Recessions are NOT the time to increase your marketing budget

by Jason Miletsky

There are two things brands can always count on when a recession hits: less consumer spending, and hungry agencies making the case for why this is the right time to increase their marketing budgets.

It’s a weak argument that’s been repackaged in any number of variations, all basically centering around the idea that brands need to advertise more to get a greater share of a smaller consumer pie.  But that’s not reality.  The reality is that when recession strikes, companies may be forced to go through severe cost-saving measures, and the marketing budget is the first place they’re going to look.  Efforts that strictly work to increase brand exposure are especially vulnerable, as companies shift their focus from long term growth to short-term, measurable ROI.

The truth is, those companies are making the right decision.  According to ChangeWave Research, 57% of US consumers plan to spend less through April, 2009 than they did a year ago, and despite a small uptick in January, 2009, future spending levels don’t appear ready to improve anytime soon.

So if brands shouldn’t spend more, what should they do?  Clearly companies still need to market themselves to drive sales.  But instead of spending more, brands need to spend smarter.  There are two ways to do this:

1. Ditch the expensive NYC agency.  We recently went on a pitch for a potential client who was interested in hiring us to run a promotion for them for the 4th quarter of 2009.  As it turned out, one of the ideas we pitched was the exact same concept that their lead agency came up with, and is currently working on for the 3rd quarter of 2009.  Well, not exactly the same – their lead agency (out of New York), charges over double what we charge.  So look around – there are great agencies outside major cities that are every bit as creative and talented, definitely hungrier, and can stretch you budget farther, simply because we don’t carry the expense of marble floors and Madison Avenue addresses.

2. Seek out better avenues.  Mass media advertising can bring significant exposure, but it’s expensive and the effects typically take longer (and can be harder to measure).  During tighter times, brands need to seek out other ways of communication, including online messaging through social media, viral marketing and CPC advertising campaigns.  If done correctly, these methods can not only increase brand exposure (even beyond what mass media can accomplish), but they can drive short-term sales and provide immediate ROI analysis – even with a greatly reduced marketing budget.

So as much as I hate to debunk the myth the industry has been fostering since agencies felt the wrath of the very first recession, tough economies are not the time to increase your marketing budget – their the time to spend your remaining budget more efficiently.