Economic uncertainty? Feel the fear and invest anyway

When times are lean, it’s a natural human instinct to hoard what you have and cut down on what you don’t need. 

That impulse stretches to the corporate world. Marketing, in particular, has often found itself on the front line of cuts. Yet, experience has also taught us that creativity is a crucial growth driver, especially in straitened circumstances.

Experience has also taught us that creativity is a crucial growth driver, especially in straitened circumstances.

Throughout history, indeed up to and including the cataclysmic events of very recent times, periods of intense pressure and change have also been those that have seen the greatest innovation and technological advancement. Alexander Field, the respected economic historian, noted that The Great Depression was “the most technologically progressive decade of the twentieth century.” While there is no doubt that populations struggled, the period also saw the introduction of the telephone, the car, train networks, washing machines, cake mixers and the television.

Above: Continuing to invest can be beneficial even in tough economic times.

Most recently, the pandemic saw companies flip the switch on innovations that had, until that point, been making slow progress, or were still stuck in ‘development hell'. In the early months, there was no timeline or certainty about how long the pandemic might last. Staff being furloughed and bricks and mortar stores closing projected the very real possibility that revenues would be immediately throttled. And yet, companies forged ahead with digital transformation, delivered new products and service formats – many of which are proving to be market-beating strategies in a post-pandemic world.

There is still opportunity, though that sits alongside the threat that, if companies sacrifice marketing budget in this critical period, they could yet deal themselves a fatal blow.

The current cost of living crisis and recessionary climate can, in part, be traced back to the pandemic but also a range of other global shocks (the energy crisis, the war in Ukraine) that are conspiring to create challenging economic conditions. But there is still opportunity, though that sits alongside the threat that, if companies sacrifice marketing budget in this critical period, they could yet deal themselves a fatal blow.

Brands need to maintain marketing momentum

This is not hyperbole from someone who clearly has skin in the marketing game. As the world was reeling from end of the financial crises of 2008/9, Harvard Business Review made a firm statement about the value of marketing in 2010: “Successful businesses out of a recession reduce costs selectively by focusing more on operational efficiency than their rivals do, even as they invest relatively comprehensively in the future by spending on marketing, R&D and new assets.”

Even the biggest companies weren’t immune. During the 2000 downturn, Sony cut its workforce by 11%, its R&D by 12% and capital expenditure by 23%. Its profit margin did rise four percentage points to 12% by 2002, but sales growth fell from an average of 11% before the recession to 1% afterwards. It has never regained its pre-recession momentum, and lost ground to relentless marketers like Samsung.

Conversely, DuPont’s scientists created the first synthetic rubber – neoprene – just as The Great Depression began. Even though the company’s prices and sales had necessarily fallen, DuPont actually increased R&D spend on the new technology. While keeping a close eye on expenditure and benefiting from relatively low-cost raw materials, the company continued to develop despite the challenging economy and, by 1939, every car and airplane manufactured in the United States contained DuPont’s neoprene.