Feb 14, 2023

Don’t Cut Your B2B Marketing Efforts in a Recession: Here’s Why

An economic downturn will impact your marketing efforts—how you respond will impact your business survival.

As we have been weathering the unique recession we’re in and may continue to do so, B2B leadership may be wondering if they should cut marketing spend. In a nutshell: No. And here’s why: cutting marketing spend during a downturn impacts sales and puts even more pressure on margins. It decreases share of voice and share of market. And it will make it more difficult to recover when we move out of the recession.

This article is the first in a multi-series about marketing through a recession. In part one, we explain how a slowing economy affects your marketing efforts and what research shows about marketing through a recession. To provide you with expert insights, we spoke with Elevation Marketing President Scott Miraglia, Vice President of Strategy and Marketing Ryan Gould, and Executive Director of Innovation and Client Development John Edelmann.

“What’s unique about this recession is that we have inflation. But consumers are still spending. We’ve created a huge dollar that has a huge strength. At the same time, input costs are going up, and it’s getting harder to pass that price on to clients – everyone wants a lower price. That puts a lot of pressure on margins.” Scott Miraglia

What happens to B2B marketing during a recession

Calculator Cost Reduction

Marketing budgets decrease

To manage profitability, businesses look for ways to cut non-critical spending.  A lot of businesses still struggle to see marketing investment as a revenue-generator that is aligned with sales. Larger businesses, particularly, tend to look at marketing in terms of corporate communication, and don’t put much value in it. So when businesses see marketing as a cost-center rather than a revenue generator, they tend to shift funds away from their marketing efforts. Ad spend is reduced or eliminated. Activities like research, planning and strategy are cut. In-house marketing teams are downsized. And this is where a lot of their troubles begin.

Marketers must do more with less

The remaining marketing team must compensate for gaps in the team, wear more hats, cover areas they’re not familiar with. At the same time, there is pressure to increase performance on smaller budgets. They struggle with projects, executions, timelines and results. Trying to do more with less ultimately impacts their ability to generate the opportunities that they need for sales.

Targeting misses its mark

In an up market, when everyone is spending more money, many businesses use demand gen marketing to bring in new leads. But as everyone hunkers down to weather the recession, this broad marketing approach becomes inefficient and wasteful. A targeted approach is a better way to spend marketing dollars. But keep in mind that businesses have cut back on research, planning and strategy, so targeting is based on pre-recession data. In a downturn, data that disregards shifting customer dynamics also begins to miss its mark.

Marketers are under pressure to prove ROI

As marketing budget is decreased, marketers are under increased pressure to prove the return on their marketing investment (ROI) and marketing attribution. The challenge is that businesses get to positive ROI one of two ways:

  • The measured approach: by performing the right research, building the right strategy and understanding their audience. They build the right campaigns that align to that data, and make sure they’re on the right channels So when they start spending marketing dollars, they’re just fine-tuning to dial in the maximum ROI. Unfortunately, it can take 12 weeks to do all this research and planning. And they don’t have any results to show for it. It’s all investment up until that point.
  • Quick approach: on the flip side, businesses may choose to execute their marketing campaigns immediately to get to the results. This is common way to go when a business opts for some results over no results. They pay for their learnings while getting results at the same time. The difference is that when businesses go immediately to market, they’re always paying a higher cost per click, a higher cost per acquisition, a higher cost per impression. Because they don’t have the institutional knowledge to get that perfect calibration and the higher value. So they’re going to spend more money to get some results than what they spend on a measured approach.

Recession Market Research Spend Ryan Gould Quote

Sales cycles grow longer

In the B2B world, recessions tend to increase the already long buying cycle. Prospects have smaller budgets. At the same time, they increase competition by requesting more bids on their projects. Then, decision-making takes longer as they try to align their internal budget with whatever company they select.

Because the B2B sales cycle increases and competition increases, a business needs to close more leads to generate the same revenue they made the previous year. So businesses need more opportunities.

“Let’s just say for every new piece of business that you close, you need 20 leads. Now you need 30. In a recession, the biggest mistake businesses make when cutting their budget is cutting their revenue projection. Either you increase your marketing spend to generate more leads to close the same amount of business. Or you cut marketing spend, knowing that you’re also going to cut revenue because you don’t generate more leads.” Scott Miraglia

Sales and marketing fall out of alignment

When marketing budgets are cut, previously aligned sales and marketing campaigns tend to fall apart. Marketing campaigns that are still in place are missing their mark. Those that have been cut no longer feed into the sales cycle at different stages of the customer journey. As marketing returns and sales opportunities diminish, sales and marketing teams are focused on their own shifting priorities. Most likely, they don’t even realize that their efforts are out of alignment.

“There is an ongoing issue where sales and marketing aren’t aligned. And now more than ever with digital marketing, you must have alignment for a successful account-based marketing or lead generation program. And they need to be synced up to track ROAS and ROI. It starts by making sure your martech stack is set up and connected so when a conversion happens that sale can be tracked.” John Edelmann

Businesses start to look for outside support

To stay afloat, businesses may look outside for support. They might hire freelancers or low-cost agencies that can provide quick execution at a low-cost. Those small agencies and cost leaders are good at providing short term results for simplistic buying cycles.

“The challenge is that smaller agencies or cost leaders aren’t as adept at being able to provide integrated results for businesses that have more complex buying cycles.” Ryan Gould

For outside support to be effective, B2Bs must look to an agency that specializes in B2B and that provides integrated, data-driven strategies with proven results.

Why marketing is a must during a recession

Cutting marketing decreases sales revenue

Quite simply, marketing generates leads which in turn generate sales. Research from Milward Brown and McGraw-Hill show that reduced marketing and advertising spend may result in short-term savings but ultimately impacts your ability to bring in revenue. In a 2020 article, Harvard Business Review compared marketing cuts during a recession to bleeding a patient. In short, cutting your marketing spend further reduces your company’s ability to survive.

Opportunities arise to increase market share

If your competitors cut their marketing, stepping up your marketing allows you capitalize on customer churn and increase market share. The reverse of that is also true. If you decrease your marketing, you’ll lose your share of voice, customers and market share to your competitors.

Marketing opportunities arise

During the short recession of 2020, digital advertising spend decreased 38%, social media advertising decreased 33% and paid search decreased 30%. When other businesses cut their ad spend, competition decreases, bidding wars slow down and ad costs drop. While digital may be more cost effective, it may also be worthwhile to invest in opportunities on traditional channels where competitors have gone dark.

Brands that go dark lose awareness

Marketing keeps your business visible and top-of-mind

You don’t want to retreat while other businesses are going under. Kantar estimates that brands that go dark to save marketing costs reduce brand awareness by 39%. Instead, you need to forge ahead. Remind current clients that you’re still in business and you’ll be there for the long term. Because if you lose your audience to a business that is still visible, you might not get them back.

Retain current customers

It bears repeating that it’s cheaper to retain current clients than it is to acquire new ones. As we mentioned earlier, a savvy competitor will take advantage of your customer churn. You can avoid this by nurturing clients with content that keeps your business relevant, and–more importantly–helpful.

275% Increase Sales

Prepare your business for the uptick

Don’t delay your post-recession recovery. According to McGraw-Hill, businesses that continued to advertise during the 1980s recession, increased sales 275% during the uptick, whereas businesses that cut their marketing budgets saw a meager 19% increase.

“The problem is, if you start cutting and cutting deep, when the recession subsides down the road, you’re going to have a whole lot more work to do to get back to where you were. Because what happens six months or a year down the road when things start opening up and you’ve been dormant? You’re back to square one so you have to spend incrementally more to be a player.” John Edelmann 

How Elevation can help

Elevation Marketing isn’t your typical B2B agency. We work with a range of medium and large businesses across the US, with 60% of our clients being $1billion+ enterprises. We have a team of in-house specialists who provide unique insight into the challenges facing your business. Our propriety process uncovers the power of sales and marketing alignment in your organization. Starting with the optimal client outcome as our goal, we lean on data to develop cutting-edge strategies that elevate your marketing and sales success. Talk to us to find out how we can help your business weather the recession.

Contact us for a free consultation regarding your B2B marketing needs.

This is part one of a multipart series. Stay tuned to learn expert B2B marketing strategies to weather the recession.

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