How to Prepare Your Marketing Program for a Recession
By Tim Johnson
Is a recession imminent or not? The Fed has cut interest rates, and here and there, our clients report softening among their prospects and channel partners, both in terms of closing deals and lengthening of the pipeline. On the other hand, the Dow reached an all-time high on November 19, and according to Crunchbase, venture deal volume jumped 9.3% in Q3 2019 versus Q2 and 9.9% year-over-year. Seed stage funding drove much of this growth in volume.
That said, clients often ask us how to adjust marketing activities in preparation for a recession. Our recommendations are different and customized for each client and its unique market position, competitive set and needs, but a few common strategies emerge. I’ve listed a few of these below. All of these strategies are predicated on one key cornerstone: save cash during boom periods to spend on pursuing aggressive strategies during recessions.
If you’d like to discuss how to recession-proof your marketing program, let’s chat!
Don’t Cut the Marketing Budget
Yes, cutting the marketing budget boosts your margins – for about a quarter. After that, the impact is nil or negative. Cutting the budget starves both top of funnel and bottom of funnel activities. Without a continuously-replenished supply of new prospects, the success rate of the sales team will decline over time. Competitors will sniff that you’re cutting back and take advantage of the opportunities that creates to steal customers and talent.
Do Adjust Your Marketing Mix
The onset or even the threat of a recession is likely to cause your customers/clients/partners to change their attitudes, strategies and behaviors. Understanding these changes will help you update your brand proposition and mix of activities. Complete an updated audit of your brand proposition versus those of your competitors. As your customers change their priorities, your brand needs to reflect these changes.
Do your customers consider your product essential or a luxury? Do they consider pricing high-end or high-value? These are among the questions a brand audit will help you answer.
Expand Your Target Base
Even with the most aggressive of marketing plans, it’s likely revenues from your core target audiences will decline either before or during a recession. Anticipate this by reaching out to new markets and adjusting your product mix in anticipation of this change in strategy.
New markets can mean new vertical industries or new geographic markets. We’ve recommended to some clients to focus on sales to state and federal government agencies, as the budgets of these entities are typically not impacted by a recession. We’ve also suggested clients research markets overseas similar to the ones they sell into in the U.S. and set up joint ventures (JVs) or distribution partnerships to fulfill potentially unmet needs.
Launch New Products
Launching new products adjacent to the ones you currently offer generates new market opportunities by allowing you to gain a greater share of existing customers’ spend or opening your company to new customer and market opportunities. A new product is often more likely to gain traction in a down market since competitors may be holding off on launches of their own.
Exploit Market Opportunities – Ruthlessly!
New, often unforeseen, opportunities emerge during a recession. There might be an opportunity to acquire a competitor that is overleveraged, low on cash, or otherwise in distress. In addition to acquiring their market share, you also gain access to their technology, IP and distribution network. Use a recession to expand your technology and channel network, explore new software to update how you run your business, and/or poach talent from unsuspecting competitors.
Of course, these strategies are simply the tip of the iceberg in terms of how to prepare and weather a recession successfully. Frequent and effective communication with customers, partners, employees and other essential audiences is a common threat to execute all of these strategies optimally.
We’d welcome your viewpoints, experiences, questions and challenges to these ideas and hope to hear from you!