1 in 3 Marketers Say the Recession Will Surpass COVID‘s Marketing Impacts: What You Need to Know
The COVID-19 pandemic was a once-in-a-century disruption that turned the marketing world upside down in 2020. Seemingly overnight, everything changed – budgets were slashed, strategies pivoted, and teams were left reeling. Two years later, as we begin to enter a "new normal," marketers are now facing the looming spectre of a recession.
In fact, our recent survey of over 500 marketing leaders found that 1 in 3 believe the impacts of a recession will be even greater than what they experienced during COVID-19. After barely catching their breath from the pandemic, marketing teams are girding themselves for another seismic shift.
So what makes this recession potentially more disruptive than the pandemic for marketers? Let‘s dive into the data and explore three key reasons why.
The Compounding Effect
For many marketing organizations, the wounds from COVID-19 are still fresh. Budgets were cut, headcounts reduced, and strategies overhauled – all while facing the most unpredictable consumer landscape in generations. Over 60% of marketers reported significant budget cuts in 2020, with an average decrease of 35-45% compared to original plans.
Fast forward to 2022 and a whopping 81% of marketing teams say they still haven‘t fully recovered to pre-pandemic spending levels. Now, with a recession looming, they‘re being asked to tighten the belt even further.
"We barely had a chance to take a breath after COVID before the next wave of cuts and layoffs started," said Allyson Witherspoon, CMO of Nissan US. "The compounding effect is stretching teams incredibly thin."
In our survey, 37% of marketers have already experienced recession-related budget cuts in 2022, with an average decrease of 20-30%. This is on top of the already reduced baseline many are working from due to the pandemic. The cumulative impact has over a third of teams reporting they now have less than 50% of their 2019 budget to work with.
Longer Duration and Slower Recovery
While the initial shock of the COVID lockdowns was severe, the impacts on marketing were relatively short-lived compared to past recessions. As the world reopened in late 2020, delayed demand and shifted budgets led to a stronger than expected rebound for many industries. Marketing spending returned to 80% of pre-pandemic levels by Q2 2021.
In contrast, most recessions see a much slower recovery and more prolonged impact. In the 2008 financial crisis, it took until 2012 for ad spending to fully rebound – a 4 year recovery compared to ~1 year for COVID. With many economists now projecting an extended downturn, marketing leaders are preparing for a long road ahead.
"In 2020, there was an assumption that things would bounce back quickly once lockdowns lifted," said Alyssa Jarrett, Director of Brand Marketing at Iterable. "This time around, there‘s a realization that we could be operating in this environment for a year or more. It‘s forcing tough decisions about what investments are truly essential."
67% of the marketers we surveyed expect the current downturn to last more than 6 months, with 18% believing it will extend beyond 18 months. As a result, more methodical and strategic cost-cutting measures are being deployed compared to the drastic but short-term pivots of 2020.
Fundamental Strategic Shifts
The overnight disruption of COVID forced marketers to throw out their playbooks and get creative. In-person events became virtual happy hours, digital ad spend was diverted to Zoom backgrounds, and content marketing became the new king as eyeballs were glued to screens. While chaotic, there was a level playing field as every company adapted to the new reality.
In a recession, the strategies deployed to weather the storm can fundamentally reshape a company‘s market position and trajectory. Brands that cut too deeply risk losing ground that may never be recovered. Those who are able to maintain or even increase investment often emerge with a stronger competitive stance.
"During the pandemic, everyone was in the same boat, figuring it out as they went," said Kristin Lemkau, CMO of JPMorgan Chase. "In a recession, strategic choices have long-term ramifications. It‘s not just about cutting, but making smart investments to come out on top."
This recession is also the first to fully impact the era of digital-first, data-driven marketing. With budgets under the microscope, proving ROI is more critical than ever. CMOs are under increased pressure to tie every dollar spent directly to revenue and growth. This means traditional brand building and awareness activities are taking a backseat to performance marketing, conversion rate optimization, and account-based marketing.
Our survey found the top recession marketing strategies being deployed are:
- Shifting more budget to digital channels with clear ROI (71%)
- Investing in marketing automation and efficiency tools (65%)
- Doubling down on existing customers vs. acquisition (60%)
- Reducing experimental budget and long-term initiatives (58%)
- Consolidating tech stack and agency partnerships (54%)
"We‘re asking every marketer to become a revenue marketer," said Witerspoon. "If it doesn‘t drive sales or retention, it‘s not a priority right now."
Finding Opportunity in the Downturn
While the challenges are daunting, the current landscape also presents opportunities for agile and strategic marketing teams. 52% of leaders believe the recession presents a chance to gain market share from less prepared competitors. In past recessions, brands like Amazon, Kellog‘s, and Toyota famously increased marketing investment to leap ahead of peers.
Companies are also using this moment to snap up top talent let go from other organizations. With layoffs climbing and the job market softening, 35% of marketing teams are actively recruiting to upgrade key roles at a discount.
There is also ample opportunity to capture new audience segments and solidify brand loyalty. As consumers tighten spending, they are more open to exploring lower cost alternatives. 57% of marketers are developing recession-specific offers and campaigns to engage newly budget-conscious buyers.
Finally, constraints breed creativity and innovation. Many teams are using this period to test new tactics and unlock efficiencies they would not have previously considered. The pandemic saw an explosion in virtual events, live-streaming, and user-generated content. This recession could see a new wave of breakthroughs born of necessity.
"Some of our most creative and effective initiatives came out of the challenges of COVID," said Jarrett. "I‘m seeing the same energy and outside-the-box thinking happening now with our recession planning. It‘s an opportunity to question assumptions and find new ways to deliver value."
The Path Ahead
Without question, marketing leaders are facing a monumental challenge in navigating this period of prolonged uncertainty. However, if the pandemic taught us anything, it‘s the resiliency and adaptability of this function. Marketers have a unique ability to understand and connect with customers, even in the toughest of times. By staying agile, data-driven, and customer-obsessed, the most strategic teams cannot only survive, but thrive.
"The next year will be incredibly difficult, but I also believe it will bring out the best in our profession," said Lemkau. "The companies that use this time to strengthen their customer relationships, prune what‘s not working, and plant seeds for the future will be the big winners. It won‘t be easy, but marketers are no stranger to tough challenges. We‘ll get through this – together."
