Cutting budgets in a recession hurts long-term ROI

Brands that cut their marketing budgets during a recession leave themselves at a long-term disadvantage, according to research by Analytic Partners, the data and analytics consultancy.

Why it matters

Marketers are often tempted to abandon established best practices, whether that involves spending levels or brand-building strategies, in periods of fiscal stress. Staying the course, however, offers much greater rewards.

Courageous marketers are rewarded

Looking back to the last recession in a session held by WARC at the Cannes Lions International Festival of Creativity 2022, Analytic Partners identified several insights that buttress the case for maintaining, or increasing, marketing budgets in a downturn:

• 54% of these brands saw return on investment (ROI) improve;
• 60% of marketers that raised their outlay realized a better ROI;
• 52% of brands recorded an ROI uptick over a two-year window.

Increased media spend pays off

Turning to media spend, the firm’s analysis showed:

• brands that boosted their investment logged a 17% expansion in incremental sales;
• on average, brands that cut back witnessed an 18% contraction on this measure;
• two-thirds of losses in incremental sales resulted from lower investment, not a drop in ROI.