Does an economic slowdown necessarily mean that business-to-business marketers have to find even more ways to do more with less? Or can a downturn create opportunity for smart marketers to grow and thrive?
In this guide to B2B marketing during a recession, I answer these questions and share specific strategies you can use to shine when times are dark.
Are We in a Recession?
First of all, I should explain I do not think that the US is in a recession—yet. A recession requires two quarters of negative GDP growth, and the Bureau of Economic Statistics reported 0.6% growth for Q4 2007 while preliminary numbers for Q1 2008 show 0.9% growth.
So we may not yet be in a recession, but times are growing increasingly difficult for consumers. The subprime mess is real, rising energy and food costs are cutting into discretionary spending, and the weakened dollar is importing inflation to our economy.
According to the Web site How I Spent My Stimulus, the $152 billion stimulus package is going primarily to reduce consumer debt or pay for higher gas and food costs, not to stimulate incremental spending.
I like to say that we are in the worst possible non-recession. And, since prior downturns avoided becoming a (global) recession because of resilient spending by American consumers—a saving grace we don't have this time—things may still get worse before they get better.
What Does This Mean for Business-to-Business Marketing?
Fewer consumers means less demand; less demand means efforts to stimulate demand (i.e,. marketing) are less effective overall. In other words, when people buy less, advertisers spend less. According to research firm Veronis Suhler Stevenson, advertising in the US dropped 9% in the 2001 recession and Internet advertising specifically fell 27%.
I should point out that this slowdown applies to business-to-business marketers as well, because as consumer spending drops the businesses that sell to those consumers reduce their spending as well.
However, these macro trends 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. However, just because online marketing won't crater doesn't mean it 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 its prior estimate—but 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 customers. 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 US 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. It found, in fact, that by 1985 the companies that were aggressive recession advertisers had grown their revenue over 2.5X faster than those that had 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 are specific business-to-business strategies you can use during a downturn:
1. Use lead management to maximize the value of each lead
In a recession, risk-averse buyers take longer than normal to research potential purchases. When you first identify a new prospect (regardless of whether he/she downloaded a whitepaper, stopped by your booth at a tradeshow, or signed up for a free trial), that prospect is more likely than not still in the awareness or research stage and is not yet ready to engage with one of your sales reps.
This means that 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, and in a down economy you need to do everything possible to maximize value from them.
Implementing even simple automated lead-nurturing programs can yield a 400% improvement in the conversion of qualified prospects into sales opportunities over time. 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.