While lowering the cost to human life remains of utmost importance during the COVID-19 outbreak, the virus is also fiercely impacting businesses across the globe. In the United States 17 million people, 10% of the workforce, filed for unemployment in a three-week period, and the OECD projects world GDP growth will fall to 2.4% in 2020.
Lacking the deep pockets and credit lines that more established corporations can fall back on during times of economic disruption, the startup community will surely be jarred by the rocky economic road ahead.
While taking stock of company assets and liabilities, founders may be inclined to drastically decrease marketing spend, reactionarily pivot their core marketing strategies, or cut out their marketing initiatives entirely. This would be a mistake.
Companies would be wise to stick to long-term marketing strategies that work. Remaining consistent, and making small adaptations to long-term marketing strategy is no easy task, however.
Here are three areas entrepreneurs should consider in their efforts to remain true to their brands and come out stronger on the other side of this crisis.
“Use a scalpel not a sledgehammer” on your long-term marketing budget
Rand Fishkin, founder of inbound-marketing software firm Moz and market research startup SparkToro, recently tweeted: “Have to make marketing cuts? Don’t use a sledgehammer, use a scalpel. Otherwise you could cut revenue-generating channels and spend… Revenue that’s saving people’s jobs.”
Mr. Fishkin’s statement makes sense. Startups should analyze all of their marketing channels and the performance levels of each to make informed decisions about which long-term marketing strategies will continue to work during a recession, and which can be scaled back or re-tooled.
Companies that lower advertising budgets — or eliminate them altogether — during a recession put themselves at risk when economic uncertainty subsides.
An analysis using data from the Profit Impact of Market Strategies (PIMS) database, a comprehensive, long-term study of strategic business units (SBUs) in thousands of companies, showed that businesses that lowered ad spend during a recession saw “sales and income fall by 20-30% over the next two years as a result,” according to AdWeek.
On the contrary, John Quelch, Dean of the Miami Herbert Business School at the University of Miami and Katherine E. Jocz, former VP of Research Operations at the Marketing Science Institute, found that increases in marketing spend by businesses during recessions have “boosted financial performance throughout the year following the recession.” Furthermore, analysis of the PIMS database by marketing experts Alexander L. Biel and Stephen King found that businesses which increased ad spend during a recession increased their market share as the recession subsided.
Startups with low access to capital may find it more difficult to aggressively market during an economic slump, but by remaining calm and analyzing channels that provide positive ROI for the company, founders can better direct resources.
For startups with little-to-no marketing budget, there are other options to cut costs including partnering with a non-competing brand in a separate product category that targets the same consumer segment as your company to share advertising costs, and internal content creation on your own website’s blog.
There are also funding options via accelerators such as Y Combinator and 500 Startups, in addition to competitions with potential investors such as the SXSW Pitch in 2021 or Tech5, organized by Adyen and TNW. If your company is performing well in the downturn, be sure to communicate that to investors too.
Original article here.