Why Cutting Your Marketing Budgets or Teams During a Recession Will Actually Hurt Your Bottom Line.

by | Dec 28, 2022 | Budgeting

It seems I can’t open my computer without being bombarded with articles telling me why I should be scared about a looming recession in 2023. Inflation, war affecting global economies, and interest rate hikes are usually the reasons that roll off the tongue of the economists interviewed. As a marketing professional, these articles can be scary because of what talk of ‘recession’ usually means for Marketing Teams- budget & personnel cuts.

Marketers hold their collective breath when times get tough for companies, and belts need to be tightened because we know that the first budgets to hit the chopping block usually belong to the Marketing Department. Worse, when layoffs happen, marketing staff is usually on the list to be downsized and seen as a quick and expendable way to save money. But why? There are many reasons, most of which stem from decision makers that don’t understand the value that marketing brings – some of it tangible but some of it not quantifiable in normal terms. Leadership often views Marketing as a cost center rather than a profit center. Usually, when marketing is asked to prove its value (which we are asked a lot), it is in terms of leads and revenue generated, but the other important roles that marketing takes on, like brand building, awareness, nurturing, customer retention, reputation management and more are not as easily quantifiable despite their big impact on financial outcomes.

Decision-makers sometimes fail to see that marketing is not an expense but an investment in growth. Stop the spending; stop the growth trajectory. When the economy recovers, rebuilding and making up for the lost time becomes tough.

Leaders who view marketing as a necessary investment instead of a short-term savings opportunity and maintain or grow their marketing teams during recessionary periods statistically end up coming out on the other side much better off than their counterparts. So, let’s talk about data.

A research study done by McGraw-Hill1 looked at 600 companies between 1980-1985 and found that companies that maintained their marketing spends during the recession had a 256% higher sales growth than those that stopped advertising. Similarly,  research published in the Journal of Strategic Marketing in 2011 used modified meta-analysis to demonstrate that marketing can be significantly more important during a recession than at any other time. Their data suggests that companies that curtail their marketing expenditure jeopardize future sales and profits and take longer to recover from recessions than those that keep up spending.2

It is appropriate to reevaluate and spend in the places that make the most sense during a recession. It’s critical to understand that a recession changes the dynamic of your consumers, but marketers are used to using data to drive decisions and cut ties quickly with campaigns that aren’t working. Trust your teams to do what they do, and your company will fare better for it.

Citations:

2. Lisa O’Malley, Vicky Story & Vicky O’Sullivan (2011) Marketing in a recession: retrench or invest?, Journal of Strategic Marketing, 19:3, 285-310, DOI: 10.1080/0965254X.2011.581386  

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