Should B2B marketers change their strategies during a recession? Does a recession always mean marketers have to work even harder to find ways to do more with less? Can a recession create opportunity for smart marketers to grow and thrive? These are some of the topics I recently explored on a panel at the SMX Advanced conference in Seattle.
Are we in a recession?
First off, let me explain I do not think we’re in a recession in the US — yet. A recession requires two quarters of negative growth in GDP, and Q4 last year saw 0.6% growth while preliminary numbers for Q1 this year were 0.9% growth (Bureau of Economic Statistics).
So we may not yet be in a recession, but times are growing increasingly difficult for consumers. The subprime mess is real, exorbitant energy and food costs are cutting into discretionary spending, and the weakening dollar is importing inflation to our economy. According to How I Spent My Stimulus, the $152 billion stimulus package is going primarily to reduce consumer debt or to pay for higher gas and food costs, i.e. it is not going to stimulate incremental spending.
What this means is that we are in the worst possible non-recession. Prior downturns avoided becoming a (global) recession because of the resilient American consumer. This time, it looks like we won’t have that saving grace — meaning things may still get worse before they get better.
What does this mean for B2B marketing and advertising?
Fewer consumers means less demand; less demand means that efforts to stimulate demand (i.e. marketing) are less effective overall. Put simply, when people buy less, advertisers spend less. According to research firm Veronis Suhler Stevenson, US advertising dropped 9% in the 2001 recession while Internet advertising fell a whopping 27%. I should point out that this slowdown applies to business-to-business marketers as well because of second- and higher-order effects, i.e. as consumer spending drops, the businesses that sell to those consumers reduce their spending as well.
However, these overall numbers hide two important facts:
- Branding and other forms of push marketing drop in a slowdown, while direct marketing tends to rise. When budgets are cut, the channels with the least ability to measure marketing ROI are cut especially hard as companies shift spending to more measurable channels. Investment bank Cowen and Company looked at the last six recessions since 1950 and found that spending on direct marketing actually grew during six recessions.
- This time is different for online marketing. In the 2001 recession, online marketing was still unproven and got caught in the downward collapse of the Internet in general. Today, the trend to shift advertising dollars to measurable online channels is proven and won’t disappear anytime soon. So online marketing won’t crater like last time, but it also isn’t immune from a slowdown. In fact, eMarketer recently reduced its 2008 estimate for US online advertising to $25.8 billion. That is a 7% reduction from their prior estimate — showing the impact of the downturn — but it’s important to note that it is still 23% higher than 2007’s total. In other words, the recession may slow down the growth of online marketing, but it’s still growing at a significant pace.
What this means is that a recession will accelerate the decline of interruption-based mass advertising that simply shouts your message to customer. In its place we will see increased growth in measurable and relationship-based strategies such as search marketing, email marketing, lead nurturing, and online communities.
A downturn can also create opportunity for the companies that are more efficient at turning marketing investments into revenue, since there will be less competition overall. In a study of U.S. recessions, McGraw-Hill Research found that business-to-business firms that maintained or increased advertising expenditures during the 1981-1982 recession averaged significantly higher sales growth than those that eliminated or decreased advertising. In fact, by 1985 companies that were aggressive recession advertisers grew their revenue over 2.5X faster than those that reduced their advertising.
Seven strategies for B2B marketing during a slowdown
Given these macro economic trends, how should you allocate your marketing budget — and time? Here is my definitive guide to B2B marketing during a downturn:
1. Use lead management to maximize the value of each lead. In a recession, risk-adverse buyers take even longer than normal to research potential purchases. When you first identify a new prospect (regardless of whether they downloaded a whitepaper, stopped by your booth at a tradeshow, or signed up for a free trial) they are more likely than not still in the awareness or research stage and are not yet ready to engage with one of your sales reps. What this means is you need lead scoring to identify which leads are highly engaged, and lead nurturing to develop relationships with qualified prospects who are not yet ready to engage with sales. Without these capabilities, as many as 95% of qualified prospects who are not yet sales-ready never end up turning into a sales opportunity. These prospects are valuable corporate assets that you worked hard to acquire — so in a down economy you need to do everything possible to maximize value from them. Implementing even a simple automated lead nurturing program can yield a 4-fold improvement in the conversion of qualified prospects into sales opportunities over time. That’s a dramatic improvement marketing return on investment! Net-net: Companies that can do a better job of managing leads and developing early-stage prospects into sales ready leads will be in the best position to thrive in a downturn.
2. Focus on your house list. In a recession, you may have less money to spend on acquiring new customers. The solution is simple: spend more time marketing to (and building relationships with) the people you already know. Some activities that can help you get the most out of your existing relationships include lead nurturing campaigns, creating new content to offer to existing prospects, and cleaning and augmenting your marketing lead database with progressive profiling.
3. Build and optimize landing pages. When times are tough, it’s more important than ever to maximize the return on your advertising. Whether you are using Google AdWords, banners, sponsorships, or email campaigns, a dedicated landing page is the single most effective way to turn a click into a prospect. MarketingSherpa’s Landing Page Handbook shows that relevant landing page can easily double conversions versus sending clicks to the home page, and testing your pages can increase conversions by another 48% or more. Together, these tactics alone can result in 2.5X more leads for every dollar you spend, something that’s sure to look good in tough times. However, MarketingSherpa also reports that most companies are under-using this important technique: just 44% of clicks for B2B companies are directed to the home page, not a special landing page, and of B2B companies that use landing pages, 62% have six or fewer total pages. A recession is perhaps the best time to focus on some of these basics.
4. Content for later in the buying cycle. When buying slows down, you need to focus more than ever on making sure you are finding the prospects who are actually ready to buy — or even better, make sure they are finding you. One great way to do this is to focus your offers on content that will appeal to someone who’s actually looking for a solution (as opposed to thought leadership and best practices content, which can appeal to prospects who may one day have a need but are not currently looking). Examples of this kind of content can include “Top 5 Questions to Ask a Potential Vendor” whitepapers; buyers guides and checklists; analyst evaluations; and so on.
5. Appeal to the nervous buyer. A recession can mean more risk-adverse buyers, which may lead to a tendency to go with “safe” solutions. This is fine for large established companies, but it means younger companies need to do more than ever to reassure and build trust. Tactically, this means including customer references, reviews, expert opinions, awards, and other validation as part of your marketing. Strategically, a recession means fewer risk takers and visionaries, so take a lesson from Geoffrey Moore’s Crossing the Chasm and use methods that appeal to mainstream pragmatists: industry-specific marketing tactics and solutions; vertical customer references; relevant partnerships and alliances; and whole product marketing.
6. Align sales and marketing. Today’s prospects start their buying process by interacting with marketing and online channels long before they ever speak with a sales representative. This means companies must integrate marketing and sales efforts to create a single revenue pipeline. The old days of functional silos and poor communication between the two departments must end. A tougher selling environment, driven by a recession, means this is more true than ever.
7. Don’t be a cost center. Most executives today think that Sales delivers revenue and Marketing is a cost center. Marketers are partly to blame for part of this mindset, since when we use metrics such as “cost per lead” we frame the discussion in terms of costs, not in terms of impact on revenue. More subtly, using language like “marketing spending” and “marketing budget” instead of “marketing investment” perpetuates these beliefs. In a recession, marketing needs more than ever to change these perceptions. This means that marketing investments must be justified with a rigorous business case and should be amortized over the entire “useful life” of the investment. And it means marketing must increase marketing accountability by demonstrating the impact of each marketing activity on pipeline and revenue. Of course, this is easier said than done, but that doesn’t mean you shouldn’t try. Even small steps, like reports that show the total opportunity value for each lead source or campaign, can make a big impact.
Even if we aren’t in a recession, we are in for some tough economic times — and an economic slowdown means a tendency to scale back marketing spending. However, research shows that a downturn creates opportunity to accelerate growth faster than your competitors. This means it may be the best time to step up your marketing — at least in quality if not quantity. The marketers that focus on getting the most out of every dollar spent and on demonstrating marketing’s impact on revenue and pipeline will be well positioned to come out of the slump looking like a star.