The high global recession risk is becoming increasingly prominent as 2023 approaches. As a result of the recent decline in consumer confidence, central banks worldwide have continued to raise interest rates. A recession is likely to occur due to some of these indicators.
The world’s largest economies – the United States, the Eurozone, and China – are experiencing a slowdown. Global economic indicators are warning of a recession far worse than the financial crisis of 2008, somewhat reminiscent of the turbulent 1970s marked by skyrocketing inflation and an energy crisis.
Even though the recession will affect all economies, it will likely be more severe in emerging markets and developing nations.
In 2022, the COVID-19 pandemic contributed to the fragile economic situation, particularly in China. After the outbreak of the war in Ukraine, the condition in the energy sector deteriorated, which had a direct impact on Europe.
To analyze possible future scenarios, the business world still needs to understand the characteristics of the economic downturn of 2022. To combat the crisis, all industries must develop their best strategies.
How does this Recession Affect Marketing and Advertising Services?
Although the marketing industry and its agencies have not been severely affected by the downturn, the industry’s actions are critical to combating declining customer confidence and enhancing global supply.
Under GroupM’s mid-year advertising forecast, advertising will continue to grow by 8.4%, excluding US political advertising. This estimate is slightly lower compared to the previous forecast in December 2021. In addition, marketing budgets increased in 2022, but at a slower rate than in 2021, especially for older marketers.
As seen from this graph, the industry is slowing down, but the situation is not entirely dire. However, we should not forget that high inflation in consumer prices could spark a recession in the near future for marketing and advertising services and many other sectors.
A marketing agency must prepare for difficult times and keep its staff motivated to be on the safe side.
A Five-step Strategy for Agencies
The year 2023 may be economically challenging, but such times are full of opportunities, even if you are not a risk-taker.
Develop a Strong Financial Plan
The first step to overcoming the recession is to create a solid financial plan. Understanding your budget structure, including cash flow, spending, and revenue, will help you prepare for winter.
As a first step, you should spend your money carefully, i.e., avoid taking too many risks at once. In many cases, companies come up with new investment ideas, believing they have found the holy grail of preventing decreasing profits. Still, they usually expand their services without a solid customer base to support them.
Rather than relying solely on gut instinct, try to analyze the level of risk. By doing so, you will be able to concentrate on healthy growth.
Despite temporary decreases in revenue, you can still function satisfactorily during this period, especially if you keep a cash reserve for possible dark days. Last, it would help if you kept your debt levels in check to avoid a drop in your credit score.
Get your Metrics in Order
In a recession, you need to be careful with your spending. You should pay close attention to your metrics to achieve success. Make sure your campaigns are delivering a return on your investment. Observe your metrics and keep your eyes wide open.
Invest in strategies that will produce high returns on investment (ROI). Depending on your needs, you might choose SEO, PPC, or email marketing as your marketing strategy. It is up to you to decide what is essential according to your agency’s specific needs.
For example, if you use social platforms for marketing, interaction is a great metric to monitor. In light of Google’s latest intervention, it’s a good idea to rethink your website’s SEO strategy and ensure it’s working for you, not against you. If you focused solely on website traffic, you would be making a mistake, so think of creative ways to get new customers and revenue.
Make Smart Pricing Decisions instead of Cutting Costs.
Budgeting doesn’t mean sacrificing customer satisfaction or letting all opportunities slip through the cracks. Harvard Business Review research suggests that focusing exclusively on cost-cutting is probably a mistake: Companies that fared best through and after a recession tended to balance offense and defense more effectively. Keep an eye out for genuine revenue-generating opportunities. Be curious, not afraid.
Innovative pricing is one way to do this. Financial hardships are also likely to be experienced by your customers. Offer them personalized discounts and package deals to help them out.
This strategy is likely to benefit your company as well. If your service has already proven successful, you may want to consider pay-per-performance pricing to strengthen your customer bonds.
Put more effort into efficiency and productivity instead of waiting for doomsday and pouring your resources into the worry pit.
Maintaining current clients and attracting new ones during and after the downturn will be easier if you develop creative pricing models. By focusing on providing quality output at an affordable price, you may be able to keep the boat afloat even more efficiently.
Provide a Wide Range of Services, Clients, and Technologies
Your agency will be protected from the crisis if you have flexibility. Diversifying your work, at least in one area, is always a good idea. It’s the same old story – there are eggs and baskets.
Trying some neighboring sectors is an excellent place to start if you are looking for something different from your typical business. If you usually focus on retention marketing, consider acquisition marketing.
For digital agencies, you can also diversify your customer base to strengthen it by entering new markets. Getting more services and industries under your belt may be a good idea if your services only concentrate on one or two areas. It would help if you didn’t forget that luxury is a market that rarely goes out of style. So far, at least.
Is your team tech-savvy? That’s even better. Despite recent developments in AI, the Metaverse, and blockchain, don’t be scared of these technologies. You will gain a competitive advantage if your team is enthusiastic about these areas and ready to conduct extensive market research.
Relate to your Audience
Stop room-scrolling your Twitter feed and jump off the bandwagon that everything will be horrible. It would help if you instead direct your energy towards connecting with your audience and telling them you’re all in this together.
A human-driven and flexible agency would show its clients it is human-powered and adaptable by adopting an emotional tone rather than an aggressive one. Providing your audience with humorous content and feel-good design choices may provide some relief. Keep in mind that humor isn’t the same as cynicism. There was a time when cynicism was in vogue.
You are behaving as if nothing is happening is not what we recommend. Instead, be accurate, and you will earn credit, which will benefit you even more.
You only need a relatable and humane touch to create a realistic and warmer brand image. Realness always wins.