The economic downturn - are you making the right business decisions?

The economic downturn - are you making the right business decisions?

In the second post of our series - dealing with the key challenges businesses are facing in 2023 - we’ll look at the issue of inflation and recession.

Of course, we know that addressing the impact of recession on business will involve many actions, but one of the key issues you must address is marketing - for business survival and success.

Why is a marketing budget always the first casualty?

The first approach most businesses will focus on is the implementation of cost-reduction measures, such as streamlining operations, reducing overheads and expenses, and finding ways to increase efficiency.

Typically, when deciding on what to cut back on, marketing is always one of the first areas of business expenditure to get the chop.

While 83% of CEOs see marketing as their number one growth strategy, only 50% of CFOs believe marketing drives growth, with more than 60% believing that marketing investment should not be maintained during a downturn. [McKinsey & Company]

Consequently, when a recession hits, the likelihood is that the marketing budget will be the first thing to be cut or even put on hold completely.

Cutting your marketing budget comes at a cost

However, the data evidence suggests that your marketing budget is the last thing a company should look to save money on, and in fact it could be catastrophic for your business. A recent survey suggests that marketing is directly responsible for 44% of sales and has an even larger indirect influence. [The CMO Council]

In tougher market conditions you need to be more visible, not less. Without continuing to feed your sales pipeline, your orders will dry up. It’s the function of marketing to build awareness, engagement and deliver leads for Sales - marketing influences more than 60% of a purchase decision. [Harvard Business Review]

The key benefits of maintaining marketing spend

It’s important to view the current challenging economic conditions as an opportunity that can allow your business to:

  1. Increase growth during a recession: Historically companies that pull up the marketing budget ‘draw bridge’ perform poorly or fail completely. A recent two decade study of companies that cut budgets altogether found that sales fell by an average of 16% in the first year of not marketing, by 25% after 2 years, and by an alarming 36% after 3 years. [Ehrenberg-Bass Institute]
    Businesses that maintain or increase their marketing spend saw significantly higher growth during a recession when compared to companies that cut or eliminated their marketing. During the 1974-75 and 1981-82 recessions for example, companies that continued to invest in marketing saw a staggering 256% more growth than competitors that cut their budgets. [ICEAW]
  2. Increase visibility for your marketing spend. With so many companies cutting their marketing spend there will be fewer companies to compete against, so the competitor landscape will be far less busy. By maintaining your marketing spend you can dramatically increase the visibility and impact from your marketing, providing more ‘bang for your buck’,
  3. Increase your market share. With many businesses falling off customers radar as companies scale back their marketing and sales activity, it becomes easier for the businesses that maintain their spend to attract the customers who are looking for their products or services in their sector. Increased visibility will allow you to win a bigger share of the market as a consequence.
  4. Increase customer confidence in your business. Those that cut back on their advertising and marketing activities send the message to their customers that their business is worried about its future. By continuing your marketing activities you send a signal of stability to customers and prospects - people want to buy from a company that they can have confidence in, one that they feel is moving forward. Providing a strong, visible presence sends all the right signals and will help to increase sales when others are falling.
  5. Be in pole position to take advantage of the recovery. Companies that invest in marketing during a recession put themselves ahead of the pack when the recovery happens. Most recessions last no more than 2 quarters, longer downturns no more than a year - the recovery will come. Marketing is about being consistently visible and those companies that reduce their spend lose that visibility. It can take 6 months or more to build your marketing pipeline back up to pre-recession levels. Companies that continued to market don’t have to do this, enabling them to accelerate away from the completion. 9% of companies emerge from a recession in a better position by continuing to invest in marketing. [Media Hawk]


Maintaining business performance during an economic downturn requires strong decision making, thorough planning and consistency of delivery. The right business strategy therefore is to hold your nerve and keep your marketing budgets steady or even be brave and increase your marketing spend.

As the saying goes: “When times are good, you should market; when times are bad, you must market.”

To find out how MC+Co can help you drive more impact from your advertising and marketing spend, call +44 (0) 1277 366898. Alternatively, please fill out the form below and we’ll get back to you asap.

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