Digital Advertising During An Economic Downturn

Many brands spent the second half of 2022 in denial around inflation and how that was directly impacting their sales. Investors and C-Suite executives were quick to blame the inner workings of their marketing efforts or seasonal trends to explain the drop in average order value and lower conversion rates, but now that we’ve stepped into 2023, more brands are in the acceptance phase of the 'cost-of-living-crisis' that is reducing consumer spending. 

With inflation rates higher than they’ve been in more than 40 years, the big question marketing teams should be asking themselves is, how are we currently spending our marketing dollars, and do we really have a data-driven understanding of our profit margins, customer CaC,  lifetime value, and AOV by key customer segments? 

Mistakes You Should Avoid

The easiest thing for brands to do is cut media spend, particularly on the brand marketing side, but also on the performance media side.  It’s easily one of the largest line items in your financial expense document, but the mistake that brands are making is cutting the wrong piece of the pie. This is effectively short-term thinking, when brands need to think of their long-term strategy. Remember, downturns don’t last forever, and most are under a year.  Furthermore, 60% of brands that increased their media investment during the last recession saw ROI improvements. Alternatively marketers who cut their ad spending risk losing 15% of their revenue during a recession. 

If your business can’t afford to spend into its media, ensure that you’re not cutting investments in quality creative content and the team members who are responsible for the performance of your marketing. Lastly, don’t make the mistake of underfunding your marketing program, which can actually reduce your ROI even further. This is why understanding the true value of your customer and what it costs to acquire from the top down is a crucial component to all of this.  

According to a study by Neilson, brands should actually rethink their decision to reduce their marketing budget. Most brands are already under-spending—50% of media plans are already under-invested by a median of 50%. 

How To Find Opportunity During An Economic Downturn

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If you don’t have this in place already, invest in an omni-channel attribution tool and data analytics that can help identify the true influence of each revenue channel. This can help keep your media mix clean and lean. 

Capitalize on the decreased competition in digital ad platforms as the industry is pulling back, by investing into your industry more or maintaining your presence when media costs are cheaper to reach the same volume of people. 

Refocus energy into your brand presence and the relationship you’ve built with your current consumers. Look at ways to improve the lifetime value of your consumers, and continue to invest in organic content that keeps your brand relevant in today’s conversations. 

Don’t forget about your team. They’re the ones who keep the light on, and we all know that high turnover stifles growth and has a trickle down effect to the bottom line. 

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