During a recession, it’s common for businesses to find ways to cut costs, especially during times of inflation and economic uncertainty.
For example, at the end of last year, small and large big tech and media companies conducted mass layoffs. Meta let go of around 11,000 employees for its first round, and the platform announced that a second round of layoffs is coming and 4,000 employees are in danger of losing their jobs. Some brands also reduced workforces to reduce costs. Pepsi laying off hundreds of workers in headquarters roles at the end of 2022 comes to mind.
But a reduction in employees isn’t the only way for businesses to cut costs; for some brands, budget cuts land in the advertising spend column.
The industry coined the term “ad spend slowdown” to highlight how advertising spend has decreased YOY due to the ad recession. While some may do this to help mitigate costs, research shows that cutting back on advertising is a major mistake.
Karla Jo Helms, CEO and Founder of JOTO PR Disruptors, suggests that it’s important that brands increase their advertising budgets during the recession.
“During uncertain economic times, marketing seems like an easy cut,” said Helms. “Businesses who strategically approach marketing during downturns position themselves ahead of competitors.”
Andrew Byrd: Analysts believe there is a 64% chance that we will fall into a recession this year. Why is this the case, and what are the implications for the advertising industry? 
Karla Jo Helms: This is the case because when there’s a lot of free money circulating in our society, it lowers the value of money, raising the cost of goods. It also means that fewer people will be spending, or they will start pulling back their spending.
The implication for the advertising industry is that companies could pull back on their advertising. We have heard that advertising and marketing are the number one places companies pull back. However, I’m a contrarian theorist and did not see that during the pandemic. We had so much more targeted promotion, even in our industry.
We keep a tab on different sectors and how they market by signing up for various lists. I have never seen the volume of advertising that happened during the pandemic. So I no longer believe that people pull back their marketing and advertising. But that could be the implication for companies that think they need to.
AB: What would you say to brands considering cutting their advertising budget because of the recession? Why is this a bad idea?
KJO: Some of the most recent studies I’ve seen highlighted that about 60% of the brands that went dark during the recession and did no advertising for six months saw their exposure, brand prominence, and audience targeting decrease by 24%.
That’s a fourth of your revenue. If you were cutting a fourth of your salary out, how well would you be able to live? The same thing is true for businesses. Businesses are micro of the macroeconomy, and advertising is a key driver of the American economy. It contributes to employment sales, but it is also directly related to the gross domestic product.
Throughout history, when advertising has boomed, the economy’s output has boomed. Don’t decline during a recession. You can be in control of it, to a large degree, by advertising.
AB: You said marketers should avoid traditional advertising and approach new marketing strategies. Why should they pivot, and what new marketing strategies should they use?
KJO: Some may listen and say, “Oh, I shouldn’t use this marketing or advertising channel.” That’s not what I mean. For companies and businesses today, the traditional approach is to put out marketing and advertising about your solutions and products. People don’t care about that. They care about the problems and the pain points that you solve.
So don’t be the status quo. Get out there and disrupt and communicate, don’t be married to the solution; communicate and be married to the problem you solve. I was talking to a prospect today. They approached us about a product launch and talked about all the bells, whistles, speed, and feeds. I asked them what does this solve? And then I work it back up to the pain point, right? Their technology solves real economic issues, and that is what they should advertise. That is the story. I would tell people to quit branding their own industry, get out there, and be disruptive along channels.
AB: IAB/PwC released a report highlighting that despite the rumors of an ad recession, 2022 showed signs of growth for the digital advertising industry. What do you make of this claim? Is it the industry’s resilience and innovation?
KJO: Yeah, the industry is innovating. Technology is coming out that is helping a part of the economy that has had pent-up demand and that has yet to have the help it has now since COVID. And that is the small business and middle market. Technology today helps SMBs compete with the Goliaths.
When all these massive layoffs happen on the top corporate level, the opposite occurs in SMBs. They’re hiring like crazy and can’t fill the jobs fast enough. I advise the industry to innovate even more to figure out how to service that small middle market because they are exploding and looking for ways to get more exposure. They’re looking for ways to be just as credible as their bigger counterparts. Our large corporations have a run for their money going on right now.
AB: As you mentioned, there have also been significant layoffs in every industry, including the advertising and ad tech industry. Can your approach help mitigate the massive loss of layoffs? How can the industry come back from this?
KJO: I don’t see the advertising industry as an industry that gives up. Its basic premise or postulate is communication and outflow. That’s remunerative, and that is what creates business. There are opportunities for the advertising industry to help these fast-growing SMBs and the segments of our economy. As long as we have innovative leaders willing to pivot and look for new and disruptive communication methods, the industry will continue to show signs of growth.
AB: What final words of advice would you give the industry to ensure they make the most of their ad budgets in the wake of a recession?
KJO: When in doubt, promote. My background is in crisis management, and the first thing you do in crisis management as you’re mitigating the damage is to promote and advertise like hell. That gives you the bandwidth and the positive public exposure to fix and minimize the damage. The same goes for recessions or any other crises. If you lose some staff, if you’re changing locations, or if you are experiencing any disruption, advertising can give you the resources to expand while you’re going through this. So when in doubt, promote.