When the economy cools, when margins tighten or when the market becomes unpredictable, the first response from many companies is to cut costs. Marketing very often sits at the top of that list. Why is that the wrong move?
The logic looks simple on the surface. If we cut advertising spend, lower campaign and communication budgets, we will free up some funds quickly. The balance sheet shows it right away. Problem solved? Not at all. The effect of a smaller marketing investment on revenue only shows up later, and by then it can already be too late to undo the mistake.
The key question we should ask is whether marketing really is just a cost or a luxury we treat ourselves to only when business is good, or whether it is in fact a mechanism that helps the company absorb risk.
To illustrate, we can borrow vocabulary from the auto industry. In times of stability, marketing is the engine of growth. In times of uncertainty, it becomes a shock absorber that keeps things from going further off the rails.
What happens when we ‘cut’ marketing costs?
To repeat: scaling back marketing activity rarely produces an immediate drop in sales, and that is precisely why the decision can look justified in the short term.
But the negative effects, which often substantially exceed the ‘savings’ from cutting marketing investment, show up with a delay. When a company stops deliberately building its presence, scales back communication and pulls back from public visibility, it starts losing access to its audience. Customers see less of it, hear less of it, and as a result think about it less. Competitors are only too happy to fill that empty space.
The history of crises shows that companies that froze marketing budgets during recessions or business ‘dry spells’ needed substantially more time and money to regain their previous position once the crisis was over. After the 2008 financial crisis or the post-2020 pandemic, many European brands realised that their short-term ‘rationality’ (we deliberately put it in quotation marks) turned out to be expensive over the long run.
Strong brands weather crises more easily
During the coronavirus pandemic, bars and restaurants were among the first to close in many places. The drinks industry took a hit as a result. The Heineken brewing group is a good example of a strategic response. It adapted its communication, but it did not retreat. As bars were closing, it shifted its focus to home consumption and digital channels. The messages changed, but the presence stayed. Denmark’s Carlsberg followed a similar path. Instead of pulling back entirely, it invested in strengthening the brand and in various local initiatives tailored to a time of social distancing. The result for these brewers wasn’t just a preserved market share, it was higher consumer trust once the toughest period had passed. Customers stayed connected with ‘their brand’, and once conditions normalised, they saw it as a brand that had been with them in a moment of uncertainty, and came back to it.
It will be interesting to watch how the drinks makers respond in the next chapter, which is full of challenges. With younger generations drinking less, the start of this year brought gloomy outlooks and the first announced cuts. So far it looks as though companies will rationalise their production processes first (sometimes through staff reductions), but a significant pullback in advertising is not expected.
Marketing acts as a safety fuse
When prices fluctuate, supply chains are disrupted or consumer behaviour shifts, a company with a clear identity and stable communication has more room to manoeuvre. In that situation, marketing isn’t decoration or, to use a foreign expression, a ‘nice to have’, a welcome extra. It is a ‘must have’, an essential layer of protection that helps defend the company. So inside a company it has more than one function. If one is generating demand, the other is reducing uncertainty.
When the market and your target audience understand who you are, what you offer and why you matter, sensitivity to price drops. The need for constant promotions drops. So does the risk that customers swap you for the competition at the first sign of disruption.
In that sense, marketing works much like insurance. The cost is visible today, the effect appears when it is needed most. Companies that understand this role don’t treat marketing as a variable cost to be trimmed at will. They treat it as part of their risk management system.
When does cutting marketing costs make sense?
None of these arguments mean that every marketing activity is untouchable. A challenging period is also a time when it pays to take a hard look at whether we have been spending money on activities that don’t deliver. Cutting underperforming campaigns is rational, but the money saved should go into new, better-planned and more focused activities, not into ‘savings’.
The question isn’t whether to reduce costs. The question is whether we understand which part of marketing produces short-term results and which part builds the company’s long-term resilience.
Marketing is a strategic topic for leadership
If we treat marketing as a cost and a bonus for the good times, we see it purely as an operational matter. If we also see it as a safeguard for periods of risk, it becomes a leadership topic. That means we don’t decide on it solely through a budget line, but through the question of what position we want to occupy three or five years from now. Do we want to be a brand that customers choose because of price, or one they choose because of trust? And above all, do we want to retain and grow our market share, our revenue and our profit?
Marketing isn’t a guarantee of success. But it is one of the key mechanisms that gives a company stability, resilience and a faster recovery, even from a crisis. At Pakt, we see marketing as part of business strategy, not an extra layer of communication. If you are also thinking about how to strengthen your company’s resilience, let’s talk.
