Harvard Business Review: Don’t Cut Your Marketing Budget in a Recession

In the face of economic downturns, the instinct for some companies is to slash marketing budgets. While this move might seem prudent, it has been historically proven to be a tactical misstep.

Harvard Business Review’s 2020 report, “Don’t Cut Your Marketing Budget in a Recession,” by Nirmalya Kumar and Koen Pauwels, found that during past recessions, companies that maintained or increased their marketing spend not only achieved stability, but actually saw growth.?

A critical point emerged: the risk of falling behind during quieter markets—when every customer's attention becomes more valuable—should be the real concern for businesses today.

Innovation and Timing

Innovation doesn’t wait for economic recovery. Data shows that companies launching new products during downturns benefit from the reduced noise in the marketplace, thus capturing more attention and higher sales.?

Products launched during recessions have also demonstrated higher survival rates and long-term profitability due to greater consumer attention. The timing of these launches is crucial, with the greatest success coming from companies targeting the mid-point of a recession when consumer sentiment begins to improve, yet competition remains low.

The Emotional Connect in Tough Times

Emotional marketing becomes pivotal during economic recessions. From B2B to B2C, brands that effectively communicate during downturns don’t just sell products; they sell trust.?

For example, Coca-Cola’s campaigns during lackluster economies have often leveraged themes of hope and resilience, which resonates deeply with audiences and reinforces brand loyalty. Similarly, during the COVID-19 pandemic, companies like Singapore Airlines repurposed their marketing to highlight community assistance, thereby building stronger customer connections and brand presence.

Strategic Reallocations: A Smarter Way to Spend

Maintaining a marketing budget during a recession is not about continuing with business as usual, but about allocating funds with precision. It's essential to adapt strategies to the changing consumer landscape as well.?

Research suggests reallocating budgets towards digital marketing can yield higher ROI, as online consumption of information increases during recessions (Nielsen Reports’ “Navigating the New Era of Media: How to Maximize Digital Marketing Effectiveness”). This strategic shift ensures that businesses not only maintain visibility but also enhance their engagement in a cost-effective manner.

The Real Threat

The evidence is clear: the companies that navigated recessions most successfully are those that viewed their marketing budgets not as optional expenditures, but as essential investments in their future. As competitors cut back, the opportunity to capture greater market share and build a stronger brand presence is monumental.

On the other hand, failing to seize this opportunity can result in long-term competitive disadvantages that are difficult, if not impossible, to recover from once economic conditions stabilize. The true danger in times of economic uncertainty is not the risk of spending, but the risk of becoming invisible.?

For businesses in the mortgage industry, the decision to cut marketing budgets can be particularly shortsighted. Instead, a bold, well-calibrated investment in marketing during these times can secure not just survival but a decisive competitive edge in the recovery to come.?

Should you want to discuss how to fuel your company’s growth through marketing, public relations, branding or social media, you can reach me at [email protected]. Here’s to your success!

Rosalie Berg is the President and Founder of Strategic Vantage, a leading marketing and public relations agency specializing in the mortgage and financial services industries. An award-winning executive with over two decades of experience, Rosalie is celebrated for her strategic acumen and her exceptional ability to elevate brand visibility and business growth for her clients.