Why You Should UP Marketing In A DOWN Market

Markets

There is no arguing that we are facing a down turn in our economy, I’m not ready to call it a recession yet, but we are definitely feeling the pinch. That is the nature of business-it goes in cycles of ups and downs.

When the market slows and sales start to drop, owners’ first instinct is to cut their costs. One of the first to be slashed is the marketing/advertising budget. Ad budgets are often at the top of a cost-conscious small business owner’s hit list because it’s an easy decision to make and it has an immediate impact to the bottom line.

This is a grave mistake. Smart business owners know this is the time to spend more!

Let me explain. When the economy shrinks it tends to shrink as a whole, meaning that people are still buying there are just less of them; the pie has shrunk. If you currently own say, 3% of your market and if the total market is $300m then your sales are $9m.

During a slow down let’s say that the market potential has shrunk by 50% to $150M, assuming you are continuing to do the same income producing activities (marketing, sales, promotions ect) your sales should be $4.5M. I know, as an owner that is scary because your sales on that marketing budget has gone way down and your instinct is to cut budgets, sit back and “wait for it to turn”.

What you do at times like this really depends on how you view marketing. Is your marketing viewed as an expense- something you just have to do? Or do you view it as an investment?

Smart marketers know that while all the competition is standing on the sidelines, if they have the audacity to actually spend more (invest), they will capture more of the market share(because competition is waiting) and when the markets turns around they will reap the huge benefits because they have a greater market share and the pie is now bigger.

So in our above example if you were to get just 2% more market share, which would be 5%. When the economy recovers and the market value goes from $150MM to $300MM your sales would grow and now be $15M.

When is the best time to buy in real estate? When the market is down. When is the best time buy stocks? When the market is down. The same principle holds true for small business marketing.

Have courage and think strategically. Up your marketing spend in this down market. Invest in the longer term growth of your company.

Jeff Paro

Jeff Paro is a marketing and digital technology coach. He is the owner of Sticky Marketing Systems and a Duct Tape Marketing Coach.In addition, he is a top speaker and peak performance strategist for the famed success coach Anthony Robbins. Jeff has ran training workshops and given presentations for over 500 companies including many of the top fortune 500 companies

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Comments

  1. Laurie Englert says:

    Great article. I like how you posed the question if you consider marketing an expense or an investment. Great way to get business owners focused on achieving results rather than debating dollars.

  2. Haitham says:

    I totally agree with the concept, good article, well written.. But I think it shouldn’t be addressed to small businesses. In the small business environment marketing ROI is not measured in market share units, it is usually measured in terms of sales, enquiries or leads, unlike big business who take market share, brand awareness,etc.. into consideration.

    I also disagree with the assumption that the market share remains constant with the increase of the size of market, this is only true if the number of suppliers remains the same and their relative marketing activities also remains the same, which doesn’t actually happen because as the market goes up more suppliers appear and the marketing spend of the other “waiting” suppliers also goes up again, which changes the distribution of the market share.

  3. Meredith says:

    I don’t disagree with your premise but if you’re really talking about small business, spending more to not see an increase in sales may not be a viable option. For example, if a company is used to spending $10 per sale and suddenly you want them to spend $20 per sale that could wind up putting them under before they have the chance to realize the benefits of their increased market share in a recovered economy. If a company can afford to increase their CPA, great. If not, a look towards more creative lower cost marketing efforts (PR, cross-promotions and co-branding, social media) makes more sense than doing what they’re used to doing only spending more to get results.

  4. Meredith: The point I was trying to make is that the marketing budget should be the last expense to be cut. I agree that budget should always be scrutinized for efficacy. What I see most owners do is “cut back” their marketing budgets. Perhaps I should have pointed out that they would also need to allocate savings from reductions from another part of the business to account for the increased marketing spend. I just want them understand the why. Thanks for the comment!

  5. Haitham: Same point as above. I was only introducing a mindset. Even though you are correct most small business owners don’t measure in market share (that was for illustration purposes only), market share usually can’t be measured without a sales figure. Even leads don’t give an ROI until convert to sales.

    I think we were both making the same point about market share (i assumed worst case scenario-it remained the same). There wasn’t meant to be any reference of direct proportions. Again the point was that the companies that figure out away to gain market share, by having courage to market harder, smarter, more efficient- however they can- in a declining market, will benefit tremendously. I could go into case examples about coca cola, budweiser….that we’ll save that for a later date. Thanks for the comment!!

  6. I don’t disagree with your premise but if you’re really talking about small business, spending more to not see an increase in sales may not be a viable option. For example, if a company is used to spending $10 per sale and suddenly you want them to spend $20 per sale that could wind up putting them under before they have the chance to realize the benefits of their increased market share in a recovered economy. If a company can afford to increase their CPA, great. If not, a look towards more creative lower cost marketing efforts (PR, cross-promotions and co-branding, social media) makes more sense than doing what they’re used to doing only spending more to get results.

  7. You are dead on.

    You have to be the first person who calls marketing an investment. Meredith suggest that your premises is correct, but unrealistic for small business… I think she means that perhaps you could have spelled out specifics — personally I think you meant much of what she detail out.

    The reality is that small businesses to often think of marketing as an after thought, when in fact it is the first thing. If they INVEST in high return marketing, then their efforts would be seen as a necessity, not an expense.

    I have a design and marketing firm. We work with small and large businesses as well as not-for-profits. For us this economy is business as usual, we’ve always guided our clients to think long-term, but invest short-term. Businesses need to cut the fat and leave only the muscle in their marketing efforts… As they always should have anyway. Frank Irias, http://www.DaishoCreative.com

  8. I agree that budget should always be inspect for efficacy…. i like your present the question if you consider the marketing as an investment….

  9. ya of course as you told When the economy shrinks it tends to shrink as a whole, meaning that people are still buying there are just less of them; the pie has shrunk. If you currently own say, 3% of your market and if the total market is $300m then your sales are $9m is absolutely true….. That’s why the market is up and we are down in market….