With 95% of businesses fearing a recession, the marketing budget is likely to be low

As global central banks raise interest rates to stem inflation, many businesses are fearing an impending recession.

But since they want to protect themselves from the worst effects of a potential recession, it is clear that many have not learned from the past and will cut sales and marketing budgets.

They are the title of Sapio Research’s latest International Business Barometer Report. ‘Wave 6: Preparing for a Recession?’ As the headline suggests, the report shows that about 95% of the world’s businesses are concerned about a potential recession. However, these concerns do not spread evenly. In the United States, 45% are extremely concerned about the business recession, compared to just 11% in Germany.

More than one-fifth (22%) of businesses, meanwhile, are being affected by the current economic uncertainty. Again, these effects do not spread evenly. The situation is getting worse in Japan and the United States, with 28% of businesses in those countries already feeling the pinch. Globally, the percentage of loss-making companies is expected to increase to 42% by the end of the year.

The study also shows, however, that the reactions to any recession can be as perverse as in the past.

Jane Hales, managing partner at Sapio Research, said, “While many companies say their top mitigation strategies will boost sales and marketing activities, most still can bite their feeding hand. “The highest proportion of potential redundancies will be created in key areas such as sales and communications.”

In addition, half of the business expects to cut discretionary marketing costs (such as PR, events, advertising and sponsorship) over the next 12 months. Currently, only 6% of companies are cutting marketing budgets.

While world advertising leaders have recently gathered in Cannes for the annual Cannes Lions International Festival of Creativity, this can hardly be welcome news. Not that many business leaders question the effectiveness of advertising as an influential channel.

“Globally, social media and paid social media are significantly more valuable marketing channels for retention and drive growth, especially in the United States, than advertising.” “The UK is the only country that values ​​the two channels equally.”

At least some business leaders, however, see the potential recession as an opportunity. In the United States, for example, some 37% plan to use it and promise more captive viewers as an opportunity and plan to increase their marketing spending.

“The downturn in companies that reduce their marketing budgets not only makes it harder to retain customers but also makes it harder to bring back new and existing customers as economic growth returns,” Hales added. “They also weaken themselves in the face of a PR crisis that puts the company at risk, something that 41% of U.S. companies felt after Covid-19. It would be a shame if they abandoned the lessons learned during the epidemic and put themselves at risk again.

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