3 ways to use your communications budgets properly during a recession

First and foremost, this is not the time to cut budgets!

The increasing uncertainty brought on by the current economic situation since the start of the war in Ukraine will certainly continue. Especially also until inflation has stabilized and/or interest rates have been raised. Companies are responding to this primarily by cutting their budgets. Particularly in times of economic uncertainty, the right communication is important – also to guide one’s own company through the accompanying rough air. 

Cycle of marketing and communication budgets

Over the years, it has become apparent that how companies handle their marketing and communications budgets during an economic downturn follows a fairly standard two-part cycle. In the first part, companies carefully evaluate their budgets to ensure they can survive the uncertainties. This usually leads to early cost cutting. The most aggressive cost-cutting measures are often implemented at the beginning or in the middle of the first quarter of the economic downturn. When “downturn,” “economic depression,” “negative growth” and other terms from the glossary of recession-speak enter the corporate vernacular, marketing and communications spending is usually among the first to come under review. Big mistake. 

This leaves a significant gap for messaging, new product discovery and targeted marketing – the very mechanisms for raising awareness and attracting customers that give companies a competitive advantage and drive growth when they need it most. 

The irony of earnings

Ironically and counterintuitively, the greatest communications returns often occur during economic downturns. Without exception, the most successful brands have embraced the philosophy that spending on customer outreach and communications with key audiences during tough times is critical to survival and future growth. 

Seizing the momentum

According to a report in the Harvard Business Review, “Products launched during a recession have both higher long-term survival rates and higher sales.” While other brands are pulling back, companies that continue to invest in communications – and don’t view it as a calculable line item – will emerge stronger and often outlast the competition. 

At a time when many are cutting marketing spending, a company can increase its market share if it can maintain or even increase its communications spending. A company’s messages must reflect the real challenges its customers face. Our advice: earned media attention is reaching consumers in unique ways right now, as positive press coverage is automatically validated by third parties. As people turn away from traditional ads, media coverage offers an asymmetrical advantage amongst tighter wallets. More than ever, it is important to have an agency partner or internal communications team that knows the overall market and business environment as well as the media landscape and is able to tell stories that resonate. 

Cost-benefit factor

The communications team must have a seat at the table when it comes to making important decisions. Cross-functional teams that are small, agile and strategic are able to move quickly and respond as needed to the evolving business and consumer landscape. In normal times, targeted and measurable paid digital marketing coupled with strategic advertising efforts has among the lowest customer acquisition costs of any communication modality in the marketing toolkit. During an economic downturn, acquisition costs can drop even further because the cost of buying digital content is lower.

So it’s time to start looking for new customers.

This brings us to the second part of the cycle.

In the end, the brave with foresight wins

Companies with a sophisticated understanding of the impact of communications on the bottom line maintain or often increase spending during a recession.  As if on cue, companies that were inactive at the beginning of the downturn usually find, a quarter and a half or two quarters later, that competitors who have continued to invest in strategic communications now dominate the market. Sixteen to 24 weeks after the recession, we get a lot of these…. “Hey, we’re ready to start again. How about tomorrow?” Calls. We’re getting them right now.

In times of uncertainty, companies can’t disappear from the minds of customers and prospects. Brands can not only survive an economic downturn, but emerge stronger. Those that invest in their communications and know how to publish news can withstand the pressure and bounce back quickly.

Mika Mondo GmbH
Markgrafenstraße 36
10117 Berlin

+49 30 2576 2050