As we head deep into the back half of 2022 and into 2023, it’s abundantly clear that we are—and will—be experiencing volatility in the economy. We feel confident this is coming (already here most likely—we’ll find out Thursday 7/28) because of a variety of factors:
- The American Savings Rate has not been this low since 2009:
- Just last week, the White House is getting in front of the recession language by trying to sort of change the definition of a recession. Source: https://www.whitehouse.gov/cea/written-materials/2022/07/21/how-do-economists-determine-whether-the-economy-is-in-a-recession/
- Inflation is at the highest point it’s been since 1980:
- The Federal Reserve is intentionally throwing cold water on the economy by raising interest rates and is signaling that they will continue to do so for the time being:
- The housing market is finally cooling off, car repos are increasing as the auto industry cools off, the stock market is in a bear market, layoffs at a wide variety of companies have started, the dollar is too strong compared to foreign currencies, supply chain issues are persisting, etc., etc.
The good news is that, well, everybody knows it. When COVID hit, I’ll never forget 3/20/2020. On this day, I personally fielded calls almost the entire day of concerned clients who wanted to reduce spend out of pure fear. It was a completely unexpected shock when California went into lockdown for the first time and nobody knew what was going to happen.
Funny enough, e-commerce & digital marketing BOOMED. I spent weeks trying to calm clients down and explain to them how they need to think logically about what was going to happen and how they could capitalize on it. Those that listened experienced some of the most unbelievably fruitful times of their lives.
There’s a reason why the rich get richer during times of economic downturn. They’re not acting emotionally. They’ve been here before and know we’ll be fine. They know it’s a time to INVEST!
Fast forward to now. We’re comping against the e-commerce boom of 2020/2021 with a travel boom and growth rates are slowing for established online brands a bit. Marketing directors everywhere are going to be reforecasting goals and growth rates. Leadership will be putting them under immense pressure. As we all know, things roll downhill so this means the pressure is coming for us marketing agencies too!
So now that we’ve established what’s happening, what can we do about it?
1. Think Rationally, Not Emotionally
Sensationalized, clickbait headlines about the end of times will be fighting for your attention if they aren’t already. All they care about is getting your click and capturing your attention for as long as humanly possible. They try to accomplish this by scaring you silly and creating division, so don’t fall for it. As Matthew McConaughey recently said, “we are not as divided as we are being told we are”. Seriously though, the #1 thing you can do is put things into perspective.
2. Don’t Buy a Boat
The owners of the business need to be smart with the business’ cash flow. Limit your expenses on depreciating assets and don’t be silly. Now isn’t the time to go buy CLEARLY BAD financial investments (new cars for example). Just wait 6-12 months, prices will fall, and you’ll have the leverage to save significant amounts of money on people who need your business badly. Now is the time to really ensure you’ve got that 6 months savings in place. If the business were to go to 0 (let’s hope not), a healthy business should be able to survive 6 months while you figure it out.
3. Don’t Turn Off Growth
When COVID hit, we had a $100mm client that sold organic soil to places like Home Depot & Lowe’s. We had employed a marketing strategy that was wildly successful. They called us and pulled their marketing budget out of fear, and asked to terminate as soon as they possibly could. We hopped on a phone call and I explained that if the market was so panicked that they were running to grocery stores to raid toilet paper shelves, what else do you think these people are doing?
Yep, prepping and gardening. And what do you need to garden? GOOD SOIL.
I convinced them to stay on by explaining this, and in just 1 month they were up over 200%.
The point of the story is, you can’t pull your growth rug out from under yourself during a recession. This is one of the biggest mistakes a brand can make. Let the other brands lower your CPC’s and capture this ripe opportunity. You’ll pay less for every click, capture a huge audience for cheap, and when the recession is over you’ll come out on top over all of your competitors. Sometimes clients think this is the time to cut agencies, but in my opinion that can’t be further from the truth. During tough times, you should be closer to your marketing agency than ever before.
4. Move Blazingly Fast
Now isn’t the time for corporate B.S. bureaucracy. If your marketing agency tells you they need X, get them X. If you brought in experts to help you navigate these complex waters, these people have likely been through this before and need your trust. There may be market shifts, fast innovations, and pivots you need to make. If you’re aligned with a partner that really cares about your business (and not some “set it and forget it” agency), hold them close.
Break down barriers and GSD (get shit done). Brands that move quickly will come out on top. Those that get stuck in approval processes, pursuit of perfection, micromanagement, etc. will lose.
5. Plan for Multiple Scenarios
Try to think ahead of what could happen so you have an idea of how to handle it. What if you lost your biggest client? What if sales dropped by 20%? How easy is it for you to reduce expenses if needed? Do you have access to liquidity if you need more to weather a storm? How would you handle a cut of staff if needed? All of these things suck to think about, but your business is relying on you to be a leader and know how to handle the hard situations too.
6. Invest in Skills, Competition is Real
One of the best things to invest in during a recession is skills. Skills open up additional opportunities. For example, in the last recession I learned website development & design so I could build websites for people on the side. This was before I started Digital Position, and it made me more valuable to my employer and thus they chose to lay off others instead of me. If you think work isn’t a competition, you’re kidding yourself.
7. Don’t Lose Sight of the Long-Term
During a recession it can be so easy to get completely lost in the short term focus and fear. If you’re a good business owner, you have a vision you’re trying to accomplish – don’t lose sight of that. Don’t get stuck over analyzing things that aren’t going to move your business forward, this recession will be over eventually and what will you have accomplished during that time?
8. Good Brands Win, Bad Brands Lose
Good brands have a mission & purpose. Take for example one of our clients, Sunski. I can’t speak highly enough about this company; they sell recycled sunglasses that are great for the planet. When COVID hit, the Sunski team literally pivoted their business to producing PPE so they could help local hospitals. Their customers are loyal because they’ve earned that loyalty by having an amazing brand with amazing people. Don’t just sell a product, stand for something and humanize your brand for the world to see. Quality brands with a mission will weather any storm with a passionate, dedicated following.
A recession can be a really healthy thing for many businesses. Sure, maybe you’re used to 50% growth and you’re at 15%. But it’s the work you do during the recession that will determine how high that growth rate is when it’s over. Don’t sit on your hands in fear and shell up, because if you do, when you come out of your shell the world will have changed around you and you’ll be left behind.
Let’s do this!