A recession is looming here in the UK. And with a recession comes uncertainty for your clients, and for your own digital marketing agency.
But understanding how a recession affects digital advertising and your clients business, will help you to no just survive in a recession. But how your digital marketing agency can grow during a recession.
Because being the best prepared and most resilient agency, means that you’ll be the ones coming out the other side, ready to take advantage of the economic boom.
With a recession comes a reduction in spending by consumers. This in turn leads to a reduction in spending by brands and clients on advertising efforts. After all, spending on advertising is an easy way to cut costs and recoup some of these losses in the short term.
We’ve already seen the first signs in a report from VAB, which reported on a slowdown in the growth of ad spending in the US. Ad spending growth rates of 20% in 2021, decelerating to 12% in 2022, and a predicted slow down to 5% in 2023.
But is reducing ad spend (and spending on digital agencies) the best thing for businesses? Statistics say, no.
The findings from IPA’s “Advertising in a downturn” seminar showed that cutting advertising budgets is a profitable short-term strategy. But long-term, it can cause massive damage to a brand in the form of lost market share to competitors.
As a digital marketing agency during a recession and the experts in the situation, it’s your job to convey to clients why a change in advertising strategy, tone or even a slight rebranding is what is required. Not a stop altogether.
At the height of COVID lockdowns, the digital marketers who adapted the tones of their adverts are the ones who experienced new customer growth for their clients.
In response to the coronavirus pandemic, Visa adapted its Olympics and NFL ad sponsorship. It ran PSA-style videos featuring prominent Olympic athletes, and a 30-second advert showing NFL stars showing jersey’s advertising their favourite local small businesses. The results? An increase of 99% in organic traffic to the Visa website from April – June in 2020, compared to 2019.
This is just one example of how brands were forced to adapt to huge socio-economic changes. When small businesses were struggling in the face of uncertainty of the pandemic, Visa did what they could to support and put out a message that supported these small businesses.
When other brands were more cautious with ad spending, Visa adapted. And they came out of the recession with significantly higher traffic than they went in.
A recession also creates an opportunity for digital agencies to offer alternative services to their clients. When short-term sales become less profitable, digital services with long-term and delayed impacts like SEO can be an attractive alternative to sell to clients: Where spending now will result in higher sales further down the line when the recession ends and consumers begin spending again.
When consumer wallets tighten for a lot of brands the first instinct is to reduce ad spend and reduce risk. Which is where you come in. Because the best course of action for brands isn’t to reduce ad spending, but to change their advertising strategy and target goals. It’s your job to help clients understand that while a recession offers its own challenges, there are also opportunities.
Short-term sales generally see a fall in the face of economic difficulty: Which makes a recession the time for brands to focus on long-term sales growth with increased brand building. And with this fall in ad-spend by business, comes a reduction in the cost of ads. According to research by the Harvard Business Review into previous recessions and economic downturns, the businesses that
“were able to increase share of voice by maintaining or increasing their advertising spending captured market share from weaker rivals. What’s more, they did it at a lower cost than when times were good.”
Statistics show that maintaining or even increasing ad spend through the recession will benefit businesses in the long-term. And not only that, the cost of running ads becomes cheaper for clients.
Research from Sidecar 2021 Benchmarks Report showed that costs fell steeply for PPC advertising during the start of the coronavirus pandemic; for both search and social advertising.
For Amazon we can see a significant decrease in the cost of CPC advertising. In times of uncertainty, it’s not unsurprising to see less advertising on a platform that is focused on spending.
But on a platform where branding is possible, we see CPC prices recovering quickly from pandemic levels.
The digital agencies who noticed the opportunity that the recession represented profited. In CPC advertising, they could get in first, and snap up the market share of keywords they were bidding for. And they did it at reduced cost.
So not only should your clients avoid reducing their spending on advertising efforts, a recession creates an opportunity to potentially expand their efforts.
During a recession, hiring efforts are usually the first thing to go. It’s a knee jerk reaction by managers and senior members of staff. But reducing your hiring efforts can have long-term detrimental effects on your business.
Digital Agencies are already struggling to hire, with more open opportunities than digital marketers to fill them. And your competitors will be ready and waiting to snap up the available talent that could have been yours.
But when your agency doesn’t have the available funds to offer the highest salaries, there are other ways you can attract the best digital talent. And it’s all about knowing what the people want.
One way is to offer benefits that employees would consider instead of a higher salary.
One of the most important things to the candidates we work with is flexible, hybrid or remote working. Opening your agency up to the option of remote workers opens yourself up to entire new talent pools. And it also means you can offer lower salaries to those who live in and work remotely from lower cost-of-living areas.
Owl Labs 2022 ‘State of Remote Work’ report shows that over half (52%) of employees would consider taking a pay cut to have greater flexibility in where they work.
In fact, salary was only the second most important factor to candidates according to Major Players 2022 Salary Survey. Their findings show that work/ life balance was the most important factor to a digital marketer considering a career move. And given how the lines between work and home blurred during the pandemic, this isn’t a surprise.
So when you can’t offer a market beating salary, what can you offer? You can offer flexibility on which clients your team gets to work on. You can focus on company culture by hosting more company events. Or recognising that your employees will also be struggling with a recession and offer support where you can. Take steps to help your team with their work/life balance. Offer detailed career and progression plans.
Because these are all the things that tempt your team away. Which means they can be used to make them want to stay.
These are just a few examples of the different ways in which you can continue to hire through a recession. As well as how you can retain the current staff you do have. Because the last thing you want is to be spending all your time and money on replacing a burnt-out team.
It’s all well and good understanding that you need to maintain hiring efforts during a recession. But if you’re looking for more advice on how to hire effectively, you can read our full guide on attracting and retaining talent here.
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