In a Soft Market, the Need for Public Relations Strategy Remains Firm

Eileen Petridis   |     October 29, 2024

When the economy sours, or even when recession rumors are afloat, marketing and public relations are among the first budget items on the chopping block. However, what seems like discretionary or luxury spending really isn’t.

It is the backbone of your company’s future.

History proves this point

The value of keeping a strong marketing investment, despite economic downturns, has been demonstrated time and time again, according to Michael Benedek, Forbes Technology Council member, in his article Why To Invest in Your Brand During Times of Economic Uncertainty. “History shows that businesses that continue to invest in their brands can come out stronger after these down cycles, but many companies have a tendency to cut marketing budgets when the economy starts exhibiting cloudy forecasts,” he writes.

Benedek goes on to highlight a great case study of a brand that expanded its marketing budget during a major economic contraction and has since realized long-term success. It was during the Great Depression when the war of cereal brands loomed large.

Post, the undisputed market leader at the time, chose to make major marketing cuts. Kellogg’s, on the other hand, eager to leverage any opportunity to get a leg up on its larger competitor, doubled its advertising budget. This seemingly irrational decision led to a 30% increase in profits for the company.

But the financial rewards didn’t stop there. As recently reported by Bakery and Snacks, Kellogg’s continues to lead the pack today with a 30.01% market share, followed closely by General Mills with 29.85%. Post Holdings follows with a much lower 18.95%.

Groupon represents a much more recent marketing and PR case study after successfully navigating the 2008 financial crisis. At a time when many brands were cutting back their marketing budgets and marketing tactics, Groupon went in the other direction, heavily increasing its marketing spend and growing to serve more than 300 different markets during this time. This contrary approach allowed Groupon to boast a $500 million profit despite the recession.

Market Research agrees

What Happens When Brands Stop Advertising?, a research report from the Ehrenberg-Bass Institute for Marketing Science, echoed a similar theme. The study explains that “The sales of a brand are like the height at which an airplane flies. Marketing spend is like its engines: while the engines are running, everything is fine, but when the engines stop, the descent eventually starts. Sales start declining after marketing stops.”

Specific findings include:

• When brands stop marketing for a year or more, sales often decline year-on-year following the stop (on average, sales fell 16% after one year, and 25% after two years).
• The rate of decline is fastest for brands that are already declining before marketing stops.
• Brand size also matters. Small brands typically suffer greater declines than bigger brands.
• Bigger growing brands tend to continue to expand after marketing stops for one to two years, whereas the sales trend quickly reverses for small growing brands.

The takeaway message is that economic downturns will come and go, but your brand should be eternal. However, it can’t stay afloat on its own forever.

Even research mega-leader McKinsey, in its June 2023 report titled Beyond Belt-Tightening: How Marketing Can Drive Resiliency in Uncertain Times, reflected a similar ideology that cutting marketing expenses is a short-sighted approach. Successful companies invest for long-term growth, the report concluded.

If you must cut, make PR strategy the last cut

Bill Gates is rumored to have said that if he was down to his last dollar, he would spend it on PR. Why?  Because, like many great business leaders, Gates recognized the value of investing to maintain the trust of key stakeholders and customers, especially during rough times.

PR is one of the most budget-friendly, cost-efficient tactics to keep your brand in the spotlight, regardless of the economic environment, it’s long been touted. Perhaps that’s why the recent IPA Bellweather Survey (reported in the April 2024 issue of PR Week ) projected that main media advertising would be down by -0.7 in 2024, while PR spending would actually increase, albeit modestly at 0.6. It was the third consecutive quarter that PR was projected to increase.

Our own agency has the makings of a case study to support the idea that, when market projections take a dive, savvy businesses ride the tide of PR. It was during the Great Recession of 2008-2009, the worst economic downturn in the U.S. since the Great Depression, that our agency experienced the greatest organic growth in its nearly 35-year history—effectively proving that PR is a critical component in an organization’s marketing mix even during low times.

Benefits of staying the Course

On the surface, it may seem counter-intuitive to spend the same or even more on PR and overall marketing when everything else is pointing downward—especially if others in your market segment are pulling back.

The concept of mob mentality can be appropriately applied in this situation. Those in positions of budget-making (or cutting) authority read the scary headlines, they listen to the doomsayers in their trade groups, and they see their competitors going down the path of cutbacks. So, naturally, they think that’s the right direction and they follow in their footsteps, whether history and basic math support this flawed thinking or not.

The reality is there are many advantages to upping your marketing investment and changing the ratio of your spending to favor PR during a downturn:

• A chance to be heard above the roar. When your competition isn’t out in the market making lots of noise about its strengths, customers and prospects are more likely to see and hear about what you have to offer. And if your PR efforts result in some high-profile earned media placements, you’ll likely see a boost in your search ranking, making your business even easier to find.
• An opportunity to increase awareness for your brand and your offer. The old adage “out of sight out of mind” is so true when it comes to marketing. If others are pulling back and you’re staying active on myriad marketing channels, your brand remains top-of-mind.
• More efficient spending. You’ll likely find a lot more deals and discounts from your media partners during times when there is less demand for media space.
• A perceived position of leadership. If you simply follow the pack, you’re not seen as a leader. But if you act boldly and form your own distinctive path, audiences are likely to notice. This is a great time for you to showcase your thought leadership and subject expertise through paid social posts, advertorials, sponsored content, blogs, and the like.

Don’t forget to flex

It’s important to remember that, in times of uncertainty, it’s not just about spending more but spending more wisely. This may dictate a change in marketing and public relations strategy to truly leverage the opportunity to stand apart from the competition.

What changes make the biggest impact?

• A change in tactics. Carefully consider where and how you’re spending your marketing and communications dollars. PR, as previously stated, is a great way to stretch budget dollars and gain considerable credibility for your brand. Now might be a great time to augment your marketing portfolio with a proactive PR campaign.
• A change in timelines. With market conditions changing so quickly, you might benefit from switching to quarterly planning vs. annual planning to efficiently adapt to evolving opportunities and challenges. Perhaps migrate more budgets to programmatic and digital advertising where the cost to develop creative is low, along with the time to deploy it.
• A change in messaging. Customer loyalty is easier to create and build if you demonstrate that you really care about your customers and are there to help them. So if you know the economy is squeezing your customers and prospects financially, you should consider shifting your focus to products and services that make it easier for people to stay at home for dinner and entertainment, rather than spending more money to go out. Another recommendation is to launch a frequent buyer or loyalty discount program that provides financial savings for customers who demonstrate brand loyalty.

Yes, the economic forecast may be uncertain, but you can be certain you’re spending your marketing and PR dollars wisely and helping your company grow by paying attention to history and learning from other companies’ mistakes.