The global recession that has set in could be the next big disruption for brands and advertisers could face who has just begun to settle into a post-COVID marketing rhythm. With the prediction of 60% of economists for the recession to be confined to the Eurozone, and a projected global growth rate of 2.9% decline from 4.6% at the start of the year – an economic slowdown seems imminent.
As consumers adjust their spending to acclimatize to inflation and higher interest rates, many advertisers and brands are following suit. According to data from Nielsen, in the second quarter of 2022, the U.S. advertising marketplace shrunk by 7% in comparison to the same time last year, to signal that many marketers anticipate, or have already experienced, cuts in their budgets.
But while dialing back media may seem to be sensible for short-term budgetary concerns, marketers engaged in alleviating the impact of economic downturn and maximizing returns of their marketing budgets need to think of recovery.
Meanwhile, for marketers sensing a protracted downturn, the good news is that recessions do not last long. Historically, 75% of recessions end within a year, and only a full 30% last two quarters. Therefore, any budgetary cut will be for a short period and result in nominal savings, while hitting brands headed toward the bounce-back period that is likely just around the corner.
With brands already under-spending impacting the ROIs by a median of 50% – any additional slashing of media expenses could only result into cut ROI further, at a time when brands need to increase profits most.
In fact, slashing the budget isn’t the solution, but optimizing the media mix and pouring in money into channels that are performing well.