Is Cutting Your Marketing Budget a Smart Decision?

4 minutes

September 22nd 2020

Is Cutting Your Marketing Budget a Smart Decision? 1

Veronika Mikec is a full-time student, writer, and future revolutionary.

In times of recession and similar uncertain financial situations, most companies reduce their spending of money in order to maintain economic stability – this is especially true in areas that are generally considered less important for the functioning of the company. The vast majority of business owners strive to keep afloat by cutting down their marketing budget. However, such an approach to maintaining financial stability in the long run turns out to be detrimental not only to the visibility but also to the overall success of the company.

But why is a conversation about the marketing budget important right now?

In the light of current circumstances, many companies have found themselves in unknown waters – what to do in order to successfully continue their business? This is where a strict management of marketing resources comes into play. Research shows that it was the companies which did not actually reduce their marketing expenditure but rather increased them had the easiest time getting back on their feet after an economic crisis.

Your marketing plan therefore needs to be updated regularly – especially during the constant changing economic conditions. We’ve listed some major aspects of marketing interventions that you should be looking at in a time of recession; ultimately, they may prove to be a blessing in disguise.

Research and Development and product launches

Launching new products is risky regardless of the current state of the market, and there is always a considerable debate in every company about which of the many new products in development are actually ready to hit the market. Because of this, very often launching new products during a recession seems impossible. However, numerous research shows that such products have greater long-term viability as well as higher sales revenues. Part of the reason for this is less competition and the maintenance of research and development.

Of course, time also plays an important role – the best time to launch new products is supposedly right in the middle of a recession. This is when new products on the market give consumers hope that the economy is finally regaining stability.

Prices and promotions

Due to declining sales volumes, many companies tend to raise the prices of their products and services in the hopes of maintaining revenues and margins. However, in times of recession, consumers become more cautious and notice even the slightest increase in prices, which reduces the likelihood of sales in the long run – this makes raising prices an extremely counterproductive approach to marketing.

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Communication with consumers

It’s important to consider advertising as an investment, as it raises the visibility of companies that are able to maintain or increase their advertising budget, since the majority of companies choose to reduce or even completely cut it. By reflecting the challenges the consumers are facing, your company will stand out as one that cares about its customers beyond just selling products and services.

For example, with your marketing budget, you can show your customers what’s going on behind the scenes and bring them closer to the production of your products, or focus on promoting the services your customer base desperately needs in the current situation. It’s important to show that you are willing to stay with them in good and bad times.

Adapting the response to the current situation

Your brand and company size have a strong impact on your performance in times of economic crisis – the stronger your company, the easier it will be for you to maintain prices in a recession, or even secure lower prices from your suppliers. However, the dynamics of the industry and the country in question have a big impact on the ease of your weathering the storm. Don’t forget to deal with all parts of your business; skipping just one means reducing your market presence, which can leave the door open for competitors to take advantage of the situation and move forward at your expense.

Marketing in a recession will always prove a challenge, as it involves going against the current and your own instincts. But since customers’ behaviour dramatically changes during such times and reflects these changes in their wants and needs, you must power through. By joining your customer base on this strange journey, you’ll be able to build a stronger bond and further your business relationships with them in the future. With a changed choice of media and other, more effective promotional tools (such as business gifts), you can count to reach a greater audience even if the prices are lower.

Staying committed to marketing in difficult times will not only prevent you from falling behind the competition, but will also ensure a better position on the market when the situation finally improves. An economic crisis does not necessarily mean you should panic – if you use your strengths wisely, you’ll benefit from it and step out of the situation you found yourself in stronger, more successful and more experienced.