Article | by Sophia Charters

Marketing budgets during Coronavirus

and what we can learn from the 2008 recession


This resource is part of Adapt to COVID-19

The COVID-19 crisis is sweeping us into a global recession and businesses large and small are facing increasing financial pressures. While there are some obvious exceptions (notably supermarkets, online retailers and digital entertainment providers) the majority of brands are switching into ‘survival mode’ and reviewing their budgets accordingly.



Thankfully, we’ve endured multiple periods of economic downturn in the last century and this is the perfect time to revisit the lessons that have been learned. In this article, I’ll explain why marketing is not optional, how you can understand changes to your customers' behaviours, and where to spend, save and adapt to manage your budgets effectively.

As businesses suffer slowing sales and project continued revenue losses, a number of brands will be inclined to focus on the short term and consider slashing their marketing spend to compensate. The latest survey conducted by Marketing Week reveals that around 90% of marketing budgets have been delayed or are under review.


This trend is concerning for three key reasons:

1. Customers expect to be hearing from you

In their recent global consumer study, Kantar found that the majority of consumers think that brands should continue to advertise during this period of crisis. While it’s important not to exploit the situation, your audience does expect to hear from you. 75% of consumers believe that brands should keep them informed of what they are doing and half of those surveyed think that brands should continue to use the same tone ‘as they have always done’.




2. Advertising activity has long term effects

Building brand awareness and equity takes time. The marketing communications you are sharing now can take months and years to generate their full impact among your target audience. The implication of this is two-fold. Firstly, by cutting spend now, you’ll suffer the consequences later down the line.

Secondly, the tactic of ramping up marketing activity at the end of the recession will take time to create results. It won’t provide immediate gains in a newly revived and noisy advertising landscape.


3. Periods of recession offer great opportunities for some

Brands that maintain their advertising budgets will have the advantage against their competitors who have either reduced or ceased advertising entirely. Brands that are able to actually increase their marketing budgets stand to gain huge ground in the share of voice, and therefore share of the market, as others clear the stage for those who increase their volume of communications. There are countless examples of famous brands who have made incredible strategic gains in previous recessionary periods including Kelloggs, Procter & Gamble, Target and Lego.


Unsurprisingly, making decisions for the short term inevitably has profound impacts on longer-term success. Any savings that can be made now by reducing campaign activity will pale in comparison to the impact that maintaining, or even building brand equity would generate for your pipeline.


“Businesses that maintained comparably strong brands in the 2008 financial crisis recovered nine time faster than those who didn’t.”


Marketing is not optional. Data shows that following 2008’s financial crisis, the businesses that maintained comparably strong brands recovered nine times faster in terms of their stock market value.

Even if a brand is able to weather the storm of COVID-19 and the resulting recession by surviving with minimal marketing efforts, they will find themselves be in a weakened position for longer. These businesses will likely remain in survival mode, unable to thrive, for a longer period of time that those who maintained their level of marketing activity.


How does consumer behaviour change during a crisis?

Now that we know that customers expect to be hearing from brands, we have to consider what it is that they want and need, to hear. In order to maximise the value of your marketing budget, it is critical that you understand your audience, their circumstances, anxieties and aspirations. This has always been true but as we move into a recession, your audience will also be moving into a new psychological space, where they expect new or different things.

Following this time of crisis, we can expect a general trend for consumers to be more concerned with family, safety and security. But there will also be differences in how certain people perceive the effects of a recession on their finances and, therefore, how they adjust their spending behaviour accordingly.

FS-Consumer-Behaviour-Combined (1).jpg

In 2009, Harvard Business School professor John Quelch argued that traditional demographic segmentation models do not serve marketers in a time of recession. Instead, he proposed segmenting of audience groups by their psychological perspective.


The ‘slam-on-the-brakes’ segment

    • Perceive themselves to be vulnerable and hit hardest in terms of personal finances
    • Reduce their spending by eliminating, postponing, decreasing, or substituting purchases
    • This group includes lower-income consumers but also those with higher incomes and greater levels of anxiety around their financial security



The ‘pained-but-patient’ segment

    • Feel concerned about their ability to maintain current spending habits in the short term but are optimistic about the long term
    • Reduce their spending by economising in all areas, but less thoroughly than the ‘slam-on-the-brakes’ group
    • This group included the majority of households that remained unaffected by unemployment across all income levels



The ‘comfortably well-off’ segment

    • Perceived themselves as capable of being able to successfully navigate the troubled economy
    • Purchasing more selectively but generally maintain their spending levels
    • This group primarily consisted of those in the top 5% income bracket, as well as those who are very confident about the stability of their finances at a lower income level



The ‘live-for-today’ segment

    • Unconcerned about their financial security and continuing to spend ‘as normal’
    • Taking slightly longer in the consideration phase for larger purchases
    • This group was more likely to be demographically more urban, younger and spending on experiences rather than possessions


One thing that was common for each of the four psychological segments identified above was their prioritisation of purchase types:

  • Essentials – products that are necessary for survival
  • Treats – indulgences that can be justified
  • Postponables – purchases that are required or desired, but not immediately
  • Expendables – purchases that are not deemed to be necessary or justifiable

And changes to each segment’s purchasing behaviour could subsequently be mapped by these categories:


Source: HBR, How to market in a downturn


“Businesses that invest in understanding their customers’ changing needs throughout the economic transition will be able to adjust their strategy and product offering in line with changing demands.”


Best use of your budget now

Insight that takes into consideration the thoughts and feelings of your audience will help you understand their actions, and even predict how their behaviours are likely to change as the situation progresses. And when you understand how your audience perceives your products and services during a recession, you have the power to adapt. Businesses that invest in understanding their core customers’ changing needs throughout this economic transition will be able to selectively and judiciously adjust their strategy and product offering in line with new or changing demands.

One positive to come from a difficult economic climate is that financial pressure provides the necessary impetus to carefully and systematically review budgets. Now is the time to make well-evidenced recommendations for the best use of budget in terms of where to save, spend and adapt:

1. Save where you can 
Save by eliminating any tactical activity that is underperforming.

2. Adapt to opportunities 
...By determining which of your products and services are likely to decline, stabilise or grow. Then divert investment toward the strategic priorities you’ve identified. It’s important not to alienate your loyal customers who turn to you for your existing services. But it’s important not to ignore innovations in product offering, or shifts in positioning which will genuinely help your audience.

3. Spend on the right messaging in the right places 
Starting with solid audience insight, you’ll be able to identify their desires and concerns and ultimately what they need to hear from you. You’ll also know where your customers are and of course, right now, that is likely to be at home and online (but online where? and how?). 


To sum up...

Strategic investment is your best defence against an impending recession.

Spend to maintain, or if possible build your brand equity.

Spend to gain an advantage on competitors who slash their advertising budget.

Spend to understand your customers in this changing economy and to make sure the messaging you produce meets their needs.

When you invest in your marketing efforts you’re investing in the long term future of your business. There’s no better way to set the expectation that your future will be a successful one.

Zero Day - the crisis roadmap digital workshop


The live digital workshop where our team and your team come together, to create your customer-centric crisis roadmap

See what ZERO DAY is all about

Related articles