Anyone who trades in stocks and shares will be familiar with the term “buy the dip”. It’s a trading strategy where an asset value falls, and investors buy at the lower rate in anticipation that it will increase again in the future.
During times when there are temporary uncertainties and dips, this is a sound strategy. However, if dips turn into sustained periods of downturn, then, at best, there’s a stagnation and now win. But if the asset value does rise again, then investors can make a tidy return.
It’s a very similar situation with marketing and I believe that businesses should market the dip. When there’s a downturn, marketing should, at minimum, be sustained and ideally be reinforced. Market the dip.
Of course, context is vitally important and there are nuances, subtle and otherwise. But first let’s look at what happens to marketing budgets during a market correction or cyclical adjustment.
Why Do Market Budgets Get Reduced?
During economic downturns marketing budgets are often the first to be cut as companies look at reducing costs. The last time this happened was during 2020 and the COVID-10 pandemic when marketing budgets dropped at the fastest rate since the 2008 global recession.
During the 2008 crisis, some figures say that ad spend dropped by as much as 13%. In 2020 the reduction was supposed to be 6,1% Other data sets indicate that UK ad spend fell by as much as 39% in Q2 2020.
Why did marketing budgets reduce drastically during the pandemic? Well put it this way – if you were marketing cars or fast food, what would be the point? In the early days of the pandemic during a particularly restrictive lockdown, people’s travel was severely limited and we couldn’t visit restaurants. Why try market cars when you couldn’t even visit a showroom? Why advertise a tasty burger when all drive-thrus were closed? It totally made sense.
It’s common sense not to push something when it can’t be purchased.
What Are the Impacts of Reducing Marketing Budgets?
When cutting a marketing budget, the very first thing that takes a hit is your company’s visibility. If I were to ask you about which burger brands come to mind that would be easy – McDonald’s and Burger King right? But then who? Wimpy? Maybe so ten or twenty years ago, but what about Five Guys or Honest?
If McDonald’s and Burger King stopped advertising, which burger brands would be prominent in your imagination? Are Maccy D’s and BK such mainstays that you’d buy the anyway? Is the number and presence of their restaurants enough that they’d be natural winners anyway?
Or would the most popular brand be the one that has the most marketing?
Of course this is a highly nuanced scenario and you’d have to ask if the premium burgers really would usurp the value brands. But it’s an interesting role play that your marketing managers need to evaluate. There’s a very real threat of losing market share when you reduce your marketing budget.
The Benefits of Marketing in the Dip
In 2022 Analytics Partners, a data and analytics consultancy said that there was a case for maintaining or increasing marketing budgets during a downturn.
Their data showed:
- 54% of brands saw Return on Investment (ROI) improve
- 60% of marketers who raised outlay saw better ROI
- 52% of brand saw ROI increase over a two-year window
- Brands that increased media spend saw 17% sales increase
- Brands cutting back on media spend lost 18% of sales
On balance these are positives. But not by much in some cases. It appears to be a fine line between winning and losing.
However a risk assessment needs to be undertaken – do you risk losing out or invest in the chances that you’ll benefit?
Do Some Clever Marketing in the Dip
When the pandemic affected everything back in 2020, I recall the whole office I was in at the time being sent home in early March. Everyone had to work from home and we were a truly digital marketing agency.
There was a sense of fear in everything from actually catching the virus to the effects in greater society, especially the health and wellbeing, socially and mentally. This extended to the commercial world where firms were unable to do business. As primarily a B2B marketing agency we had to consider our own position – do we furlough everyone or keep on doing what we do best?
The first decision we made was to make a very clear public statement that essential digital services such as domain names, hosting, email, website maintenance, critical updates, SEO, and relevant PPC campaigns would continue to be supported.
The key message was that we’re still here, we’re still operating. But because this was such a monumental event and affected all corners of society, the biggest aspect was the element of humanity – we cared, genuinely.
This approach seemed to spread; we saw more and more brands saying that they were there, they cared, mental health was important etc. That was the human thing to do.
Then we looked at the businesses which also provided essential services and helped them amplify their similar messages. Some of our clients were involved in critical infrastructure, so they had to maintain their own levels of service “to keep the lights on”.
In all, we maintained our marketing as we did for many of our clients. They all kept a steady path and benefited after lockdown.
Tailor-Made Intelligent Marketing Strategies
One major consideration in ongoing marketing during a downturn, is who are your audience during these times? No, really, WHO are they? What sort of people are they? The psychology of really analysing who your people are is vital in order to provide the right service.
Back in 2009 Harvard Business Review suggested that customers be segmented into four distinct persona types in the context of a downturn:
- Slam on the brakes! The most precarious customers, vulnerable and with the potential to be hardest hit by a downturn, are often quick to put a hold on everything.
- Pained but patient: This group is cautious, being resilient and optimistic about long-term views but lacking confidence in the short term.
- Comfortably well off: Largely unaffected by events, this group are more selective now and occupy the top 5% income bracket (So we can assume that 1 & 2 above plu 4 below are “the 95%”}
- Live for today: This is the carry on regardless segment. Typically urban and youthful, consumer habits continue unless they’re out of work.
You’ll need to see if this applies to businesses as well. Is your firm or the ones you serve in any of these brackets but behaving as such as a commercial entity?
HBR went on to classify goods and services into four categories:
- Essentials: Necessities for survival or well-being
- Treats: Indulgences with a justifiable immediate purchase apparently/
- Postponables: Needed or desired items that can reasonably be delayed.
- Expendables: UNnecessary or unjustifiable purchases.
Knowing your audience personas and the categorisation of your products and services gives your organisation a basis for mapping our consumer segments’ changing behaviour, as in the HBR grid here:
The follow on from this analysis is to tailor your tactics. Yes, a marketing strategy is important, but downturns are short-lived and a tactical mindset applies here. Again HBR have produced a handy table to outline your next marketing actions.
With both the above tables, you don’t have to take them as gospel, adjust them to your specific marketing requirements.
A purpose-built marketing strategy dependent on your potential customers, client base, and their very specific needs will help you market in the dip in a way that puts your firm in the positive side of the ROI and conversions equation. By intelligently analysing the situation you find yourself in, as well as the predicament of your customers, you can tailor your marketing and your even sales and support offerings to provide a steady and increasing return.
Winners in the Dip
Who pivoted their business quickly enough and ran supporting marketing to win in the dip of the last pandemic?
BrewDog were interesting: the punk brewers produced hand sanitizer at their distillery in Aberdeen, contributing a much sought after and helpful product during the lockdown. With challenges in their own business, their staff were diverted to producing and packaging, then realised dispensers were in short supply, so used their own beer bottles.
By August 2020 they’d become a fully approved supplier to the NHS and shipped over 100,000 units of hand sanitizer for free. That’s marketing gold in itself!
Deliveroo capitalised on the fact that restaurants were not open, people could not visit nor congregate, and so the home delivery business really took off. They provided a very necessary public service and so saw the brand value increase 52% to £2.2 billion.
Amazon too were very visible during lockdown as we were all forced to buy online and the world’s biggest ecommerce website expanded its offerings. Fresh foods and groceries became a staple at Amazon and they even introduced a new “subscribe and save “ service where businesses could provide a discount on goods when they have a regular order lined up. I have a guitar strings and picks subscription for my daughter, which saves the strings stretching and going dull and out of tune.
There are plenty more examples but these were some that I recall personally – seeing Deliveroo drivers and Amazon vans was a massive change on our empty roads and quiet neighbourhoods.
All these brands conducted marketing that pivoted to meet a drastically changed marketplace and they all benefited because of it.
Conclusion
It’s not always possible nor sensible but if you have a valid reason, the budget, and the wherewithal to market in the dip, you should consider it. Even just maintaining brand visibility is essential in quiet times.
To discuss and ready your “plan B” in such times, call me, your friendly digital marketing and SEO consultant, on 01252 692 765 to discuss risk assessment and contingency marketing. Done intelligently, it works!