Episode 44: Recession 2022: How It Affects Marketing and Advertising
There is no longer talk of a pending recession – the recession has arrived. With its arrival, it brought about hiring freezes, layoffs, rising interest rates, and companies attempting to minimize their overhead. As more and more companies become reactive to the situation, it is clear this will have an impact on the marketing industry and the marketers that make it up. As companies lay off talent, hiring would become easier if it were not for the economic raincloud over the country. Companies are still advertising but doing so with great caution and consideration in regard to their ad budgets. Eventually, we may see a change in the cost per click (CPC) due to potential changes caused by this recession. As with any disruption, companies and marketers alike will need to pivot and implement strategies that will allow for success in difficult times.
In this week’s Digital Marketing Mondays, Hans and Devin discuss how digital marketing is being affected by the recession, speculate on what the next few months may look like for the marketing industry, and discuss strategies for navigating what’s to come.
You’re listening to Digital Marketing Mondays. Each week, we bring you new and exciting content from around the marketing industry and help give you, the marketer, insights into what’s happening. We’ll offer our advice and share some takeaways to help you develop better strategies for your marketing. Ideally, this will also help you improve your ROI as well. So with that, let’s tune into this week’s episode.
Good morning, Devin. A happy Digital Marketing Monday to you.
So, I’d like to dive in a little bit. Back in July, we saw early signs of a potentially looming recession, and we did a show on what you can do in case that gets worse and in case it actually happens. I would say that the news today is that we’re seeing not only hiring freezes, but we’re seeing actual layoffs happening now. The hiring freezes are sort of a bellwether, and then after that come the layoffs when companies are really scrambling to reduce their costs, their overhead and so on, and interest rates keep going up. And, because inflation is rising and the Fed has no choice but to push us into a recession. So I don’t think it’s a question of if anymore. It’s advancing, and companies are responding to that. I’d like to start by saying, what are we seeing and what are we recommending, particularly to marketers since that’s our main audience, in a situation like this?
Yeah, it’s interesting, because I think it depends on what type of client we’re talking about, but especially those within the B2B space that may be of a mid-market size or potentially edging in towards enterprise, it seems like a lot of those folks are still being conservative and being very thoughtful about where their marketing dollars and efforts are going. But some of them, to an extent, are still actively spending on initiatives because they haven’t necessarily seen the dropoff. So while I think we’re seeing these large enterprises and even blue chip or mega cap type companies really starting to lay people off to protect their margins, it seems like the slightly smaller companies are not necessarily having some of the same issues at this point. But it does certainly leave the mind to wonder, what’s going to happen over the next couple months as potentially money starts to become a little bit tighter, or marketers are going to get squeezed, or Q4 budgets are probably going to shrink a little bit. And certainly, their Q1 budgets as well, for next year.
I know it leaves a permeating question, what’s going to happen here? And, I think it’s safe to assume at this point, that we are probably going to see lower competition in say, the ad space, and potentially more employers, and more employees that are available to actually go out and be hired. So the unemployment rate is going to go up. Certainly not trying to make this a political and financial conversation here, but the reality is, I think, if people have been hiring and their numbers support it, hiring’s going to get a little bit easier for marketers, which would be helpful.
Yeah, if you’ve been struggling like so many companies have in finding good people, that’s probably going to change for the better. It’s just a matter of, is this a time when you could afford to hire those good people? So, that’s a shift. And you make an interesting point of, I’ve read reports that ad spend has been decreasing. And most ad platforms, Google, Facebook, et cetera, are auctions. And we know that in an auction with fewer bidders, you’re going to probably see either lower prices or higher positions for your ad for the same price, those kinds of things. But those forces are at play here. I don’t know that I could say that I’ve actually seen evidence of that yet, but I’d imagine it’s inevitable.
Yeah, I would have to imagine so as well. And one of the main indicators that I know we like to look at in particular is, what’s the cost per click, especially a cost per thousand impressions? And what are the auction insights telling us, as in, how’s the competition doing in terms of impression share? And potentially, the percentage above your ads rate, something like that from Google specifically. But we haven’t necessarily seen that dropoff yet. And that leads me to believe that there are still companies that are trying to be aggressive with their marketing and continue to spend where it seems most valuable. And it certainly could be a side effect that these larger companies like Google, Facebook, LinkedIn, are not going to potentially see the dropoff in cost per click, because they’re trying to increase their prices. So that’s always a possibility. We just may never see that dip, because they’re trying to increase their margins with the ad dollars that we’re spending.
So if that doesn’t happen, the other side is we will probably see the drop off in folks spending over the period of the next several months. And I would suspect, especially by the end of Q4, it’d probably be a much bigger dropoff than normal. But outside of that, I think there was actually a really interesting headline by Adweek the week prior to the recording, which was Don’t Cut Your Ad Spend, Cut Your Ad Waste. And I thought that was a really profound headline. And what that prompts me to believe and even to suggest to all the marketers out there listening, is that you really need to be dialing in Q4 especially, more so than any other time. Really need to be taking a hard look at your data and identifying the campaigns that are doing well and driving results and the campaigns that are not, and cutting the spend where it’s not needed.
If you don’t have the data in place to be able to accurately measure these types of campaign effectiveness, then that’s one thing that you probably should be investing in that, regardless of whether we’re heading into a recession or not. But the other side of it is, are your ads actually being effective? Are they driving revenue for your company or your organization? And if the answer is no, now’s a great time to start looking to cut those types of programs out. Outside of advertising, marketers in general just need to get really smart about the initiatives that we’re actively participating in and what it’s ultimately going to be doing for the business or for the organization.
Yeah. You mentioned ads driving, ultimately resulting in sales. And the key there is ultimately, because in a lot of the businesses we deal in where there’s a lengthy and complicated sales cycle, it’s sometimes hard to connect an ad click all the way down to six months or three months or two months later when the sale gets made. So there are ways of doing that, and there are ways of tracking and measuring sort of multi-step, multi-touch sales processes. It’s important that you really get your arms around that. And like you said, you can actually measure and say, “All right, this is working, this is not.” And focusing your energies and resources where it’s working, because there’s going to be less buyers, a lot of purchasing decisions are being put on hold.
We’ve come from a place where it’s really hard to buy a car. The dealers are marking that stuff up, but we’re seeing interest rates going up, so fewer and fewer people are going to be able to afford to buy a car. Most people finance it, and if the cost of financing is really high, if they have the ability to maybe squeeze another 10,000 miles out of their existing car, they’re probably going to do that. I think we’re going to see the advantage tilt from the seller more toward the buyer, even in industries like automobiles where it’s been the other way around. Yeah, it’s going to be an interesting few months to watch how this all unfolds, but I’ve been through this a few times. I’m an old guy. I’ve seen this before. So, yeah.
And one final thing too, at the Inbound Conference that HubSpot puts on every year, Yamini, their CEO, actually explicitly called out one key point during her presentation. That search, whether paid or organic, is becoming less effective as a platform or as a channel. And I don’t completely disagree with her. What I do think though is she’s right. You need to be smart about how you’re actually going about or who you’re targeting within these types of efforts. And I think, again, your paid advertising strategy needs to be really dialed in at this point in time. But even the content that you’re producing needs to not just be helpful 500-word articles about any topic on the web that might be reasonably relevant to you, but you need to be creating content that’s helping support the buyer journey at this point in time. Is it a meaningful piece of content that will help influence a decision? That’s something that I think all companies and organizations should be thinking about, just trying to streamline and make that process a little bit more frictionless.
And a final tip I’ll leave with folks is that as marketers, one thing we still need to recognize is that word of mouth and referrals are still one of the single most powerful marketing tools or sources of leads that we will ever be able to have. Bar none, hands down, there’s nothing else that can compete with it. Email’s close, but it’s still, your close rates on referrals or word of mouth is still going to be reasonably high. As marketers, now is also a great time to start thinking about how you can develop an actual marketing and sales strategy from creating a referral program. A strong referral and word of mouth program, and actually marketing within the different existing lists of people that you have.
Reaching out to clients, asking for referrals or trying to promote word of mouth or user generated content. If you’re a credit union, I’d be putting out the hundred dollar gift card offers for any referrals you may be able to hand over. You’re a software company, trying to tap that existing client base to refer, to get some months off your software platform pricing. There’s a lot of programs like that, that could actually be created and built as part of a marketing strategy, not just ad hoc. That’s a highly actionable thing that all marketers can do, and especially now, because that’s an efficient way to be able to, using existing database presumably in that case. As long as you have list of emails. And folks, this is another surefire, non-costly way to do it, other than it takes time.
Yeah. Yep. Good one. All right, well thanks for those tips, Devin. I think obviously this is going to be interesting to watch how it unfolds and we’re happy to dive in with anybody that wants to talk about specifics for their own business. Thanks for sharing. Enjoy the rest of your week.
You too, have a good one.
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