Staying Ahead of the Curve: How Digital Marketing Investment Helps Your Business During an Economic Downturn Moving into 2023 many businesses will be looking for ways in which they can minimise their overheads leading to marketing budgets falling under scrutiny. While pulling back on digital marketing investment might be an effective short-term solution to cut business costs, it's worth reframing how we look at marketing investment during a recession to ensure our businesses don’t falter during this time.
Moving into 2023 many businesses will be looking for ways in which they can minimise their overheads leading to marketing budgets falling under scrutiny. While pulling back on digital marketing investment might be an effective short-term solution to cut business costs, it's worth reframing how we look at marketing investment during a recession to ensure our businesses don’t falter during this time.
Long Term Lens
If you have been investing in digital marketing up until this point it can do more harm than good in the long run to pull back on advertising spend from both a sales and brand position perspective. For brands that invest heavily in advertising; even a slight reduction can also lead to an immediate decrease in revenue. For example, when Revolve reduced marketing spend by -5% in Q3 of 2022 sales increased +10% versus the +27% increase in Q2. By continuing to invest in digital marketing you will be future-proofing your brand against sales decline and loss of brand position. Continued investment will also ensure you retain valuable data and audiences; putting a pause on ad spend to restart months later would mean effectively starting from scratch with higher costs.
While lower returns than usual in the short term will likely be the reality for many brands, reducing investment will be at the expense of long term growth. Focusing on the long term can also help avoid damaging your brand by falling into sales cycles where customers are trained to only purchase products at a discounted rate which sees average order value, profits and margins decrease.
Cost Efficacy & Diversification
With digital media spend under more scrutiny than ever, brands should continue looking for cost-efficient and relatively new ways to boost brand awareness, especially as go-to performance marketing channels have proven less measurable thanks to data privacy messages. When looking at efficiency, it is also important to maintain a test and learn budget to ensure your eggs aren’t all in one basket, diversifying media spend.
Consider what platforms may get you the most bang for your buck; and where your target customer is most active. In an economic and digital environment that is always changing, brands can get into emerging spaces and platforms early enough to be a first-mover, and capitalise on developing audiences for potentially less ad spend. This is something that is heavily talked about with social media’s current golden child, TikTok, and more recently new paid models for streaming platforms such as Netflix, Hulu & Disney+.
It will be important to ensure any platform focus changes fall under your wider business plans and long-term approach, as chopping and changing approaches too frequently will diminish any positive returns. It is also incredibly important to ensure that you are hyper-aware of your target market, and the intent of the traffic you are generating from any new platforms; and ensure you have clear KPIs. Whether the KPI is response or awareness, looking for new more efficient opportunities are essential; however, it is important to remember not all digital marketing impressions are equal (particularly for e-commerce brands); no matter how cheap they are!
Keep in mind competitors will likely reduce their budgets so maintaining your digital marketing investment may support increased market share and consumer confidence in your brand as well.
Take a look at the category in which your business operates - an economic downturn does not affect all categories equally and therefore it may be even more counterintuitive to pull back. Take for instance the Lipstick Effect; first coined in the 90s by economist Juliet Schor, the Lipstick Effect refers to the phenomenon in which lipstick sales are reported to increase during an economic downturn as customers purchase products of lower cost, but high emotional return.
Similarly, during Covid, we saw the home and living categories increase as people spent more time at home, as well as personal care products such as soap or supplements as people became more focused on health and wellness than ever before. Assess how your offering is positioned in this market as your brand may benefit from increased marketing returns during this time.
Messaging & Retention
Remind yourself of the longer-term value of investing in new customer acquisition and how you can reward brand loyalty amongst your customers in order to retain them. Look hard at your customer return rate and lifetime value. Are there significant increases or decreases here? What non-paid marketing actions can you take to increase the value of your investment in new customer acquisition?
There is an opportunity to refine your messaging across these channels and double down on customer loyalty and promote brand buy-in. Perhaps you have a loyalty program you can showcase, testimonials you could include in content to demonstrate value or blog posts that speak to the brand values that you could share among your awareness audiences.
Data & Learning
While there are continued challenges in measuring digital marketing returns, the data and insights into customer bases and behaviours can be vast and are invaluable during challenging economic times. From what products online customers are interested in, to what type of content generates the greatest Click-Through-Rate - the learnings can be varied and used to refine tact and inform processes not just within digital marketing, but across the wider business. Insights can be applied to many areas including buying, content creation, and merchandising. Removing digital marketing as a branch could limit valuable insights and learning which can ultimately help improve your bottom line.
Key takeaways to stay ahead of the curve:
- Assess whether your brand’s marketing strategy has the balance right between immediate revenue generation and long-term growth. Ensure you maintain your focus on long-term growth; and avoid damaging your brand by falling into sales cycles for that quick revenue boost.
- With digital media spend under more scrutiny than ever, investigate cost-efficient and new digital channels outside of your usual marketing strategy. There may be the opportunity to be an early adopter and achieve brand growth at a much lower cost due to competition decreasing.
- Use the data you can obtain from your digital marketing to inform other business decisions, which can ultimately help improve your bottom line.
- Take a look at the category in which your business operates - an economic downturn does not affect all categories equally. Consider whether your category is one that may thrive during a recession.
- Review your marketing messaging and ensure it adapts to consumers changing attitudes during the economic downturn. Shift your focus to retention and loyalty.