How to Grow Your Business During a Downturn

How to Grow Your Business During a Downturn

Steve Buors, CEO and Co-Founder at Reshift Media Inc

Everyone is talking about the likelihood of an upcoming recession and how that will impact the economy. As a result, prudent businesses are reviewing their forecasts and costs to determine how best to adjust to changing market conditions.

In times of cost reduction, marketing budgets are often one of the first places cuts are made. While evaluating every expense line makes good sense during difficult times, there are some “do’s” and “don’ts” when it comes to right-sizing your marketing budget.

Be clear on your marketing objectives

To make informed decisions, it is crucial that your company is clear on what your marketing objectives are during a downturn. Consumer buying habits typically change during challenging economic periods, so your marketing plan needs to also be adjusted to compensate.

Every business and their customers are different, so there is no one “right answer” as to what the correct marketing strategy should be. There are several different factors you should consider when deciding on your approach:

Customer acquisition vs. retention

In times of economic prosperity, many companies focus more heavily on customer acquisition to grow their business. However, during more challenging times, this approach should be reviewed. Typically, companies pursue some mix of acquisition and retention, the question is where the main focus of the marketing efforts should be.

  • Customer retention: Because it is more expensive to attract a new customer than it is to retain one, many companies choose to shift their marketing efforts towards keeping the customers they already have. This can involve a wide variety of activities such as loyalty programs, customer incentives, advertising retargeting and social media engagement.
  • Customer acquisition: Companies that are already in a strong market position or have an innovative product or service offering often view tough economic times as an opportunity for growth. Because many of their competitors decide to pull back on advertising, this creates an opportunity for businesses to increase their market share. In addition, the cost of advertising typically declines during economic downturns, which can reduce the cost of customer acquisition.

Awareness vs. activation

Most companies pursue a balance of “awareness” and “activation” marketing activities. In this context, “awareness” refers to outbound marketing efforts aimed at communicating a brand message to the largest possible audiences for the lowest cost. In contrast, “activation” refers to advertising aimed at getting people to take immediate action, such as visiting your store or clicking an ad to make a purchase.

During challenging economic times, this balance should be reviewed and modified based on your business objectives. Again, most companies simultaneously pursue both awareness and activation – the question is where the emphasis should be for your organization.

  • Awareness: Because customers tend to spend less during a recession, many companies lean more heavily on an outbound “awareness” campaign to remain top of mind with current customers or to potentially create a brand impression with new customers. This approach is meant to build brand affinity, so they are the first company consumers think of when they are ready to make a purchase. This type of campaign typically employs organic social media and CPM-based advertising such as display, social media, video or online radio.
  • Activation: If the company decides to pursue an “acquisition” strategy or is in an industry where customers make frequent purchases, an activation approach may make the most sense. Activation strategies typically focus on a smaller pool of targeted people who are in immediate need of your product or service. This type of campaign typically includes SEO, search engine advertising, social media conversion ads and retargeting.

Be strategic in your reductions

When looking for cost reductions, companies often make “across the board” cuts to their marketing budget – meaning that they reduce spending on all marketing activities by the same percentage amount. While this is a quick way to arrive at an expense reduction target, it fails to recognize that during a downturn some marketing strategies and platforms will typically perform better than others.

Instead, we recommend reviewing your marketing spend in light of your business objectives, campaign performance and expected industry developments.

Your business objectives will largely determine where your marketing efforts should be focused. As an example, if your strategy is to focus on activation with your existing customers, then search engine advertising, social media conversion ads and retargeting should be high on your “keep” list, while display advertising and other “outbound” efforts could be reduced. In fact, you may want to even increase your spending in certain areas to achieve your goals.

One of the few bright sides of a cost reduction exercise is that it is an opportunity to review the performance of all aspects of your marketing campaign – both online and offline. This is the time to go through every medium and platform in your marketing toolkit and evaluate their performance in light of your business objectives. Again, if your objective is activation, the strategies that deliver a low cost-per-acquisition (CPA) should be your focus, while if your objective is to stay top of mind with customers then low cost per thousand impressions (CPM) strategies should be pursued. Be sure to evaluate the full cost of each area – including support cost, creative and advertising spend. You may find that non-paid strategies such as SEO, email marketing and social media are delivering more value than expected, or you may find that you are getting a strong CPA on paid strategies such as search engine advertising.

You also need to be sure you are not making cost reduction decisions in a vacuum. It is important to recognize that during economic uncertainty, people’s buying habits and the cost of advertising tend to fluctuate. As an example, in 2020 during the height of COVID, consumer habits shifted significantly toward online purchasing while the cost of online advertising decreased substantially. We at Reshift Media were able to find some major “bargains” when running social media and search campaigns for clients. Companies that were quick to adapt were able to gain market share and grow revenues, while slower-moving companies suffered losses.

Analyze and adjust

Nobody knows exactly what will happen during a downturn, so it is important you set your company up to be able to recognize and adjust to changing marketing conditions. This means being clear on what metrics are most important to your success and having a plan on how to measure and interpret that data on an ongoing basis. Be sure to include both lagging indicators (such as sales) and leading indicators (such as email opens or social media engagement) in your analysis so you can be positioned to anticipate future changes. If possible, create a short “scorecard” that summarizes your key performance indicators (KPIs) that can be frequently reviewed.

Having the information is only one aspect of being prepared – ensuring you have the flexibility to make changes based on that information is critical. This means ensuring you have the team, partners and media mix to be able to both recognize market shifts and quickly make changes to adjust your marketing approach. This is a good time to review your media and agency agreements to ensure you have sufficient leeway to make quick changes to your marketing mix as necessary.

During economic downturns, many companies shift marketing dollars into online advertising, as it is a cost-effective, highly measurable medium. In contrast, traditional marketing efforts such as outdoor signage and broadcast TV are more difficult to adjust “on the fly.”  For example, despite a deepening recession marketers spent 14% more on internet advertising during the first three quarters of 2008 than they did over the same period the previous year.

Emphasize local

The last few years have seen a major trend towards people “buying local” which is a tremendous benefit to SMEs. According to Shopify, 47% of consumers were more likely to purchase from a brand due to its local presence, and CFIB reports that 66% of consumers say they make efforts to buy from small businesses.

To capitalize on the “buy local” opportunity, SMEs can pursue several initiatives:

  • Include local information in your marketing: Incorporate local information such as the location of the store, pricing, local offers or a photo of your storefront. Not only does this gracefully emphasize the “localness” of the business, these types of posts and ads have been shown to work much more effectively as they are more relevant to the people in your area.
  • Explicitly tell people: Don’t be afraid to explicitly tell people that your business is locally owned. This can be done in a number of ways, such as calling out how long the store has been part of the community (using “flashback” photos is a good execution of this), showcasing the owner and their team, or highlighting local sponsorships/affiliations.
  • Local social media: If you haven’t done so already, create a local Facebook page and Instagram handle for your business. These pages can be used to publish locally relevant posts and social ads to create a local social media presence in your community.

Be ready for the recovery

The economy will at some point recover, which will lead to increased consumer confidence and spending. If you have implemented the recommendations in this article, then you should be well positioned to recognize when the recovery starts to happen and have the flexibility to modify your approach to capitalize on the opportunity.

Be sure to have your recovery plan in place ahead of time so you don’t need to come up with it “on the fly.”  Think about how your media mix and spending levels should change based on your customer behaviours. As an example, if you are a well-known brand with surging demand, then a search advertising approach could help drive sales. In contrast, a lesser-known brand with a niche product may want to focus on outbound social media advertising. You should also consider if you have specific products or services that you should emphasize during recovery, or if perhaps you want to offer an incentive to help quickly capture market share. The key is to understand your consumers and market position and have a plan in place that you can quickly activate.

Steve Buors, CEO and Co-Founder at Reshift Media Inc

Steve has over two decades of digital marketing experience and has earned a reputation for being on top of emerging trends in social, search and mobile solutions. Throughout his career in the new media sector, Steve always centered his focus on providing fantastic service to his clients, helping them adopt new technology to drive their business forward – something that continues to be a key differentiator for Reshift. With a focus on the digital demands of his clients and staying “current” a top priority, his innovative approach continues to be a key factor in driving brands forward.

Pin it
Related Posts