As 2023 draws closer, experts increasingly discuss the high global recession risk. Global consumer confidence has already fallen significantly, and central banks worldwide keep raising interest rates to fight inflation. These are some of the primary indicators of the coming recession.
The US, Eurozone, and China – the world’s three largest economies – are all slowing down. The global economy is flashing warnings of a recession way harsher than the 2008 financial crisis, it is rather reminiscent of the turbulent 1970s marked by skyrocketing inflation and the energy crisis.
The recession is expected to affect all economies, yet such a scenario is riskier for emerging markets and developing countries.
The COVID-19 pandemic was the initial factor that paved the way for 2022’s fragile economic situation, especially hitting China’s economy. The outbreak of the war in Ukraine came after, exacerbating the situation in the energy sector, in turn, closely affecting Europe.
The business world still needs to understand the characteristics of the 2022 economic downturn to analyze possible future scenarios. This is a necessity for all industries to form their best strategies to fight the crisis.
What Does This Recession Mean for Marketing and Advertisying Services?
The marketing industry and agencies have not been severely hit by the downturn yet; however, the industry’s steps are critical to combat the falling customer confidence and increase the global supply.
According to the global mid-year advertising forecast by GroupM, advertising is still expected to grow by 8.4%, excluding US political advertising. This estimate is slightly lower than the previous forecast in December 2021. Moreover, the media budgets of marketers have been increasing in 2022, but the rate is slower than last year, especially for older marketers.
According to this picture, the industry is slowing down, but the situation isn’t entirely grave. Yet we should not forget that high inflation in consumer prices might spark the risk of recession for marketing and advertising services as well as many other industries in the near future.
To be on the safe side, it is becoming increasingly important for marketing agencies to keep their teams motivated and prepare for difficult times.
5 Strategies for Agencies
2023 might be economically challenging, but such times are known to be full of new opportunities, even if you are not a risk-taker.
Strengthen Your Financial Plan
A solid financial plan can be your first step to overcoming the recession. If you have a good sense of your budget structure, including cash flow, spending, and revenue, you are more ready for winter than your competitors.
First, you should spend your money carefully, aka, avoid taking too many risks at once. Businesses often come up with a new investment idea, thinking that they have found the holy grail to prevent decreasing profit, but they usually end up expanding their services without a solid customer base to pay for the new service.
Try to analyze the level of the risk rather than relying solely on gut feeling. This will help you focus on healthy growth.
Although you should expect a temporary decrease in revenue, you can still function well in this period, especially if you have a cash reserve for possible dark days. Lastly, it would also help if you kept your debt level under control to avoid seeing your credit score drop.
Work on Your Metrics
You already know that you need to be careful when spending money in a recession. The golden formula is to pay great attention to your metrics. You should make sure that you are getting your money’s worth from your campaigns. Keep your eyes wide open and measure your metrics carefully.
Try to implement strategies with high return on investment (ROI). Your strategy can focus on SEO, PPC, and email marketing. Whatever is essential will be determined by the specific needs of your agency.
For instance, if you use social platforms for marketing, interactions is a great metric to keep an eye on. And needless to say, it’s a good idea to rethink your website’s SEO strategy and after Google’s latest interventions, check if your SEO is working for you, not against you. A mistake would be to focus solely on the website traffic, so think of creative ways and get new customers and revenue out of it.
Implement Smart Pricing Strategies Than Cost-Cutting
Being careful with spending does not mean you should forego customer satisfaction or let all opportunities slip. Focusing only on cost-cutting will probably be a mistake, as Harvard Business Review’s research suggests: Companies that fared best through and after a recession are more likely to balance their offense and defense strategically. Be on the lookout for genuine ways to create revenue. Act out of curiosity, not fear.
One way is smart pricing. Your customers are also most probably experiencing some financial hardships. You can lend them a hand by offering personalized discounts and package deals.
Your company will most likely benefit from this strategy too. For example, you can strengthen your bonds with customers by providing pay-per-performance pricing if you have a service that has already proven its success.
Instead of waiting for doomsday and pouring your resources into the worry pit, you can act smart and put more of that effort into efficiency and productivity.
Coming up with creative pricing models will help you keep your current clients and attract new ones during and after the downturn. If you focus on providing the best output that is worth the price, you may find it even easier to keep the boat afloat.
Diversify: Your Services, Your Clients, Your Technologies
Some flexibility will surely help you protect your agency from the crisis. Pursuing new opportunities to diversify at least one area of your work is always wise. Eggs and baskets. You know the drill.
You can start by going out of your typical services and trying some neighboring sectors. For example, consider acquisition marketing if your usual focus is on retention marketing.
Another useful idea is to enter new markets for digital agencies and diversify your customer base to strengthen it. If you’re services cluster in one or two areas only, it might be a good time to up your game a little and get more services and industries under your belt. And don’t forget, luxury is a market that almost never dies. At least, not until now.
You have a tech-savvy team? Even better. Don’t be afraid of recent technologies like AI, the Metaverse, and blockchain that seem to remain on the business agenda for the foreseeable future. Focusing on those areas will give you a competitive edge if your team is into it and ready to conduct extensive market research.
Don’t jump onto the everything’s-going-to-be-horrible bandwagon, and stop doomscrolling your Twitter feed. Instead, use your energy elsewhere and connect with your audience to tell them you’re on the same ship. (Don’t actually say that, though.)
Adopting an emotional tone, rather than an aggressive one, in your campaigns would show your clients that your agency is human-driven and adaptable. Humorous content and feel-good design choices might offer some relief to your audience. And don’t confuse humorous with cynical. Cynicism was so 2000s.
We don’t suggest that you behave like nothing is happening. Instead, being real will earn you credit, which you benefit even more after these days.
You only need a relatable and humane touch to create a realistic and warmer brand image. And being real always wins.