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As the cost of living crisis deepens, research from Retail Economics conducted in collaboration with HyperJar predicts that £12bn of discretionary spend will be wiped from household budgets, with low to middle-income households the most impacted. Disposable cash after paying for essentials will fall for the average family by almost 6.5%, having a direct impact on both demand and choice.
The challenging economic situation, global conflicts, inflation and the still-felt aftermath of the pandemic have thrown many businesses into recessionary mode, cycling through replanning, budget reallocations and close monitoring of revenue trends. It’s understandable. The first instinct in periods of economic downturn is often to question unnecessary spending. And whilst great headway has been made in understanding advertising’s role as it relates to profitability in recent years, marketing and advertising budgets are still seen as discretionary in many cases.
However, it’s also increasingly well-publicised that reducing spend in a downturn can not only jeopardise the long-term success of an organisation, but also reduce overall brand presence, leaving the door open to competitors to steal share of voice and market share. So why are businesses still falling into this trap, and what should marketers factor into recessionary thinking?
Learning from the past to overcome short-term anxiety
When Wal-Mart founder Sam Walton was asked what he thought about the prospect of recession in the early 1990s, his fabled response was: “I thought about it and decided not to take part.”
A significant amount of historic data from past downturns shows brands that reduce spending or go dark have an expensive recovery and continue to suffer once markets start to recover, whereas brands who maintain spend to stay front of mind remain relevant and experience significant future sales growth. Walmart is a classic example. Through investing in a data-driven approach to ensure its campaigns…
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