Marketing Spend & Recession Outcome: The Science Behind Spending Your Way to Success

Raise of hands. Who is Corona homeschooling only to realize they’ve forgotten everything they ever learned in school?

Kid: What’s a synonym?

Me: Uhhh… a spice?

Seriously, who knew teaching six-year-olds how to add could be so unnecessarily complicated. (Thanks for nothing, Common Core.) It turns out one of the unexpected hardships of COVID-19 has been parents having to figure out fractions. But amidst all the whining and headache, recalling one area of learning has actually proven useful.

That’s right; we’re talking about the scientific method.

Although useful, this post isn’t another list of ways to keep revenue flowing during a lockdown. Today, we’re going back to school for a more scientific-based approach to overcoming the current economic slump.

Starting with something every student loves…

A POP QUIZ!

Which of the following companies do you think would fare bet during a recession?

  • Company A: Reallocated spending; increased marketing investment
  • Company B: Pulled back spending; downsized marketing investment
  • Company C: Spent Marketing Budget on Netflix; Instructed all employees to binge-watch Tiger King

Did you answer Company A? We hope so.

Although it is very important that we figure out what happened to Carole Baskin’s husband, it is far more beneficial to your business that it keeps investing in marketing during this economic downturn.

To understand why we recently looked at some of the biggest winners from the 2008 Great Recession to see if their experiences could likewise guide us on how to capture market share during the Coronavirus.

 

But that analysis lacked one very important thing: SCIENCE!

How a Scientific Study Shows We Can Beat a Recession

While researching the best ways to help our clients come out ahead during a recession, we came across a very interesting study from Cornell University. You might have seen it. But on the off chance you didn’t happen to catch volume 56 of Cornell Hospitality Quarterly, it’s well worth the read.

The study looked into the specifics of why some hotel groups during the 2008 downturn came out financially ahead of others. The question (step 2 of the scientific method if you’re keeping track at home) was whether there was a consistent factor that separated the winners from the losers.

 

Spoiler: There was.

 

Aptly titled, Winners and Losers during the Great Recession: The Positive Impact of Marketing Expenditure, this study used the scientific method in all its glory to conclude:

“….firms that ‘invest’ in marketing, especially in tough times, can achieve a payoff via various revenue drivers and will realize gains beyond just the short term.”

There you go. Science has spoken.

It’s an insightful read, filled with fancy performance indicators like “TRevPAR,” some nifty charts, statistical jargon like “coefficient” and “univariate,” as well as lots and lots of citations — all marks of a truly good study. Though in case you don’t have time to scan through it, here are some of the key takeaways:

 

  • Losers heavily discounted prices; winners did not
  • Losers reduced expenses across the board, including marketing
  • Winners specifically increased advertising and marketing expenses
  • During the recession low point, marketing was a primary driver of revenue for winners

 

In summary, these findings reaffirm what we’ve previously seen, which is that companies that continue to invest in marketing throughout a recession come out very, very well.

But understandably, you might be wondering how a study about the hotel industry in 2008 holds any bearing on your business in 2020.

You might be thinking that these findings are good and all, but there’s a big difference between a financial recession twelve years ago caused by faulty subprime mortgages and the global pandemic we’re currently facing today as a result of some dude getting too close to a pangolin.

You might be asking yourself, why does this matter to my business?

Why This Matters to Your Business

The first thing to note is that all economic recessions, no matter how they originate, share similar patterns and characteristics. This means the successful behavior of brands during one recession will apply to future ones. Some of these behaviors include:

 

  • Pre-emptive cost restructuring
  • Balance sheet discipline
  • Proactive mergers and acquisitions
  • Targeting recession-proof audiences
  • Pivoting product development and messaging

 

They also include, as the study concludes, aggressive commercial growth strategies like investing in marketing.

Also telling, is that during the Great Recession, hotels were one of the hardest hit. Yet of those, the ones that invested in marketing fared much better than their competitors that did not. While there is little insight to be gleaned from the performance of truly recession-proof brands during a downturn (like those in healthcare or food and beverage), far more insightful is how those businesses hardest hit cope – like hotels.

In fact, there are few industries less recession-proof than hospitality. So if hotels could beat their competitors by doubling down on marketing during a recession, it’s worth taking note.

Of course, no business would want to base its choice to boost marketing on one Cornell study, as impressive as that study might be.

But it’s not a stretch to think hotels are the only ones who fare better during a recession thanks to marketing.

So let’s test that hypothesis with some…

Other Examples of Recession Proofing via Marketing

Match.com was able to increase revenue by 25% and boost active subscribers by 30% during the 2008 recession. How? According to then CEO Greg Blatt, by investing heavily in two key areas: product development and marketing.

Likewise, back in 2009, Amazon, not quite the behemoth it is today, grew its sales by 28% via product innovation, specifically the Kindle, and aggressive cross-promotional campaigns.

But the Great Recession isn’t our only benchmark.

Way back during the 1930’s Great Depression, Kelloggs doubled its advertising spend and invested heavily in a state-of-the-art technology known as radio to promote it’s latest creation, Rice Krispies. As a result, they grew profits by 30% and outshined competitor Post, who significantly cut back marketing during the same time. And the rest is Snap, Crackle, Pop history.

During the 80s, McGraw-Hill Research analyzed 600 companies and found that “those firms that had maintained or increased their advertising during the recession …. boasted an average sales growth of 275% over the next five years.” Comparatively, companies who cut advertising only saw a recovery growth of 19%.

 

When a recession hit the early 90s, McDonald’s decided to play it safe and cut its ad budget. Smelling fast food blood, Pizza Hut, and Taco Bell ramped theirs up and, as a result, grew sales by 61% and 40%, respectively. On the flip side, McDonald’s saw a 28% drop. Yo quiero Marketing.

 

In interviewing brick-and-mortar retailers about their recession performance, the management consulting firm Mckinsey & Company found that “all the resilient players we spoke to maintained or increased their marketing spending during the downturn.” In particular, when T.J. Maxx saw its core audience affected, the department store increased advertising spend by 15% so they could reach a new consumer base.

We think that data speaks for itself.

Summary and Conclusion

As the adage goes, “When times are good you should advertise. When times are bad, you MUST advertise.”

We’re not sure who came up with that, but they definitely know their stuff. Based on the findings above it’s hard to argue with that sentiment.

If you’re looking for the ammo to overcome a recession, look no further than your marketing efforts. By continuing to invest in marketing during economic slumps and uncertainty, you’ll come out a winner.

So to recap what we’ve learned today:

 

  • Homeschooling is not easy
  • Owning tigers as pets is not a good idea
  • Cornell puts out some pretty nifty studies
  • Winning businesses invest in marketing during recessions
  • Science rules!

 

We can’t guarantee knowing all this will help you figure out how to help your five-year-old with their trigonometry homework, but it will help your business thrive in a downturn.

Because you know what they say about knowing….

The other half?

Acting on that knowledge.

If you need help, we’re providing a free opportunity analysis to help brands find their best avenues for growth, no matter what the economic climate. Together we’ll find where investing your marketing spend will benefit your business the most, and the best ways to implement. This includes figuring out which of your competitors are decreasing or increasing their ad spend. That way, just like the companies above, you can grab some of that sweet, sweet market share.

Re-Invest Your Corporate Travel Budget – And Maximize Your ROI

Now that business travel has come to a halt, what should you do with your travel budget?

As we see it, there are three options:

  1. Save that money for when business trips are possible again.
  2. Allocate that money to another part of your business operation.
  3. Use that money as a toilet paper replacement.

As appealing as the first and last choices are, we recommend going with the second. And, more specifically, investing any unusable business travel spend into digital marketing.

That might seem counterintuitive.

However, consumers still need goods and services, and they are relying on the internet to find people to do business with. So, you want to make sure you’re there for them when they need you.

Throughout the Coronavirus outbreak (and resulting recession), we have been examining the best ways to weather, overcome, and even grow during the economic downturn and rapid changes in consumer habits. What we’ve found is that the best way to protect volatility is not to stifle spending.

Instead, refocusing spending during a recession is a safer bet.

This has been the running theme throughout our ongoing look at handling the Coronavirus recession, including:

As travel expenses fall by the wayside, we are similarly finding that rather than saving that money for when travel resumes or in preparation for other future uncertainties, it is better to use those funds to protect against present realities.

In other words, investing your travel spend dollars online is a smart move right now.

Comparing ROI: Travel Spend vs. SEO and Paid Media

According to Motus, the average business trip costs $1,293. Depending on your business, that might seem either high or low. But what is even more telling across the board is what we get in return for that spend.

To that end, Certify reports that from the 445 million business trips that occur each year, every dollar spent on travel provides:

  • $9.50 increase in revenue
  • $2.90 increase in profit

That calculates as a 190% ROI from business travel.

Numbers like those make nixing business trips due to Coronavirus, a hard pill to swallow.

But it doesn’t have to be.

We just need to find an equally lucrative revenue-generating channel to invest those temporarily defunct travel funds into. Ideally, one that is recession-proof, or close to it.

In a recession (or even non-recession for that matter), the primary goal of any business marketing strategy is to connect with a target audience. Which means you want to be where the customer is. As social distancing and quarantining are sending people indoors and online in record numbers, digital marketing is the best equipped to make that happen.

That’s why SEO and paid media are as close to a recession-proof strategy during the current economic downturn.

But are they enough to compensate for losses in business trip revenue?

Short answer: YES!

Slighter longer answer: Paid media campaigns provide an estimated 200% ROI. The ROI of SEO (although harder to accurately calculate) is equally, if not more impressive. According to one study, a well-strategized SEO campaign results in a 200-275% ROI.

In both instances, these two digital marketing channels exceed the typical ROI of business travel.

While we’re not saying that companies should scrap travel for digital marketing regularly, in times when business trips are an impossibility, allocating that budget into growing your online presence can be a great substitute.

Why Invest Travel Spend into Paid Media

The reaction to COVID-19 as impacted paid media advertising in the following ways:

  • More people on Google and visiting ad-rich sites.
  • Cost-per-click has decreased on average across many paid media verticals.
  • Competition has decreased, as many businesses pull back spending.

The factors above create an excellent opportunity to pick up market share.

As the crisis continues, both costs and competition are likely to continue decreasing. This means there has been no better time to use paid media advertising. Additionally, with online traffic volume skyrocketing, especially on news sites, display networks have become more valuable to digital marketers than ever.

To get the most out of your paid media ads, we recommend diversifying between two different targeting strategies:

  1. Target Strategy #1: High intent, longtail queries

This strategy involves monitoring trends closely (using Google Trends) to see how people are searching online at any given moment and see how people’s priorities and interests are changing. Google has also released Google trend Coronavirus Hub to further help track COVID-19 related search trends.

Once you find your keyword-rich search queries, identify which match your target audience with the highest likelihood to buy, and create messaging and content around those queries. Depending on your industry, this may require excluding COVID-19 related searches, such as:

  • Coronavirus
  • Corona
  • Covid
  • Virus
  • Pandemic
  • Epidemic

The key is being super specific with your keywords (hence the “longtail”) is to mine cheaper traffic with higher relevance.

  1. Target Strategy #2: Low intent, top-level funnel conversions

This strategy is a longer-term play focusing on macro conversions. The goal is to less make a sale in the now, which is becoming increasingly tricky as households reduce spending, and more to generate brand awareness, trust, and build remarketing lists. So instead of trying to overcome buyer hesitation forcefully, your brand tactfully positions itself top-of-mind when confidence returns, and people are more inclined to buy.

How each brand generates this goodwill and converts into marketing-qualified leads (MQLs) will vary. But it typically involves creating ads around industry-relevant, thought leadership content that provides value to your audience when facing the pain points associated with the Coronavirus.

Keep in mind, Google originally banned Coronavirus-related ads. But now they are starting to lift that ban so certain industries can start providing COVID-19 relevant messaging to their audience via paid media.

Why to Invest Travel Spend into SEO

One of the worst mistakes a brand can do right now is halt its SEO campaigns. Not only will you drop traffic, lose leads, miss conversions, and decrease revenue, but you’ll fall behind your competitors. Instead, while everyone else is either pulling back or keeping their SEO spends stagnate, you should boost yours with your “extra” travel budget.

Safeguarding against your competitors moving higher than you on search engine result pages (SERPs) will ensure that when the recovery occurs, you’re not playing catch up. It takes a fraction of the cost to maintain and improve rankings compared to the loss of revenue that arises from a SERP freefall.

So the smart move is to prevent that drop from ever happening.

This means strategizing your SEO campaigns around three types of searches:

  1. SEO Target Strategy #1: Current Search Habits

Very likely, your audience is most concerned right now with how Coronavirus will impact their lives and businesses. So a lot of their searches are focused around that topic. This means you should be creating and optimizing organic content around people’s current priorities and interests, as it relates to your business.

Just like with the first targeting strategy for paid media, we recommend monitoring Google Trends closely and generating time-relevant content that provides the answers to the queries your audience is currently seeking.

For example, there are a lot of people who planned a move during this time, and are concerned about how to do it safely. So in response, businesses like Moving.com and Pods have created SEO-centric content answering those concerns.

  1. SEO Target Strategy #2: Normal Search Habits

Eventually, the Coronavirus will be contained, and the economy will recover. When it does, consumer spending habits will stabilize. So you want to start preparing today for that surge.

Since SEO is a long-term strategy, unless you are targeting very time-sensitive queries, what you do today will affect your organic search several months from now. So continue your future SEO campaigns targeting the typical search habits of your audience. By increasing these efforts, using your unused travel spend, you can even gain an added boost by pressing on, while others are letting up.

  1. SEO Target Strategy #3: Local Searches

Local SEO might not apply to every business, but as our travel reduces and home quarantining increases, there is more of a need than ever for locally based services. So if your business relies on local search in any way, you will want to focus a large part of your immediate efforts on local SEO. This includes:

  • Optimizing for “near me” searches
  • Optimizing business info, address, and contact info on your site
  • Optimizing Google My Business
  • Optimizing local business directories like Angie’s List and Yelp

Also, be sure to stay up to date on changes made by Google as policies regarding reviews and new updates are constantly changing.

Conclusion: Put Your Corporate Travel Budget to Good Use with paid media marketing and SEO

Right now, every brand should be focused on two things:

  • Staying ahead of the competition
  • Preparing for the recovery bounce-back surge

Focusing on those strategies will position your business to do well during and after the Coronavirus recession. Which is why paid media and SEO are so important. They put your business on the offensive and defensive at the same time.

There is little to gain from unused travel spend. So instead, get the most bang for your buck by diversifying into these two bull markets

  • Paid media: A short-term opportunity that can produce immediate gains
  • SEO: A long-term safer bet that provides increasing dividends over time

By investing your otherwise unserviceable travel budget into these current low-cost, high-yield business strategies on Google, you can stay ahead of the competition, keep revenue flowing, and capture market share during the economic downturn.

That way, when things return to normal, and you can once again put that travel spend to good use, your business will be in the best position possible to take flight.

7 Reasons to Keep Investing in Digital Marketing

With many of us working from home now, we’ve noticed a considerable uptick in one particular question recently. It’s a hard question to avoid, and an even more important one to answer.

We’re sure you’ve heard it, too.

Heck, you’ve probably even asked it of yourself.

“Should I wear pants today?”

But don’t worry, we’ll help you figure it out by the end of this article.

We’ll also figure out the second most important question facing businesses:

“Should I continue investing in digital marketing?”

That’s a big decision to make. And no less important than the pant question.

As marketers, especially today, we are faced with three options:

  1. Keeping things the same
  2. Pull back spending
  3. Expand operations

 

Right now, there are a lot of things businesses cannot control. Events and trips are being canceled, and people are staying home, consumer habits are changing, the list goes on. But there is one thing they can control: how they engage with their audience.

So while the knee-jerk reaction may be to downsize operations and pull your pants up over your head, take caution overreacting defensively to the sudden shifts occurring. The economy hasn’t stopped. Consumers are still buying things. Opportunities for growth still exist. Trends and needs have merely shifted. So we need to shift with them.

Mainly, our new environment has caused people to rely more on Google for answers, Amazon to buy things, social media for comfort, and the Internet overall for help.

As a result, the best strategy is to go with option three and expand your operations in the right places. This means finding ways to engage your audience cost-effectively that provides the most benefit to your brand’s future.

Since digital marketing checks all the right boxes, we recommend going all-in with your online strategy. To show why, here are seven reasons why stopping digital marketing could be a very bad move.

1. There Are More People Online Than Ever

There is currently the largest volume of people online right now in the history of the world.

Because without a doubt we are changing the way we Internet.

If there’s one central tenet of doing business, it’s to be where your customers are. Right now, everyone’s customers are online. Digital marketing is the best (and really the only way) to reach them effectively.

2. Connecting on a Personal Level is Paramount

Now, more than ever, is the time to connect with your customers. Not just because you’re a business, but because you’re a human. As humans, we’re all in this together. We are all taking precautions. We are all quarantining in our homes. We are all eating weird things we had forgotten were in the fridge. We are all not wearing pants. So let’s talk about it.

Digital marketing provides the most varied and personal ways to reach people and share experiences. Paid media and email provide a direct means of outreach, while SEO allows people to seek you out on their own terms. And then there’s social media, which is used for the sole purpose of connection, whether it’s through sharing updates, providing educational resources, live streaming events, or simply posting some much-needed humor.

This is not a time to be salesy. It’s a time to be supportive, sensitive, and helpful. That goes for new customs but is doubly important for existing ones so that you can retain and deepen those relationships during even the toughest of times.

Speaking of which…

3. Digital Marketing Provides an Easy Ability to Build Affinity

Since digital marketing is the best way to connect, it’s also the best way to build trust. Chances are your customers are stressed. So instead of pulling back from them, deliver useful, honest messaging that can comfort and help.

The most important things a brand can provide to people in a crisis are:

 

  • Clarity
  • Value

 

Even if you can’t generate direct sales at the moment, you can build long-term brand affinity through digital marketing. To do this, create and share quality content that covers those two items, ideally at the same time. Forging a positive connection and trust will build a loyal following that outlasts any downturn.

Because you don’t just want to dominate the downturn, you want to dominate the market

  1. Brands Need New Ways to Stay Competitive and Gain Market Share

The most important things a brand do for itself in a crisis are:

 

  • Keep revenue flowing
  • Capture market share

 

To achieve both during these times, your brand will need to be able to pivot strategies on a dime. Here are some of the most effective ways we’ve seen clients doing this so far:

 

  • Reallocating trade show budgets into digital marketing.
  • Meeting demand by enhancing (or creating) an online presence.
  • Seeking high-yielding, lower-cost solutions like video.
  • Replacing brick-and-mortar sales with online sales.
  • Shifting efforts from prospecting to retargeting.
  • Putting unused travel budgets into SEO and paid media.

 

Digital marketing allows companies to find opportunities amidst the Coronavirus crisis to not only generate revenue in the short term but also gain a competitive advantage over the long term.

5.       Local Search Can Make All The Difference

The changes in our behavior have made local search more important than ever. Even businesses that once paid little attention to local markets online need to rework how they target audiences using digital marketing.

 

Although you might think social distancing, store closures, remote work, and “stay at home” government mandates would deter local activity and they are causing local search to evolve.

The uptick in local search and “near me” searches presents a rare competitive advantage for small businesses, both brick-and-mortar, and e-commerce, over online megastores. As the likes of Amazon run out of stock and are behind on deliveries, smaller businesses can swoop in to fill the need. And that’s where strategically implemented SEO and SEM comes in.

6. Digital Marketing can be Recession-Proof

Every recession has a strategy that can withstand the worst of the worst.

Why? Because it is:

 

  • Cost-effective (i.e., affordable to implement)
  • Agile (i.e., easily adaptable to volatile market changes)
  • Measurable (i.e., it can track any action to provide data-driven insight)
  • Sticky (i.e., once you connect with a prospect, you can endlessly re-engage)
  • Growing (i.e., new opportunities appear on the regular)

 

Best of all, digital marketing diversifies your investment. That’s because it is not just a single strategy, it’s a strong portfolio of unique methods for reaching your audience, generating leads, and obtaining sales, that include:

 

Not only will these digital marketing channels help your business overcome a recession, but at the same time, they will position your business to grow during the recovery.

7. You Need to Be Prepared for the Recovery

Although current events may change how we operate for a long time, daily-life will stabilize, consumer habits will normalize, and the resulting recession will end. When it does, the businesses that prepared earliest will succeed the most.

A major impact of these changes will be more people growing accustomed to doing their business online, especially demographics that were less prevalent on the Internet prior. To meet this surge, your brand will need to have a strong online presence.

Also, businesses that either pulled back spending, failed to reallocate their budgets effectively, or canceled digital marketing all together during the economic downturn, will fall behind the competition that wisely did not.

In other words, what we do during a recession will determine the winners and losers of the recovery.

So the questions stands:

“Should you continue investing in digital marketing?”

The answer, without a doubt, is YES!

There is no need for businesses to struggle. They just need to find the right ways to thrive. Digital marketing provides a low-hanging fruit opportunity to not only strengthen your business now, but gain momentum for the future.

For all the reasons listed above, pulling back, canceling, or even failing to expand your current digital marketing efforts will do more harm than good. On the contrary, taking advantage of the opportunities available with digital marketing can position your company to dominate your competition and the marketplace.

And, most importantly of all, provide you the freedom you need to grow.

You know what that means?

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