Should businesses market or not market during the pandemic?

The world is experiencing an economic downturn as a result of the coronavirus pandemic. At this point it is uncertain how long this downturn will last, but two years appear to be the most cited figure, as it is done in this latest report. Consequently, sales in many organisations are dropping and supply lines affected.

When businesses face a situation such as this the normal response is to reduce their marketing budgets. So, when it became apparent that Covid-19 was here to stay, like clockwork, business managers started to lay off marketing staffs, reduce their working hours, or pull back their ads. This response appears quite instinctual to people – after all, aren’t they going to save money in view of decreased demand in the market? Unfortunately, this conventional wisdom is ill-advised.

During the 2008-2009 global economic recession, McKinsey published a report titled High Tech: Finding Opportunity in the Downturn that analysed performances of 700 technology companies during and after the 2000 – 2002 downturn in the US. It emerged that 47 percent of firms that entered a recession as leaders (i.e. in the top 20 percent of firms) emerged as laggards (i.e. in the bottom 80 percent). It also emerged that 13 percent of the leaders, including Cisco, HCL, and Foxconn, improved their market positioning during the recession.

The analysts observed that those firms that improved their positions tended to have increased their sales and marketing expenses during the recession and those which moved backwards tended to have cut down their marketing budgets.

While this appears counterintuitive, many studies substantiate the fact that when there is a recession organisation should avoid cutting down on sales and marketing efforts. In fact, they should do quite the opposite: cut down on other expenses and but increase marketing spending.

There are several reasons why this makes good sense. When one’s competitors have retreated into their shells, the advertising space becomes less cluttered and one’s message becomes clearer. This means one can achieve a higher than average return on marketing investment. After all, this is also the time that one can get the best deals from the advertising agencies, especially those that tend to suffer the most during recessions, namely the printed media.

Hence, whereas the pandemic uncertainties are reconfiguring market dynamics, an argument can be made that the situation should be embraced for the momentous opportunities it presents. Some firms will make gigantic leaps forward. Herein lies three motives for organisations to increase their sales and marketing efforts during a recession.

One, to maintain one’s position in the market. This was behind Safaricom’s move to offer free mobile money transfers for all transactions below Ksh1,000 when Kenya announced a coronavirus lockdown. They probably reasoned that if they were going to lose money anyway, and mostly from the low-income segment, then they should at least protect their market positioning. So, they provided an ‘offer’ that would retain their customers while simultaneously raking those good will kudos from the public! Smart.

Two, improve one’s competitive advantage. This can be observed in Zoom’s strategy of offering free videoconferencing services to schools worldwide. What Zoom targets is the hundreds of millions of students who will be introduced – and get hooked – to Zoom for years to come! With time those students will grow and become potential clients who are not comfortable with any other service but Zoom. Works like magic, huh?

Three, to introduce new products and give them traction. Kellogg’s classic example from almost a century ago is very instructive. In years preceding the Great Depression the US cereals market was dominated by Kellogg and Post. However, at the onset of the depression Post did what many do – it cut its cost and reined in its marketing expenses. Kellogg legendarily increased its marketing efforts and pushed its new product – Rice Krispies. As a result, even as the depression was deepening, Kellogg’s profits were rising. And, more importantly, Kellogg emerged from the depression as the dominant player that it has remained up to this day.

So, should organisations ignore all market realities and go gung-ho in advertising? Certainly not. It is noteworthy that even now giants such as Coca-Cola and Amazon have limited their ads spending (in the case of Amazon probably because it does not need to do much – the dynamics are in its favour now).

What organisations need to do is to think long-term – beyond the downturn: Perform a situation analysis, then formulate an appropriate strategy with recovery or growth in mind. This is the point where calling on a consultant to help guide the process may be useful.

Someone once said that ‘when times are good you should advertise, when times are bad you must advertise’. That is a saying worth remembering.