Why spending wisely will pay dividends

When the world locked down to fight COVID-19, the first reaction of many companies was to cut costs, and in many cases, marketing costs. Marketing activities, and particularly PR, are often seen as nice-to-have but non-essential. Also, marketing and PR services are often outsourced to an external agency that is contracted with a fairly short notice period, so it is an easy and un-emotional cut to make. However, there is a lot of research to say that marketing and PR cuts should not be made so lightly. For companies that can afford to continue with marketing, albeit at a reduced level, there are some very strong arguments and strong data to prove It can pay dividends in the longer term.

According to Data2Decisions, companies that halve their marketing budget for a year during a downturn, rather than cut it completely, recover almost twice as quickly as those companies that cut spend completely during the recession.

Research undertaken by McKinsey & Co in 2002 went further to show that companies that were able to actively spend during a recession, were rewarded financially after it was over. They took advantage of their competitors on go-slow and emerged well ahead after the recession.

The Ehrenberg-Bass Institute of University of South Australia 2008 echoes this point saying that during a recession brands should lower their growth targets but maintain marketing support.

But with less money available, the focus for a company’s marketing activities may need to change. Tough choices may have to be made. Perhaps it is prudent to focus on retaining existing customers rather than going after new ones in a downturn, as it generally costs far less to retain an existing client than win a new one. Similarly, maintaining share of voice costs much less than rebuilding it later on.

So while the instinct might be to go for the easy cuts, business leaders should think twice before rushing to cut all marketing spend. As writer and leadership expert Robin Sharma once said: “Recession is opportunity in wolf’s clothing”. For companies that are in a position to take advantage of that opportunity, spending intelligently on marketing might be just the way to do it.