An economic recession is a natural stage of the US economic cycle. A recession can be especially intimidating to businesses large and small, but it can also provide a unique opportunity for companies to focus on their marketing strategy more than ever before and gain a competitive advantage.
McGraw-Hill Research conducted a study on 600 companies across 16 industries and to find out how marketing efforts impacted company growth in and after the early 1980s recession. The research revealed that companies who increased or kept their marketing budget the same had more sales growth during and even three years after the recession. By 1985, the companies who focused on aggressive recession marketing grew by 256%, unlike those who slashed or eliminated their advertising budget.
“I have yet to see any study that proves timidity is the route to success. Studies consistently have proven that companies that have the intelligence and guts to maintain or increase their overall marketing and advertising efforts in times of business downturns will get the edge on their timid competitors.” — J. Wesley Rosberg, Senior VP at Meldrum & Fewsmith
It might seem counterintuitive, but your company can experience tremendous gains by investing more in marketing. As you tactfully reposition your products or services to address current consumer concerns, you turn your company into a useful resource for customers during a difficult time and increase your chances of dominating your industry.
Recession Marketing Case Studies
Here, we discuss some case studies that illustrate how businesses can build a greater share of the market and even thrive during an economic downturn by:
- Prioritizing their marketing budget;
- Refining their marketing strategy; and
- Increasing brand awareness.
The Great Depression
Before the Great Depression of the 1920s, Post was the top-selling cereal company in the ready-to-eat breakfast cereal industry. But when the Depression began, Post made major cuts to its marketing budget, which turned out to be a huge mistake. Kellogg saw a major opportunity to rise above Post and achieved this by doubling its advertising budget.
- Kellogg invested in radio ads to promote their new Rice Krispies cereal
- Profits increased by 30%
- Kellogg overtook Post as the industry leader and has been the leader ever since
The 1970s Energy Crisis
The years 1973 to 1975 were plagued by a year-and-a-half-long energy crisis that increased the price of gasoline and tensions with the Middle East. At the time, Toyota was doing exceptionally well in terms of vehicle sales. But when the recession came, they were tempted to make cuts to their marketing budget.
Instead, they decided to hone in on their long-term marketing plans, which helped them surpass Volkswagen and made Toyota the top imported carmaker a year after the recession ended.
The Early 1990s Recession
Pizza Hut and Taco Bell
The weakened economy caused a recession from 1990 to 1991. During this downturn, McDonalds made a costly decision to eliminate its marketing budget. Pizza Hut and Taco Bell saw this as a huge opportunity to promote their food offerings.
- Pizza Hut innovated and marketed new items, such as the stuffed crust
- Taco Bell introduced its value menu
- By escaping the shadow of the primary fast food giants, Pizza Hut increased sales by 61% and Taco Bell by 40%
- Conversely, McDonald’s sales dropped 28%
The 2008 Financial Crisis
River Pools and Spas
Large companies aren’t the only ones who benefited from pushing forward with recession marketing. In 2008, River Pools and Spas was a smaller-scale retailer with locations across Virginia. After the market crash that occurred that year, the company thought it was done for. They considered laying off their employees and filing for bankruptcy after losing so much business.
Instead, the company reassessed their offerings and figured out how to tempt customers.
- Their pool installation package was priced at $60,000 at that time
- They created more affordable packages and adapted their work process
- The company stopped focusing on retail and honed in on fiberglass pool construction
- They harnessed the power of the internet and began targeting digital consumers
- These moves saved the business and made them into a nationally-recognized pool builder
Del Monte Foods
Amid the 2008 recession, Del Monte Foods appointed Bill Pearce as the company’s first CMO.
- His goal was to drive the company forward through effective marketing
- He increased the company’s ad spend budget in response to the recession
- He rolled out memorable, consumer-focused campaigns, including the “Fruit Undressed” advertisements
- After a year, the company went from a loss of $10.1 million to a profit of $58.6 million in Q1
“Don’t scale back spending. The old way of dealing with a recession was to slash and burn head count, marketing, and capital investment. But companies that do that are likely to be out of business in five years. Now is not the time for across-the-board cuts.” — Bill Pearce, CMO, Del Monte Foods
By 2009, the entire auto industry was hurting and it was uncertain whether it would even be able to break even. Unemployment was through the roof and nobody was buying cars. In response, Hyundai strengthened its marketing by investing in nine commercial slots in the Super Bowl and the Academy Awards and invested in a customer-focused ad campaign. As a result:
- The company’s market share increased from 3.1% to 4.3%
- Their competitors in the auto industry experienced a 22% sales drop while Hyundai increased vehicle sales by 5%
- The company was voted the top marketer of the year by Automotive News
In the 2008 financial crisis, consumers all over the USA were cutting back on shopping, entertainment, and eating out. Groupon, now a market leader, spotted an opportunity to make “nonessentials” more affordable for everyone.
- The company sent out daily email discounts on goods and services across 300 markets in its fledgling years
- It saw a $500 million profit despite the recession
The Bottom Line
Historical trends don’t lie: Marketing drives income, and companies that invest more in their advertising during recession tend to do better in the long term. The US economy needs you, so take a leap of faith and don’t give into fear. You either need to increase or maintain your marketing budget in this uncertain economy. This economic slump will be brief, but your reaction to it will determine whether or not your business is here to stay.