History shows that there are two things we can be sure of when it comes to financial crises: there will be another one, and the next one won’t be the same as the last. And history also tells us there are many different causes of crises – some more bizarre than others.
In 1636, “tulip mania” took the Netherlands by storm. As the price of tulip bulbs rose inexorably, some people spent their life savings to buy them. But this craze came to an abrupt end and the price of tulips crashed, causing huge losses and a near meltdown in the Dutch economy. Perhaps the rush of recent speculative GameStop buyers should have taken a history lesson. The Covid-19 pandemic, however, told a different story.
Many economies globally have suffered the deepest recessions since the Second World War. Even with the Covid vaccinations in all their various guises being rolled out now across the world, somebody has got to pick up the tab at the end of the day. The after-effects will be felt for many years to come.
The historical cost associated with recessions
Research from the Bank of England, looking at various examples of recessions throughout history, estimates the total economic cost of a typical financial crisis at around 75% of GDP. That is huge.
Straight out of the gate, when faced with a crisis, all organizations must first systematically assess their ability to weather the storm and take corrective action. Inaction is the riskiest response but kneejerk, rash, and seemingly random actions can be just as damaging.
Rising anxiety and the growing pressure to do something (anything) often creates a variety of uncoordinated moves that target the wrong problems or overshoot the correct ones. A disorganized response can also generate a feeling of panic across all stakeholders.
Decisive action needs to be taken. Research by the Boston Consulting Group indicates that companies whose early responses to a downturn are tentative (for example, modest cost-cutting) typically overreact later on (e.g. cutting costs more than they need to) resulting in an expensive recovery for the company when the economy rebounds.
Why smart companies maintain or increase ad spend in a recession
In the aftermath of the last recession in 2008, ad spending in the USA dropped by 13% but studies by the Advertising Specialty Institute going back 100 years point out the advantages of maintaining or even increasing ad budgets during a weaker economy. Time and again organizations that maintained or grew their ad spending increased sales and market share during a recession and afterward.
There’s a saying which goes, “When times are good you should advertise. When times are bad you must advertise” but perhaps the best quote about advertising in a recession we have heard came from Sam Walton, the founder of Wal-Mart. When asked, “What do you think about a recession?” he responded, “I thought about it and decided not to participate.”
Brands need to project to consumers an air of corporate stability during difficult times, maintaining their “share of mind” with consumers and this is where CPaaS and an omnichannel approach comes in.
Over the past year, we have been working particularly closely with our enterprise clients to help guide them through the myriad of mobile digital channels available to them to converse with both existing and potential clients. Ubiquity and familiarity are two characteristics of A2P SMS which, from the increasing volumes we are delivering, is being turned to by organizations of all sizes around the world to drive their engagement. As is rich, secure business messaging through WhatsApp, Facebook Messenger, Viber, and more. What’s more, a strong digital strategy with A2P can be just as effective as more traditional ad spending at a fraction of the cost.
With our enterprise experience and expansive capabilities to deliver your content rapidly and accurately globally, we help you increase your “share of voice”. And that typically leads to an increase in market share and better financial results across a host of metrics. Rely on Mitto to deliver that injection of confidence for you. You won’t be disappointed.