With the markets in flux and continued uncertainty around economic growth, real estate pricing and fuel costs, the recession is already causing a lot of issues within Southeast Asia.
One of the most common issues that happen during every economic downturn is the reducing marketing spending. During a recession, businesses’ profits fall and they often feel the need to reduce their marketing budget in reaction to that. Because, while consumers may have less disposable income and become more price-sensitive, leading them to prefer cheaper goods and services – there is still potential for businesses to generate revenue.
However, most businesses adjust their marketing strategies to meet changing consumer demands during a recession. This is often in the form of budget cuts for marketing.
Here are 5 common misconceptions about marketing that most Southeast Asian startups have
To find out more, we spoke to Terng Shing Chen, the CEO and Founder of PR and content marketing startup SYNC. The Singapore-headquartered startup has built a portfolio of over 300 brands and is one of the fastest-growing startup and SME PR agencies in the region.
Just a couple of short years past the pandemic, the recession is another bump in the road for the region’s recovery. Here’s what Terng had to share about the issues around tightening marketing budgets.
Are you noticing a reduction in marketing budgets and growth?
Yes, we are starting to see some reluctance from brands to spend on growth during this period. It is unfortunate because we continue to see this time and time again, and the cycle repeats consistently. I know this to be a knee-jerk reaction to macroeconomic events that have to be managed by marketing leads and growth-driven founders.
Growth during recessions is not impossible, but it does mean that you have to take a smarter and more measured approach to marketing, rather than abandon all efforts.
What do you think founders get wrong about marketing during an economic downturn?
Well, I alluded to it before. Founders tend to view marketing as cost centres rather than growth generators. This may seem contradictory but overall seems to be the case when it comes to hypergrowth businesses.
The misconception comes from an archaic view of the role of marketing. This isn’t true for everyone, but there remains a distinct lack of understanding about the impact and utility of marketing for many founders and entrepreneurs that we speak to.
Are you seeing any recession-proof industries maintain growth during the period?
The usual suspects should be fine during this period, such as healthcare, transport, mass market F&B and even education. Despite the tech layoffs, there still seems to be optimism that growth will continue after the market corrects itself from the overestimation of digital transformation after the pandemic.
One industry that we are seeing a lot of activity and interest in is banking and fintech, as recessions often bring about significant opportunities for this industry.
The future does not actually seem that bad despite the markets looking a bit bleak and some businesses do well regardless of the industry. Usually, these brands tend to have similar traits such as strong community-driven marketing, a lot of customer equity (reviews, trust and more) and a solid value-driven marketing approach that looks at impact rather than volume.
What are some of the benefits of investing in marketing during this period?
The good news for marketers fearful of a prolonged downturn is that many recessions are brief -historically, 75% of recessions last less than a year and a full 30% last only two quarters. As a result, any spending cuts will most likely be short-term and result in marginal savings, while putting brands at a disadvantage heading into the likely bounce-back period.
Before assuming a drop in sales due to a recession, brands should assess the landscape and closely monitor consumer spending patterns for changes. A shift in spending habits, for example, from large indulgences to small indulgences, creates opportunities for growth in certain categories, such as affordable electronics, while contracting in others, such as dining and hospitality.
As consumers become more price-sensitive, brands’ media plans and messaging will need to adapt. Recession-friendly messaging can help to reinforce a brand’s value and ensure consumer loyalty beyond the recession.
How would you advise brands to market during this period?
Well, you should always focus on value. During a recession, consumers are more likely to make purchasing decisions based on value, so businesses must emphasise the value they provide. This can include providing promotions, discounts, or combining products and services. It shouldn’t be about changing or pivoting all the time, but increasing the value for the customer.
Also, during a downturn, there are some consumers that may be more likely to choose products and services based on quality rather than price. To attract customers, businesses should emphasise the high-quality aspects of their products and services.
Using digital channels and building communities around your brand is critical. During a recession, digital marketing can be a cost-effective way for businesses to reach out to customers. This can include promoting products and services through social media, email marketing, and search engine optimization (SEO). You have access to LinkedIn, TikTok or whatever platform works for you, make sure you use it well.
There should also be a strong focus on building customer relationships, which is critical for businesses during a recession. Personalized communication, responsive customer service, and providing a high-quality customer experience can help achieve this. Marketing isn’t all about PR, content or social media, sometimes it should be about treating the customer well and that helps build loyalty.
What’s next for SYNC?
Despite the lowering budgets, we’re still committed to expansion with new markets and team growth being paramount. The lessons from the pandemic still remain fresh in our minds, so we have already built contingencies and focused on sustainable growth as a startup ourselves.
We hope to scale our team by about 30-40% by the end of the year and extend our reach into two new markets. The team continues to monitor markets closely and we remain focused on maintaining growth during this period.