Brands and advertisers that have now settled in post-COVID marketing rhythms could face another major disruption this time in the form of a global recession. With 60% of economists predicting a eurozone recession and a global growth rate of just 2.9% from 4.6% at the beginning of the year, a slowdown seems inevitable.
And as consumers adjust their spending to adapt to inflation and high interest rates, many brands and advertisers are following suit. According to data from Nielsen Ad Intel, the U.S. advertising market fell 7% in the second quarter of 2022 from the same period last year, a sign that many marketers expected or had already experienced budget cuts.
However, while reducing media spending may seem reasonable for short-term budget problems, marketers should focus on mitigating the effects of the recession and maximizing the effectiveness of the marketing budget, while spending on recovery.
The recession doesn’t last forever, so do your marketing
The good news for marketers who fear a long-term recession is that many recessions don’t last long – historically 75% of recessions end within a year and 30% end only in the last two quarters. So spending cuts are short-term and are likely to lead to nominal savings, and brands are at a disadvantage around the corner heading for a bounceback period.
Given that most brands are already spending less, lowering their ROI to 50% median, further cuts in media costs can help further reduce ROI when brands need to maximize profits.
The solution is not to reduce the budget, but to optimize the media mix and invest in channels that work well. If you find the right balance, ensure that your spending is appropriately allocated to reach, efficiency, and frequency. For example, an automobile manufacturer has recently increased its reach by 26% and its exposure by more than 39% by optimizing media allocation without adjusting its budget.
