By on August 3rd, 2022

Digital Advertising Strategies During a Recession

How a brand responds during an economic downturn can have a significant impact on business. Brands should recognize the opportunity to gain market share with digital advertising.

Economic forecasters are warning that the American economy may soon enter a recession if we aren't already in one. We're in a time of economic uncertainty, unprecedented inflation, and two straight quarters of GDP decline. Rising interest rates have businesses holding off on making significant capital investments, and that, in turn, is contributing to negative economic growth. This uncertainty is causing many businesses to carefully decide whether they need to cut some areas of their budget in favor of shoring up their cash reserves.

Related: What to Expect from Working with a Programmatic Agency

Some businesses may start asking their marketing teams to decrease investment as a result. But is cutting down on your marketing campaigns the best idea for your business? Maybe, or maybe not. Companies that continue to market during economic slowdowns often come out ahead in the long run. The key is using that marketing budget wisely and knowing how to make the most of every dollar.

Why Cutting Your Marketing Budget Now May be a Bad Idea

It's normal for marketing and ad spending to decrease when the economy starts to slow down. Facebook and Google recently reported that they are seeing advertiser pullbacks. During the 2008 recession, ad spending in the U.S. dropped by 13%.

But decreasing your ad spend may not be a smart move. In a survey of 154 senior marketing executives, one study found that businesses that took a proactive approach to their marketing during a recession achieved better business growth both during the recession and longer-term during the recovery period. Of the marketing executives that were surveyed, many of those taking a proactive approach actually increased their digital advertising investments during an economic slowdown.

But why is marketing during a recession a good idea?

  • You'll earn greater exposure and brand awareness. When ad spending drops, the market is less crowded. That can allow your brand to stand out without as many competitors clamoring for attention.
  • There are deals to be had. Less overall advertising demand creates more available ad inventory which leads to lower CPM and CPC rates for advertisers.
  • It projects an image of stability and a growth mindset. Brands that continue to focus on growth and look for areas of opportunity through marketing can separate themselves from brands who slash budget and merely attempt to weather the storm.

Additionally, this economic slowdown, from a marketing and business perspective, may not be as bad as you think.  As eMarketer outlines, there are key differences between the current economy and the last recession in 2008:

  • Total U.S. ad spending is on pace to increase by over 13% year over year in 2022, but U.S. display ad spending is expected to grow at over 20% year over year
  • Not all marketing channels are created equal: between 2008-2009, the 17.5% decrease in total ad spend came from channels mediums like print advertising while digital advertising continued to grow
  • As of this writing, consumer spending remains strong despite the rise in inflation and interest rates

Related: Top B2B Programmatic Advertising Tactics to Increase Lead Gen

U.S. programmatic display ad spending will continue to increase in 2022 despite a potential economic downturn and recession.

After all, consumers will still consume, even during a recession. Their buying habits will likely change, and they may be more selective about the products and services they spend their money on. But while some brands may go silent, other brands see a pathway to make more of an impression on their target audience.

The opportunities are there if your brand can identify them. As Coca-Cola’s CMO stated in a recent interview with Adweek, the company is continuing to focus its marketing efforts 3-5 years down the road despite the turbulent economy today. Coca-Cola increased its consumer facing marketing investments by 5% in the second quarter of 2022. With this opportunistic and growth mindset, marketers can turn an external recession into a period of business growth.

Identifying Marketing Opportunities During a Recession

Your brand will need to make intelligent marketing decisions during a recession. These smart decisions will involve identifying key marketing opportunities to help you stand out to consumers even when their household budgets are tight. So how do you do it?

Find Pockets of Opportunity

As marketing and advertising demand goes down, prices go down, too. This brings new pockets of opportunity to marketers in terms of discounted advertising inventory and less competition on high value audiences.

It's important to focus on your conversion rates which may go down as consumers keep a closer eye on their budgets and have less disposable income. However, the discounted advertising inventory and lower cost to engage high value audiences may outweigh the impacts of incrementally lower conversion rates.

Data-driven digital advertising provides these pockets of opportunity. Consumers aren't going to decrease their time online during a recession. If anything, their internet usage may increase as they opt to stay at home to cut costs. Programmatic, paid search, and paid social advertising are effective ways to precisely reach your target audience, and these advertising channels provide measurable results compared to other offline marketing channels.

U.S. consumers will continue to spend more time online and on social media channels. It's important for brands to engage consumers where they live their digital lives during a recession.

Convert Customers at All Costs

From a marketing perspective, the most cost-effective way to drive more top-line revenue is to retain the customers you already have. During a recession, it's more important than ever to retain current customers as they'll be your best source for consistent income and growth. Marketers should focus on granular audience segmentation to target current customers with upsell or cross-sell promotions to increase repeat purchases and overall customer lifetime value.

Related: What's in a Programmatic Ad Tech Stack, & How Much Does it Cost?

The next most cost-effective way to acquire new revenue is to convert the prospects who are already in your sales funnel. Bringing net new prospects into your funnel and pushing them through will be more challenging during a recession and a lot more expensive. A recession may force some marketers to be tighter about their return on ad spend (ROAS) metrics. Proactive marketers, however, may go the other way – they will try to convert the prospects that are already in the funnel at all costs. To do this, granular audience segmentation is, once again, important. Executing sequential retargeting campaigns and developing look-alike models from high value customer segments or recent converters are great ways to convert prospects into paying customers.

Stick With It

While companies will want to tighten their budgets as economic uncertainty continues, your marketing budget is one area you may want to avoid cutting. One of the byproducts of effective marketing and advertising is top-line revenue growth. Businesses will need to do all they can to grow revenue during these uncertain times. Cutting marketing budget may do more harm than good to achieve revenue growth.

Related: How a Programmatic Ad Campaign is Optimized & Measured

Instead, you may need to recalibrate where and how you invest your marketing and advertising dollars. Focus on digital channels and devices where your audience lives. Programmatic, paid search, and paid social advertising helps you leverage data to improve audience targeting and reduce media waste. Digital advertising channels also help marketers measure results and “defend” these marketing investments during times when marketing budgets may be under scrutiny. Start by engaging and retargeting prospects already in your funnel and attempt to convert them at all costs.

But most importantly of all, don't give up.

Contact us if you want to learn more about how your brand can take advantage digital advertising opportunities during a recession. PrograMetrix offers comprehensive digital advertising services that can help you achieve your goals regardless of the status of the economy. We encourage you to schedule a free consultation with our team today.

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Our marketing department operates the PrograMetrix blog and is comprised of multiple contributors.