No one knows if the U.S. economy is going to enter a recession in the near term. Goldman Sachs wrote in November, “The U.S. will probably stick a soft landing next year: the world’s largest economy is forecast to narrowly avoid a recession.” As a Forbes contributor, one economist wrote, “A recession might be avoided, but that’s highly unlikely.” Former Boston Federal Reserve President Eric Rosengren was quoted on CNBC as stating, “A recession is ‘quite likely’ next year.”
Additionally, there are plenty of statistics that point to a recession. For example, when inflation is above 4% and unemployment is under 4%, it is a perfect indicator of a coming recession. Two consecutive quarters of declines in gross domestic product (GDP) used to be another common recession indicator. Still, some components of GDP or that influence GDP are down, while others are up.
On the other hand, consumers still hold $1.4 trillion of the $2 trillion in stimulus funds provided during the COVID pandemic, and holiday spending in recent months indicates they plan to tap into those funds, inflation or not. The stock market is in a volatile period, but GDP, the leading measure of the U.S. economy’s performance, grew 2.6% in Q3 2022. Layoffs have dominated headlines in the past few months, but there remain 1.67 jobs available for every unemployed person in the U.S. today.
The real, immediate question for marketers becomes how to develop plans and budgets for 2023. It’s in volatile times that marketers should shift into overdrive. Here’s why:
- Even in a recession, whether business-to-business or consumer, customers are still buying. They might buy less overall and/or shift their purchasing habits, but they are still buying. Companies that pull back from their marketing efforts won’t be present when customers are ready to buy.
- Recessions are ideal times for companies to enter new markets. Many real or perceived competitors that slow their marketing efforts leave a void that a more aggressive company can fill.
- Market research is essential to identify changing customer purchasing patterns. Without that research, companies have the potential to offer the wrong products/services to their customers, which they are likely to remember after the recession is over. Market research is also critical to enter new markets.
- If companies cut back on their marketing spend, when customers and prospects look for products and services, they won’t be able to find the company and will select another provider. These switches are frequently permanent, causing the company to lose a customer forever.
- Periods of volatility, like we’re in today, impact industry segments differently. While there are layoffs at companies like Twitter and Meta, many companies offering cybersecurity solutions continue to grow at healthy clips. Fortune Business Insights expects the global cybersecurity market to grow from $155.83 billion in 2022 to $376.32 billion by 2029, a CAGR of 13.4%.
Volatility creates opportunity. Marketers that double down, analyze how their customers are changing behaviors and rapidly adapt their products or services to meet those evolving needs will win. Marketers who take advantage of competitors’ conservative practices and potentially grab market share permanently will win. Marketers that enter new markets and use volatility to expand their product/service offerings will win.
Yes, it may be daunting to watch marketing spend stay constant or rise while a company’s revenue and income are falling, but this investment frequently pays off when markets become more stable and competitors find their market share has shrunk, or companies in a given industry discover they have a new competitor.
