Over the past couple of weeks, we have kept an eye on what the recent events will bring, as uncertainty in Sri Lanka is far beyond predictable. With fuel shortages, creative professionals are presented with lesser options to travel, gather, and create content. The power cuts leave them with interruptions to the creative process and lesser sources for creative inspiration.
Besides, given the uncertainty of the crisis and the need for brands to remain tone-sensitive, campaigns have been cut short while brands try to remain present.
– Source: Institute for Health Policy Sri Lanka Opinion Tracker Survey
Conversely, consumer sentiment has fallen to its lowest point on record; People are anxious. It’s no wonder that by May 2022, Sri Lanka’s Index of Consumer Sentiment by the IHP: a measure of how the public views their economic situation and the wider national economy, recorded the lowest, with all indices down since March.
With most brands back against the wall, it is no surprise that some brands have chosen to cut down ad spending by half on social and paid search, let alone with some brands going completely dark (no Ad spend – mostly ATL – for over 6 months). In a recent article by Forbes, digital advertising was found to be the first to hit by a recession over other paid channels with the declining digital ad sales being the first fire alarm going off indicating an economic downturn.
But have we reached a dead end?
After spending countless hours reading through studies, research papers, and articles on how past recessions have affected the advertising industry, we are here to uncover
the unique challenges and opportunities the downturn presents, and what we can learn from them.
A fundamental change in Consumer Behaviour Patterns
This is a given. During an economic downturn, consumers set strict priorities to reduce spending. The waves of bad economic news gradually wear off consumer confidence and buying power, driving consumers to adjust their behavior in fundamental ways.
As the economic crisis takes a toll, many Sri Lankans turned to Facebook, Whatsapp, and Twitter communities for mutual aid. Empathetic and Comforting messages that strengthen the emotional connection with the brand (for example: “We are here with you”) will be vital to put worried consumers at ease.
Still, the loyal customers are by far the most dependable and “star customers” in a downturn. Because attracting new customers is difficult and even more difficult in harsh times, you can at least rely on your existing customer base. These Loyal customers will help you scrape the barrel for cash and future growth.
Planning for the future is Challenging
The most successful firms are those that plan ahead of time. When times are tough, it can be difficult to see the big picture when businesses are trying to get by in the short term. But Survival will not suffice.
This is where market research will come into play. Strategies following market research that identifies patterns in consumer behavior can help determine business performance. Clever advertising alone will not guarantee sales because a new mix of realities will shape the future.
Budget cuts: a bitter pill to swallow
It’s no wonder that during harsh times, businesses are less likely to take financial risks; you might find yourself re-evaluating your marketing spend and cutting down some fat. As it is far easier to trim off your communications budget than to let some of your marketing staff go. But, the real challenge is to make strategic budget cuts between the value-adding and non-value-adding, while not negatively impacting your business in the long run.
Because, the last thing you want is for budget changes to have an immediate effect on the ability to generate revenue, whether now or in the future.
On the bright side, however, one of the most effective ways to reduce potential losses is to build and maintain strong brands – ones that customers identify with and trust. It was the large brands – such as Nike, Hubspot, DollarShave Club, and Apple that stood tall with steady share prices in past recessions.
Although it may seem sensible to cut budgets to save short-term revenue, experts say the opposite. When competitors lay low with their slashed marketing budgets, opportunities exist in a less cluttered space to make a breakthrough.
Forbes quotes such famous breakthroughs in history where downturns have made way for brands to win market share.
- Automotive: during the 1973 recession, Toyota increased its ad spend at a time when everyone had dropped theirs. Toyota went on to become the top imported car maker in the US by 1976.
- Restaurants: During the 1991 recession, McDonald’s dropped its advertising budget which Pizza Hut and Taco Bell took advantage of. Pizza Hut sales grew by 61%. Taco Bell sales grew by 40%. McDonald’s sales declined by 28% to quote a few.
Visionary leaders see the silver lining in the dark cloud.
So, how are you going to roll your sleeves and take action? Tell us in the comments below.
Credits to Sources: