How an investment mindset could drive long-term growth for your e-commerce business.
Although stocks are at all-time highs, murmurs of a pullback and recession have been swirling since early 2022 when the economy slowed down for two consecutive quarters in a row.
Since then, the Fed has pulled out all the stops in an attempt to reduce inflation rates, and so far we’ve avoided a full-blown recession. Still, many business leaders have had to take a hard look at the bottom line over the past couple of years to decide what would be cut if things took a turn for the worse.
With signs that consumers are spending less in 2024, marketing might seem like the obvious place to cut — after all, slowed consumer spending is one of the hallmark signs of a recession, so the obvious conclusion would be that less marketing is needed.
However, recent data suggests that this is a shortsighted approach. Instead of chopping your marketing budget, leaders who adapt to economic ups and downs by flexing their approach to meet consumers where they’re at just might come out on top in the long run.
The research speaks for itself. Read on to learn how companies who continue to invest in marketing regardless of economic conditions could be building a more resilient — and sustainable — e-commerce business.
Fear of the future can lead to missed growth opportunities
In December 2022, McKinsey surveyed marketing executives of dozens of major U.S. consumer companies. These executives reported that during the previous year, on average, their boards were demanding an 8 percent reduction in marketing expenditures (some as much as 10-20%.)
There are many reasons board members might call for the cuts. Here are a few:
- Immediate Return on Investment (ROI) focus vs. Future-focused mindset
Often, the results of marketing efforts aren’t immediately visible. Therefore, when resources are tight, leaders may choose to prioritize investments with immediate returns over long-term brand-building.
- Short-term stability vs. long-term growth
During times of uncertainty, anything outside of maintenance feels risky. It might make the most sense to preserve cash and focus on maintaining your current market share and spending any more on marketing than necessary for this goal could seem like a waste.
- Perceived risk
The marketing budget might be seen as a discretionary expense. If competitors are also cutting marketing budgets, there may be less perceived risk in reducing spending to align with the market.
However, research has shown that when companies invest in marketing even during a recession, they come out on top in the end. A McGraw-Hill study during the recession of the early 1980s found that businesses that maintained or increased spending on advertising during that time saw an average sales growth of 275% in the five years that followed, while those that cut spending in that category saw an average growth of 19% over that same period.
More recently, McKinsey researchers found that companies that drove growth during the 2008 recession saw above-average shareholder returns for the following decade. In short: Marketing is a resource to invest in the future of your business even during tough times.
Pieces of the puzzle
In today’s e-commerce landscape, marketing is more important than ever for brand awareness. But the fact that e-commerce marketing is important doesn’t magically give you unlimited resources to spend on it.
The good news is that you don’t need unlimited resources to be effective.
Instead of attempting to cut marketing costs across the board, there are a few strategies you can use to eliminate inefficient spending. Then, you can reinvest your savings into targeted campaigns to drive growth and distance yourself from competitors.
Here are three tips marketers can follow to recession-proof their e-commerce business:
Find out what’s working
You already have access to the data you need to make informed marketing decisions. Before you make a single cut, you must understand exactly how your marketing dollars are currently being spent — and how much you’re getting in return.
Rather than making an across-the-board decision, go through every channel, market segment and geographic area. From here, it becomes clear which outlets are worth a continued investment, and which ones can be chopped.
The savings from marketing in areas that aren’t bringing in returns can be applied where they’re going to have the most impact, ensuring that your marketing strategy gets the most bang for its buck.
Emphasize value
During an economic downturn, leveraging SEO strategies and creating engaging content for your consumers becomes more important than ever. With less discretionary income to spend, more shoppers turn to the Internet to research all of their options before ever pulling out their checkbooks.
By creating engaging, organic content that emphasizes the value of your product, you set your e-commerce business apart from the competition.
As a bonus — organic marketing, using free methods to get people to notice and buy from your online store (i.e. Google searches, social media, email lists, etc.) is free, making it an incredibly cost-effective option when money is tight.
When businesses focus on creating quality content and building a solid online community, they’re better equipped to reach their target audience without excessive spending, AND they’ve invested in a stronger customer base that will keep coming back once the economy improves (and discretionary income returns to their pockets).
Full-funnel marketing is your friend
Think back to your college classes on marketing for a moment. You probably learned that there were two types of brand-building: more traditional advertising and, in a completely different realm, the digital world.
In the past, it was best practice to use different strategies for SEO, email marketing, social media, etc. Although these tactics are good at driving sales, but they aren’t necessarily set up to create long-term customer loyalty.
Meet “full-funnel marketing” — essentially, targeting your customers at every stage of their buying journey, from their first exposure to your brand to when they make a purchase and become lifelong fans of your brand.
With this approach, you guide consumers through a funnel, starting with a broad audience at the top and narrowing to those who will actually buy from you at the bottom. As the journey down the funnel continues, marketing efforts go from more generalized to more specific and targeted, ensuring your marketing dollars are as effective as possible, creating maximum ROI both now and in the future.
Don’t let recession fears hold you back from investing in marketing for your e-commerce business. Instead of going for the quick fix by cutting your marketing budget during tough times, set yourself up for long-term success by identifying what’s working, emphasizing value for your target customers and using cost-effective strategies like organic marketing to make the most of your marketing budget.
De-bloat your marketing strategy with Nogin
Need a confidence boost? Nogin is here to help you take a positive, strategic approach to marketing your ecommerce business so that you can continue to grow no matter what the future holds.
To find out more, set up an introductory convo with one of our Nogin Experts today.
