What are recession-proof brands doing? They don't overreact, but proceed with confidence based on calm data analysis.
In Japan today, signs of a recession are looming, including rising inflation, falling stock prices, and war in Europe. In response to these sudden changes in the market, many managers are making decisions to cut costs by restricting new hiring and firing employees.
Measures like layoffs are common for businesses facing times of economic uncertainty, and when budget cuts are required, investments in marketing and advertising are often candidates for reduction.
But there are indications that reduced marketing budgets during a recession could hurt brands and businesses more than just cost cutting.Research shows(Harvard Business Review, August 2020, 8).
Instead of rushing to cut costs to secure short-term profits, business leaders and marketers should secure and optimize their marketing investments, test strategies that adapt to the economic downturn, and build brands that get results in both the short and long term.
In this article, we will introduce some key points for doing so and provide some examples of past success stories.
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Be careful not to overreact
When a recession or other crisis is looming, companies are required to respond quickly to mitigate risk. In recent years, many companies have made changes to their strategies and tactics in response to major market changes amid the chaos caused by the COVID-19 pandemic. Of course, there are necessary changes to respond to market changes, but there have also been cases of companies overreacting.
The impact of the COVID-2 pandemic on companies over the past two years has not lasted that long, and many companies are returning to pre-COVID levels. This trend is not limited to the negative impact of the pandemic, but is also seen in the positive impact. See the chart below.
One of the key lessons we've learned from experiencing the pandemic is that even in times of economic uncertainty, not all brands are necessarily negatively affected in the long term.
Changes in stock prices of various companies before and after COVID-19
The lesson we can learn from this is that we should not overreact to changes in the market. What companies need is to always calmly analyze data on marketing effectiveness. By regularly reviewing the analysis results, it will be possible to adapt appropriately to changes.
In a recession, cutting back on marketing investments to cut costs can undermine the brand's ability to build trust with consumers. Continuing to invest in marketing when competitors are cutting back can also be seen as a way to build a foundation for long-term competitive advantage.
Related Case Studies
There is a case where a decline in future sales was predicted if branding advertising was discontinued, so if you would like more details, please refer to the case report below.
Free download of case study
What would happen a year from now if we stopped branding advertising?
- Visualizing the short-term, medium- to long-term effects of advertising -
Maintaining marketing investments for long-term growth
In a recession, where uncertainty is high, brands that maintain consistent investments while analyzing their marketing effectiveness will be better positioned to adapt to change and succeed in the long term.
The Harvard Business Review article mentioned at the beginning (a study on the 2008 recession) warns against cutting investments during a recession or other crisis. As one of its reasons, it cites the example of British household goods manufacturer Reckitt Benckiser, who increased its share of voice (SOV) by aggressively investing in advertising during the 2008 recession, while competitors continued to suffer from declining profits despite cutting advertising expenses, which resulted in increased profits.
Even if you cut your budget, the key to advertising in a recession is to test and adjust your messaging to take into account changes in the market and consumers. For example, in the case introduced in the above article, a brand's advertising during a recession was successful not only because it was humorous and emotional, but also because it conveyed messaging that pointed out what kind of brand they were. Analyzing and verifying the effectiveness of advertising while conducting messaging tests is also very important for maintaining brand equity in a recession.
Finding a path forward with confidence based on data analysis
If you constantly use data analysis in your marketing practice, you can make your investments more efficient. Data analysis allows you to optimize your marketing investments and grow your business or brand without wasting your precious budget, even in times of economic downturn.
Data is an asset whose true value can only be unlocked through analysis. For example, by learning from past data and creating models that can predict consumer reactions, it becomes possible to detect and discover new trends and continually optimize investment allocation to adapt to an ever-changing market.
Summary
If a company cuts back on its marketing investments during a recession or other crisis, it may not only lose the brand equity it has built up over the years, but it may also miss out on the opportunity to achieve long-term results.
In business, in order to strike a good balance between short-term profits and long-term growth, it is important for managers and marketing executives to calmly analyze data.
At XICA, we are experts in helping you maximize your marketing results with data. By repeatedly updating our knowledge gained through on-site practice, we pursue not only analysis and technology, but also business results.
If you are interested in data analysis for building recession-proof brands and continuous business growth after reading this article, please find out more about XICA's services, which provide objective data analysis and suggestions from a third-party perspective.Contact us.
