In the age of uncertainty, business leaders often cut back extensively.
Specifically – they cut back on their marketing. However, to safeguard, optimize and grow your business the best solution would be to invest.
By now, you’ve likely heard all the cautionary guidelines that we need to follow in order to maintain our health and the health of those around us.
The Coronavirus (COVID-19) pandemic is spreading at an unprecedented rate and with no cure in sight, this may be just the beginning. Yes, it’s real. Yes, it’s scary. So, yes, we’re in a time of great uncertainty. Uncertainty around how we can safeguard not just our health but our finances and businesses.
There’s serious talk about an impending recession. If you’re a business executive or owner, we know you may be scared about the economic future your business faces in the next few months, but now is not the time to pull back. Now is not the time to make rash decisions and cut all budgets. It’s not the time to limit the potential growth of your business. Now is the time to double-down on your marketing and invest in your business and its future.
While several companies are aggressively tightening their belts on their cash output, experienced entrepreneurs are seizing the opportunity to increase their inflow of cash by investing into their business’ future growth.
It’s a drastic move that businesses who’ve gone through a recession will take, as they understand that there is less competition right now, making it easier to get results more quickly.
One needs to remember that this isn’t the first time we’ve gone through times of uncertainty and economic downturn.
Rewind the clock and there have been as many as 47 recessions in the United States alone.
Let’s look back at a couple and see how businesses that invested in their marketing emerged unscathed.
The Stock Market Crash of 2008
Surpassing the Great Depression of 1929, the stock market crash of 2008 was accurately dubbed “The Great Recession”. It was the worst financial upset in history, specifically in September and October of 2008. It saw the Dow register as one of the lowest ever, unemployment rate rose to 10%, hedge funds and insurance firms found themselves holding worthless investments, and Lehman Brothers declared bankruptcy.
In fact, we saw 12 of the most important U.S. financial institutions collapse within just a few weeks. Other banking giants outside of the U.S. needed financial rescue to escape bankruptcy as well, and several businesses, such as General Electric, were trying hard to remain afloat.
But there was a silver lining. Some savvy businesses thrived – Groupon was one of them. As consumers were looking at ways to cut their expenses, Groupon capitalized on these thrifty shoppers. It doubled down during a time when most were scaling back. The investment in their marketing is what allowed them to grow faster than Ebay, Amazon.com and Yahoo.
Groupon, which sends out frequent discounts for local businesses, quickly spread to over 35 countries and 300 markets in its first two years, creating a $500 million annual profit. They made a business – through their marketing – of providing consumers access to all the non-essential products they desired during a time that seemed dire and bleak.
There were also a few banks and lenders who grew during the recession, such as Wells Fargo and Citigroup. Wells Fargo shifted their business model and concentrated on selling financial products in a branch atmosphere to develop a distinct structure where they would lend not only to real estate but also to small businesses, energy and agriculture.
While other banks were focused on boosting their branch number, Wells Fargo kept theirs to a minimum by only taking on Wachovia. This shift in their business focus allowed them to double their branches in the East Coast and helped them gain capital.
What can we learn? When faced with economic uncertainty, businesses should protect and optimize what they already have to seek out new growth opportunities.
The 2001 Recession
This recession was caused by a boom and subsequent bust in dot-com businesses that lasted eight months, from March to November. The boom was said to have been partially created by the Y2K scare that took place in 2000. During this time, companies made rash decisions and bought billions of dollars’ worth of new software because they were afraid that the old systems wouldn’t sustain the transition from the 1900s to the 2000s.
Many dot-com businesses that benefited during the surge of buying up software products ended up being significantly overvalued and failed. Conglomerates such as Microsoft saw a dip in 2001 and 2002 as they had to overcome the dotcom bust.
The second reason for the 2001 recession was due to the attack on the World Trade Center that took place on 9/11. The terrorist attack added more injury to businesses who were already struggling in a down economy. As this recession was short-lived, companies such as Cisco, eBay and Amazon.com lost value but quickly recovered.
Even when there is no looming risk of a global recession, businesses go through years where they are profiting…and years when they are not. The biggest risk to any business is two-pronged: inaction and rash response. During times of economic uncertainty, anxieties rise and we often feel pressured to ‘do something’.
But this ‘something’ doesn’t always fare well. These rash decisions are typically uncoordinated and stem from a sense of panic and will result in an expensive recovery for a business once the economy rebounds.
Stabilize your business. First, determine how much the recession will hurt your business. If you’re in the travel, healthcare or education industry – you’ll likely get hit harder than others if we head into a recession from the COVID-19 virus. But that doesn’t mean you have to cut all costs that you depend on for operating and growing.
Instead, shift your business model or focus. Invest in more digital marketing spaces so you can capture and win your competitor’s customers. If your business is going to prosper in tough times, you need to continue to expand your customer and client base.
And that means drawing in new sales opportunities and customers from your competitors who will potentially respond with cutbacks and budget-tightening tactics.
What does all this mean? In essence, don’t cut back on your marketing! That’s the biggest mistake most companies make.
In times of economic uncertainty, many businesses will cut their marketing budget first. This isn’t the time to cut back on your marketing. In fact, if we’re to learn anything from history it’s that this is when you’ll need marketing the most. If possible, now’s the time to step your marketing up!