Recession-Proof Your Marketing

With a recession looming, what should I do with my marketing?

We’ve been hearing a lot of chatter about a looming recession. And we’re all too familiar with the rising costs of supplies and labor. So, what should we do with our marketing budgets? Should we pull all of our marketing to save costs and weather the storm? Or, should continue our investment in marketing, maybe even increase it, to boost sales during hard times?

First, it’s important to remember these decisions need a rational approach at a time when it’s easy to let emotion take the wheel. The goal is to come out of the recession on top, not just pull the covers over your head and hope for the best.

Luckily, there are some options between full-stop and full-throttle. Here’s how to get started.

Take Inventory

If you’re peering into the future and seeing things getting tighter, take a moment to review your marketing strategy and any dollars you’re spending on it. This can include money spent on advertising, promotion, trade shows, boosting social media posts, and any staff or contractors whose roles are dedicated to marketing.

If you don’t know it already, it’s time to figure out your CPA (no, not your tax accountant, though you should probably have that figured out too). Your CPA is your Cost per Acquisition; how much money it takes you to earn a new customer/client? You should also be calculating the customer's lifetime value (CLV) and the cost to retain a client. The latest research is showing that replacing a lost customer is roughly five times the cost of keeping an old one. But that will vary from industry to industry and company to company.[1] [2] [3] [4]

Now calculate your churn rate. How many customers have you gained in the last year, and how many have you lost? Take the number lost and divide it by the number gained. That’s your churn rate. Churn is like golf, you want that number to be low.

Easy Churn Rate Formula:

Total # of customers lost in the last year / Total $ of customers gained in the last year

Using these numbers, you can get a clearer picture of how much you should be investing in your marketing to keep your business goals on track. The reason you want this number calculated now is so you have a baseline for your own marketing efforts. As you navigate forward, remember three things; as the recession becomes more and more realized, (1) your CPA will go up, (2) your competitors will likely pull their marketing funding leaving a wide open playing field for you, and (3) customers remember who was there for them during the tough time.

Help your existing customers

Your customers are experiencing the recession too. They are likely facing budget cuts and thinner margins. That means the more you can lighten their burden, the more grateful they’ll be.

Sometimes this means discounts, but it doesn’t have to.

You have an opportunity to upsell and create package deals by giving loyal customers special “recession pricing,” while creating a stronger bond with them when we all pull out of this together. Take a look at what your customers are buying from other suppliers. Offer to throw that into your package for less than what they’re paying now, but let them know pricing may go up after a year or two. For clients facing a recession, a dollar now is worth two dollars in the future. For you, two dollars in the future is worth a dollar now.

This really focuses on the “keeping customers is easier than gaining them,” philosophy. If you can pull more revenue and/or profit from existing customers without much pain, you can focus your marketing dollars on more efficient means of revenue growth.

Adjust Your Message, Not Your Price

If your customer believes a recession is coming or is here, they're going to be very sensitive to price, cost, and value. Dropping prices can be tempting to capture quick business, but can also set a dangerous precedent.

It’s easy to lower prices, it’s much harder to raise them when the recession is done. Temporary sales and package prices can be used strategically (which is why this point isn’t contrary to the last point), but lowering your price, in general, can lower the overall perceived value of your offer.

Think about the difference between a Rolex and a Timex. They both tell the same time and last longer than you need them, but their cost is extremely different because of their “perceived value.” Keep your pricing strategy stable during a recession, while varying your pricing tactics.

Instead, start emphasizing why your offer is the best value for the price you ask. Maybe you’re not the cheapest, but there’s a reason for that. What is it? Will you end up saving the customer money in the long run? Fewer repairs? Fewer Mistakes? Finding more money where they didn’t expect? Increasing revenue? Reducing downtime?

This still won’t be enough for some customers, but let them keep price shopping. They’ll either come back, or they weren’t worth the trouble in the first place.

Remember the Pareto Principle

The Pareto Principle is also known as the 80/20 rule. In short, 80% of your business comes from 20% of your customers. The inverse is also true, 80% of your trouble comes from 20% of your customers. Spend time focusing on your top 20%, and try to pare off the troublesome 20% and you’ll find your team has more time and energy for more profitable efforts. This is also true of your marketing. Take a look to see if you can pinpoint where the majority of your response is coming from. Double down on the most efficient portions of your marketing.

The best strategy for your marketing during a recession is not to cut the budget and it’s not sailing blindly through troubled waters. Take a moment to assess your marketing and make sure your dollars are being spent wisely.

If you are taking a look at your marketing budget, Oranje Boven would love to help you find the best use for your dollars. Reach out to Ben@OranjeBovenMarketing.com with any questions you might have, free of charge.