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What Can Be Done to Mitigate a Recession?

When the going gets tough, firms almost always cut their digital advertising spend. While this may look like a cost-saving measure, it's absolute insanity. When the number of people who can afford to spend starts to shrink, it's more important than ever to be able to reach them effectively. Suddenly, their business is more valuable than before.

It can be tempting for companies to shift all their focus to chasing this diminishing number of leads, while also cutting digital marketing budgets simultaneously. Instead, we believe the answer lies in focussing on brand development, which is a service that can be provided by agencies who specialise in brand consultancy. This is effective forward-thinking planning.

What Is the 95:5 Rule in Marketing?

One of the fundamental principles of marketing is the 95:5 rule, the idea that at any given time, only 5% of consumers are in-market and looking to convert. In a recession, we can imagine that this percentage shrinks closer to 1%. Most buyers in a B2B situation are buying for the future, and we know that marketing is a highly effective way to reach future buyers.

While the total number of consumers in the market is vast, not even the largest of businesses can hope to appeal to a large segment of that group. Most companies operate in well-defined niches, meaning there are only so many eligible buyers for their services or products. When consumer spending drops, these buyers cut their spending.

Is the 99:1 Rule More Accurate in a Recession?

It's well established that B2B sales are often slowed by a recession, which can be for various reasons. When one point in the funnel begins to close up, this has a trickle-down effect. The closing of this funnel, thereby cutting the number of eligible buyers from 5% to 1%, increases the number of future potential buyers from 95% to 99%.

In a recession, the number of future buyers increases, although it does cause hardship in the short term. Can you see where we're going? This increases the need for B2B companies to focus on the long-term future of their brand, shirting their efforts to better market towards buyers who will reenter the market once the financial conditions allow them to do so.

What Does This Mean for Businesses?

Capital is often misallocated and misspent in B2B marketing, especially when operating in a recession. The data suggests that B2B marketers spend over 90% of their budget chasing just 5% of eligible customers. This course of action neglects a colossal 95% of potential customers who could generate future revenue for B2B firms. When things get tough, this method is often doubled down on, often through short-sightedness.

Marketing budgets are often one of the first things on the chopping block, so marketing personnel are forced to focus primarily on the low-hanging fruit, the easy wins. This means that future business, which could be far more lucrative, is ignored and cast aside for short-term gain. Budgets for medium to long-term marketing projects, such as brand development and brand consultancy, are often repurposed to reinvest in short-term lead generation.

This doesn't make any sense to us. The lake has become much more crowded, and there are far fewer fish to catch. There's greater competition for customers who are likely unable to afford to spend in the first place. However, these customers may be able to spend in the future, once they have the budget available.

What Can Businesses Do?

Instead of moving budgets around to focus on the need for short-term lead generation, which will likely be less effective than normal, we should focus on brand development instead. Referred to as 'memory-generation', this activity is intended to effectively market the brand in a way that should increase future demand from future buyers. If brands need help, there are brand consultancy agencies who can help, paid for by cutting spending elsewhere.

B2B businesses need to think further ahead than the recession that they're currently experiencing. While there is a need to generate business in the short term, doubling down on this approach will result in a lighter pipeline of work in the future and cause even more significant harm. The best way to invest is to focus on the future, no matter how difficult.

B2B Companies Need to Invest Smarter

Cuts are almost always inevitable, but that doesn't mean companies need to cripple their ability to generate future business. Instead, look at moving funds away from the creative side. Almost 80% of B2B advertising generates zero growth for brands, meaning there's scope to scale this down if that budget can be used more effectively elsewhere.

If needed, reuse or recycle old creative until the worst of the recession passes. Reusing old creatives can have an added benefit, too, reinforcing the same messaging to your target audience. Great creative work can stand the test of time and be used more than once. If you have them to hand, sweat the assets and get as much life out of them as possible.

Being able to recycle old creative and save budget from elsewhere should be able to justify the need to not cut marketing, however tempting it might be for the company's CFO or financial director. The shift to focus on brand development and positioning may bring in some short-term revenue, but will have an even more significant effect moving forward.

Don't Be Afraid to Ask for Help

At Royal Flush, we follow the data and always look for ways to help our clients get the most bang for their buck. Effective brand consultancy shouldn't cost the world, and by taking a measured approach, and considering all of the relevant factors, we can have a measurable impact.

To book a free one-hour consultation, submit an online form or give us a call on 01492 463209.

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