How Agencies and Brands Are Facing Economic Downturn

You're likely hearing it everywhere, from your favorite YouTubers to news outlets and television channels. We're in the midst of or shortly approaching a recession. Whether we're already there or approaching it, marketers might wonder how to navigate their ad budgets and strategic approach amid an economic downturn.

This is not financial advice, and understanding that every agency and brand is different. But I think it's essential for those of us often not in the boardroom when businesses need to pivot during an economic downturn. Generally speaking, agencies and brands advise their leadership teams or clients to keep advertising, even if tactical adjustments need to be made. Which typically involves making targeting changes or leveraging different messaging; more on that later.

Less than 3 months ago, social media professionals from across the globe went to Social Media Week to learn from the very best marketers. And many of those learnings and best practices must be put on hold until budgets return.

If this is your first time as a marketing professional, typically, the first thing that happens when you go into recession is that many publicly traded firms cut their marketing budget. This is when you realize that your department is a cost center, not a revenue generator. 

How Agencies and Business Leaders Look To Pivot

However, the best leaders in business understand that brands should keep advertising through a recession. Doing the opposite, pausing or eliminating marketing, can have adverse effects that can often outlast the economic downturn. 

If a brand chooses to go dark, it can literally be forgotten by its target audience. And knowing that we often only have a few seconds to foster a connection with consumers, it's vital to have those multiple touchpoints. Choosing to pause on advertising entirely will cause the overall funnel to shrink and, most importantly, cause a decrease in overall brand awareness. 

As part of our coursework during my Alternative MBA, we looked at the financials of a variety of businesses to better understand what a financially-sound company looks like. 

From a financial standpoint, some brands might pull back their ad spending, and understandably so. Brands are concerned about their cash flow, for instance, and it's easy to see advertising as the easiest thing to cut when it comes to cost centers.

From a consumer journey, behavior shifts when any form of economic downtown hits. Consumers may decide to no longer engage with "bottom of the funnel" ads like those that are clickable and shoppable to save cash. But they'll likely still follow and engage with their favorite brands, even if they aren't purchasing at that given moment. 

At our agency, it's more about being more cognizant of our hours billed and genuinely understanding our clients' needs so that we can deliver precisely what they want at a reasonable cost. Given that advertising spending in recessions fluctuates, forecasters often look further ahead to uncover any insights. But it might be valuable to take a different approach.

Looking Back To Better Understand What’s Ahead

According to GroupM's latest forecast, US ad revenue this year is predicted to grow by 8%, excluding US political advertising, despite fears of a recession. That growth will likely be driven by industries like travel and hospitality, which are experiencing a resurgence in the wake of the pandemic. Sometimes it's helpful to look backward to see what learnings we can leverage ahead of uncertainty. 

Looking back at the 2008 recession for any sort of insight, both financial and auto brands that made significant and moderate cutbacks to ad spending saw a drop in net sentiment about their brands, while brands that maintained their spending did not.

I've talked about my love for challenger brands, helping brands like A2 Milk, Merrick Pet Care, and Maven Car Sharing, each working to establish themselves in their respective categories. Challenger brands have a unique opportunity to grow their share of voice and overall market share if they decide to be aggressive with their advertising spend and more focused on their target with the messaging. 

 You've likely seen more ads promoting sales, discounts, or bundles. This type of messaging can effectively drive people to take action, driving sales or conversions in this case. However, that means the top of the funnel is not being refreshed enough, and in turn, brand affinity is lost.  

How Do I Adjust To Better Serve My Brand or Clients?

We'd advise clients considering reeling in their ad budgets to instead focus on targeting their ads more carefully. If a brand knows its target consumer lines up with the core audience of a true-crime podcast, for instance, they might shift their spending accordingly. Brand loyalists tend to generate a significant share of any company's profits. Email marketing and loyalty programs are both excellent channels to reach that audience.

Another way to think about creative optimizations is "If your creative is not optimized and it's misconstrued, it's not helping your brand, it's helping your competitor." That's a common problem for ads that are not branded or ones that don't convey a strong brand persona, according

To help educate our clients, we promote creating content with audience-first in mind; otherwise, things can cause issues. In other words, a viewer might see a Pepsi ad at home but remember it as a Coke ad when they shop at the grocery store and buy the competing product instead.

What about Influencers?

Thanks to the privacy changes that protect the consumer, when it comes to iOS, advertising on Facebook and Instagram is more challenging to measure ROI because of Apple's iOS 14 changes. For brands looking at other marketing channels to leverage, influencer marketing could be a more impactful and creative choice for budget allocation

I can talk about influencers and why they are crucial for nearly every brand all night and day. Influencers are great at reaching a brand's target audience at scale by leveraging the influencer's audience. During my time in the cannabis industry, I loved influencers because they took the place of paid advertising, which we couldn't leverage. 

For the brands I've led social media strategy for, we used influencers as an efficient way to achieve various marketing goals, whether for the top of the funnel, the bottom of the funnel, or even for events. And from a cost perspective, influencers and content creators are often a better choice compared to hiring talent, photographers, potentially a videographer, and more, just for a single content shoot.

If you're looking to evaluate influencer marketing for your brand or client, think of ways to focus on middle- and lower-funnel tactics. Think about ways to drive consideration and conversion where you can more accurately provide ROAS. 

Let me share an intelligent tactic regarding influencer marketing that is great for challenger brands or those with less brand affinity than their competitors. Identify and partner with an influencer whose sponsored content can be leveraged as ads. Through "white-labeling," brands can put ad dollars behind their influencer's content. 

From a tactical perspective, influencers can help your brand connect organically with great results—even more so than traditional ads run through Facebook and Instagram ads. And as we get closer to election season, just like inflation, expect the value of your ad dollar not to go as far, and the cost of running ads will only increase due to an influx of advertising spending in general. 

Life is cyclical, and this downturn will also pass. It's truly not doom and gloom. I appreciate you taking the time to read my latest blog, and I hope there are some actionable items in here that you and your teams can leverage. For more learnings, be sure to check out the rest of my blog!