Cutting Marketing During a Slowdown Proven to Slow Sales, Revenue and Recovery

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Cutting Marketing During a Slowdown Proven to Slow Sales, Revenue and Recovery

Cut, cut, cut. When business slows down or even during an economic downturn, companies, especially B2B operations, often look to areas they can trim from the budget. Inevitably, marketing is one of the first areas where leaders go to cut back. Unfortunately, for those that start down this path, it can be a slippery slope that actually causes more harm than good.


While researchers have studied economic slowdowns dating back more than 125 years, there is no need to look past our most recent experience with the Great Recession. During that time a growing bookstore decided to keep innovating, expanding and increasing its marketing budget. By doing so, Amazon – which had just posted its first profit a few years earlier – grew by 28% in 2009 and is now one of the largest companies in the world.


“It is well documented that brands that increase [marketing] during a recession, when competitors are cutting back, can improve market share, and return on investment at lower cost than during good economic times,” says John A. Quelch, a professor at Harvard Business School.


Cutting back on marketing during a slowdown is actually the opposite of what companies should be doing. Study after study has shown that marketing (namely advertising and PR) can actually grow your business when times are tough.


While, it is most often not a core competency for a company, marketing is essential to generating leads and sales. In fact, studies show that when a company cuts marketing, any money your business may save more than likely will be negligent due to a decrease in sales.

However, because cutting marketing is based more in fears than in facts, most companies still cut marketing.

How about increasing marketing during an economic slowdown?

There is actually evidence to suggest that increasing, or at least maintaining the marketing budget through an economic slowdown is the safer bet.


McGraw-Hill wrote a paper about the recession of 1985 and found that companies which either maintained or increased their marketing budgets during that time experienced a 256% increase in sales versus companies that decided to make cuts.


There is additional anecdotal evidence as well dating back to the Great Depression. At the time, Ford Motor Company, which invented the car, dominated the industry. However, while many companies decided to hunker down, GM went against the grain and invested heavily in radio advertisements, as well as outdoor billboards, promoting their new budget friendly line called Chevrolet. Even before the depression ended, GM had overtaken Ford as the largest auto manufacturer in the world, and just a decade later was responsible for selling almost half the cars in America.

Why is marketing more successful during a slowdown?

As a popular maxim says, “When times are good you should advertise. When times are bad you must advertise.”

For GM during the Great Depression, their promotions were on-point and hit home with a struggling country, but there was also less noise to compete with. In the early 1930’s Ford went the opposite way and halted almost all their advertising, PR and promotions and went from $40 million in profits in 1930 to $88 million in debt in 1932-33.


There is also the case for staying “top of mind.” People have a short memory for products and services until it is actually time to pull the trigger and make a purchasing decision. When others are no longer marketing, or simply cutting back, that creates a larger share of the pie in the minds of your prospects. This can lead to increased sales, shorter sales cycles and increased revenue.


Additionally, remaining in the limelight conveys to your target audience that you are not only stable, but thriving during these challenging times.

The Biggest Bang for Your Marketing Buck

While the case to keep the marketing budget intact is clear, there are also ways to ensure that you are generating the biggest bang for your marketing buck.


Advertising is always a good way to spend your budget and the cost of ads may even dip if the length of the downturn is long enough. However, there are ways to not only stretch that dollar even further, but to be more impactful to your audience.


PR is often thought of as generating press releases that announce company news or awards. A much better approach is a relatively new, or at least less common, approach that includes utilizing third-party, testimonial-supported feature articles. These articles about your success stories do not use advertising language to sell, but instead inform and educate your prospects about how you solved a problem for your customer. Essentially, it is word of mouth marketing where your customers do the talking for you. Instead of, “buy this product,” your customers offer up the facts and let the reader decide.


The key during the good times and the bad is simple: always be promoting – always and in all ways.

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