95% of businesses fear recession, with likely marketing budget cuts
As central banks around the world raise interest rates in an effort to curb inflation, many businesses fear an impending recession.
But as they seek to insulate themselves from the worst effects of a possible recession, it is clear that many have not learned from the past and will cut their sales and marketing budgets.
These are the main results of the last International trade barometer Sapio Research report. Entitled “Wave 6: Preparing for a recession? the report shows that around 95% of businesses worldwide are worried about a possible recession. These concerns, however, are not evenly distributed. In the United States, 45% of companies are very concerned about a recession, compared to only 11% in Germany.
Just over a fifth of companies (22%), meanwhile, are already affected by the current economic uncertainty. Again, these effects are not evenly distributed. Japan and the United States are faring less well, with 28% of companies in these countries already feeling the pinch. Globally, the percentage of companies affected is expected to reach 42% by the end of the year.
Research also shows, however, that the answers to any recession are likely to be as wrong as they have been in the past.
“While many companies say their primary mitigation strategy will be to ramp up sales and marketing, most are still likely to bite the hand that feeds them,” said Jane Hales, managing partner at Sapio Research. “The greatest proportion of potential layoffs are expected to be in critical areas such as sales and communications.”
Additionally, half of companies plan to reduce discretionary marketing spend (such as PR, events, advertising, and sponsorship) over the next 12 months. Currently, only 6% of companies are reducing their marketing budgets.
With world leaders in advertising recently gathering in Cannes for the annual Cannes Lions International Festival of Creativity, this is unlikely to be good news. Neither is the fact that many business leaders question the effectiveness of advertising as a channel of influence.
“Globally, social media and paid social media are significantly more popular marketing channels for driving retention and driving growth than advertising, especially in the United States,” Hales said. “The UK is the only country that values both channels equally.”
At least some business leaders, however, view any potential recession as an opportunity. In the United States, for example, around 37% plan to use it and the promise of a more captive audience as an opportunity and plan to increase their marketing spend.
“Companies that cut marketing budgets due to the recession not only make it harder to retain customers, but also to bring new and existing customers back once economic growth returns,” Hales added. “They also leave themselves more vulnerable to a public relations crisis that puts the organization at risk, which 41% of U.S. organizations experienced post-COVID-19. It would be a shame if they chose to forgo the lessons learned during the pandemic and put themselves in harm’s way again.
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