long arching effect on overall sales and will continue to keep the lower funnel full.
Bottom Line: Fill the funnel and keep the lower funnel full
Creative Converts Shoppers to Buyers
One of the key differences between prior slow downs and this current situation, is that advertising has changed. Take advantage of those changes. One of the primary changes in advertising is in how your brand is represented and how your shopper reacts to that content.
Messaging should resonate with the shopper in these new times. It is imperative to tune your brand message to your shoppers’ current attitudes during such a financial crisis. Seek out your shopper where they are present and tailor your messaging to fulfill their sentiments at the time. By combining Sentiment Analysis and Search Data, we can tailor messages to optimize pages and provide premium content to ensure your ads connect with your target shopper at all the right touch points.
Bottom line: Increase communication, optimize content & pick the right media mix
New Market Expansion… Yes, it is Possible
While clamping down during a recession is the intuitive thing to do, it's not the smartest. According to a recent study by Harvard Business Review, “While pragmatic companies recognize that cost cutting is necessary to survive a recession, investment is equally essential to spur growth, and that they must manage both at the same time if their companies are to emerge as post recession leaders.”
Different industries react differently to a financial downturn. A certain industry might be more severely hit than the other…and this may cause different results in different regions. It is important to take advantage of the current situation and investigate other customer targets and markets. They can be different audiences or different uses for your product.
*Case in point - American sportswear company Under Armour and its record spike in net sales share worldwide. While its total annual revenue is about 5.7 billion US dollars, the revenue share from the Asia-Pacific and EMEA (Europe, Middle East, and Africa) regions combines to a total of 30%. The shift in sales share from North America to the Asia-Pacific region is primarily due to Under Armour’s global expansion tactics.
Furthermore, their expansion into sports and activity footwear now accounts for over 20% of their revenue.
Source: Statista, 2022
If the last few years have taught us anything, it is that shopping habits have moved out of stores and into online platforms. This only further facilitates global expansion. By expanding into different geographies (maybe out of state or out of the country) you can ensure you can target a different audience or find a new purpose for your product. This will in turn, spur growth instead of a slump for your brand during the downturn.
Related Read: See how Scanmarker expanded into different regions by promoting it in different product categories with language translators, aids for dyslexia, and other reading and learning disabilities.
Similar to new regions, finding new demographics is equivalent to new market discoveries. Gen Z presents itself as the most viable market today. They are not only looking to see authentic representations of products and brands but also respond to visual content easily. A recent study highlighted that 40% of Gen Z users preferred using TikTok and Instagram for search over Google.
Source: Statista, 2022
Bottom Line: Adapt to where your shoppers are. Gen Z and Millennials will continue spending as long as your brand is kept in front of them
There will always be winners and losers during an economic downturn. Those who push during such times are the ones who grow...And continue succeeding post recession.