The coronavirus pandemic has changed everything. Retail habits have improved. Companies that attract new customers and retain existing ones – right now – can recover or grow quickly as the economy reopens and continues.
However, after the closure of Covid-19, the United States and the world can still face a serious recession. On April 14, 2020, the International Monetary Fund released its financial overview, who said, "It is very likely that the global economy this year will experience its worst recession since the Great Depression."
The IMF estimates that the global economy may fall by 3.0 percent in 2020. "Advanced Economies" and the US economy may contract 6.1 and 5.9 percent respectively.
Not all economists are as pessimistic as the IMF, but it is generally believed that after the "Great Lockdown", business operations will not immediately return to pre-pandemic levels.
This is not good news at all, but it is also not without hope or opportunity.
Promotion in a recession
In 2009, Gerard J. Tellis and Kethan Tellis, professor and student at the University of Southern California Los Angeles, examined (PDF) more than 40 studies that examined the relationship between marketing and performance during and after a recession.
Tellise's review looked at both the quality of the investigated reports and the subsequent results.
Kamber study. For example, researcher Thomas Kamber in 2002 studied the results of 822 companies after the recession in 1990 and 1991 and found that "the group of companies that maintained or increased their advertising spend had greater sales growth than those who reduced their advertising," according to Tellises.
"Those (companies) that maintained or increased advertising had a sales growth of 7 percent in 1991 (which was during the recession) compared to non-existent growth for the companies that reduced their advertising spend. This gap in sales growth between the two groups increased to 25 percent in 1995 . "
McGraw-Hill. A 1985 McGraw-Hill study looked at how the recession in 1981 and 1982 affected 600 companies to companies.
"All companies increased sales for up to six years after the first year of the recession," Tellises wrote. “However, the companies that did not lower their advertising during both years of the recession had sales that grew to almost 340 percent in year six. By comparison, companies that lowered advertising during one or both years had much more modest sales increases that grew to just over 200 percent in year six. These results provide strong evidence that failing to cut advertising during a recession will help keep sales growth at a high level. "
Meldrum and Fewsmith. A similar study conducted in 1979 by Meldrum and Fewsmith, Inc., an advertising agency, looked at the sales performance of 143 companies from 1972 to 1977. The companies that continued to advertise during the recession of 1974 and 1975 had much higher sales at the end of 1977.
This specific report may not be as convincing, Tellis and Tellis noted, since the companies that continued to advertise during the recession had already shown improved sales up to it.
Business review from Harvard. 2010 Harvard Business Review published the results of a review of 4,700 public companies that had experienced a recession.
According to the report, "companies that master the delicate balance between lowering the cost of survival today and investing to grow tomorrow are doing well after a recession. Within this group, a subset that uses a specific combination of defensive and offensive traits has the highest the likelihood – 37 percent – of breaking away from packaging, which selectively reduces costs by focusing more on operational efficiency than their competitors do, even though they invest relatively extensively in the future by spending on marketing, R&D and new assets. "
Plan for growth, profit
These studies should be encouraging even in the current state of the economy. Sustainable marketing (combined with justified cost savings) tended to precede revenue growth in companies that survived and thrived through a recession.
This growth in turn could have come from either increased sales to existing customers or from new customers purchased, perhaps directly, as a result of marketing and advertising during the recession.
The takeaway for many companies – including pure-play e-commerce, omnichannel retailers and B2B companies – is to continue to market, continue to communicate. Continue to attract, engage and retain customers now and after the coronavirus lock.
Even the IMF's dismal forecasts held a bright spot: the US economy could resume in 2021, with 4.7 percent growth. And it's only eight months away.