By the middle of March, most people realized that COVID-19 was going to impact the global economy and directly affect the lives of thousands of people along with several industries. The only question was how significant this impact would be, and which industries would be hit the hardest.
Many in the U.S. construction industry took a wait-and-see approach. At that time, most economists were saying that if the United States did have a recession, it would be short-lived.
“The manufacturing and construction industries will be more likely to hold off on any big decisions like layoffs,” according to Rebeela Farooqi, who was interviewed by MarketWatch at the time. Farooqi is chief U.S. economist at High Frequency Economics, a New York-based economic research company. The reasoning was that “you can’t just hire someone with no experience, especially if you expect a rebound.”
But by late May, leaders knew that very few industries will remain unscathed, and the construction industry is not one of them. Although there have been exceptions, contractors have been and will continue to lay off workers. Projects have dried up, been delayed or were canceled, as developers lost their financing.
So, what should contractors do if they find themselves in a tough spot right now? Many have already reduced their workforce and cut expenses wherever they could. Further, they have eliminated most nonessential expenditures.
However, contractors must be careful about what they deem nonessential. One expenditure in particular—marketing—invariably finds its way onto the chopping block. Although eliminating marketing and its costs may offer some immediate relief, it may prove to be the wrong decision long term. Here’s one of the best examples of how this could happen:
In the 1920s, Post cereal was the leading ready-to-eat cereal manufacturer in the country. Kellogg’s was also a large company, but not nearly as big as Post. During the depths of the Great Depression, Post decided to cut costs significantly, and one of the expenditures it marginalized was marketing, mostly in the form of advertising. Rival Kellogg’s doubled its advertising spend.
In time, Kellogg’s profits grew by 30%, making it the industry leader. Post never caught up, and Kellogg’s has maintained that leadership position for decades.
Defending Your SOV
What happened here is that Post went dark. People did not hear about the company that much in the 1930s, whereas they did hear about Kellogg’s. Today, we refer to this as share of voice (SOV). SOV can be difficult to understand and, complicating matters, can be calculated in different ways. Essentially, however, it is a measure of the market one brand owns compared to its competitors. It is viewed as a gauge of brand awareness. It is typically based on investments in advertising, PR/communications and social media, as well as paid and organic web traffic.
SOV is essential because for people to know about a construction company, or any other type of business, that company must be visible. In a recession, this can mean that what construction opportunities are available, the brand with the most SOV is most likely to get it. Additionally, as the recession ebbs, that company will likely come out stronger and significantly ahead of its competitors, just like Kellogg’s.
Recession Marketing Rules
Once convinced that marketing is needed during a recession, companies must determine how to use their marketing funds as effectively as possible. Although all forms of marketing involve some trial and error, in tough times, we want to minimize that—and its related costs—as much as possible. Here are some ways to accomplish that.
Determine Marketing Spend
Marketing spend may have to be reduced, but that’s okay. Competitors will also be cutting if not eliminating their marketing budgets. So even if a contractor cuts theirs, the goal is to not reduce it as much as their competitors. There is no magic formula to determine this. What is most important is that a contractor budgets as much money as possible for marketing and stick with it.
Focus on What Has Worked Before
We mentioned this is no time for trial-and-error marketing. Here’s an example of how to bet on the sure thing: A home service company found it was getting the most leads—and the most business—by advertising in a publication catering to the local art community. The company eliminated all other marketing programs and increased marketing in this one publication. It paid off. The 2008 recession did not impact their business.
Look for No-Cost Marketing Options
The first thing most consumers do before hiring a contractor is to look for online reviews. Don’t ever discount the value of positive reviews. People do not make buying decisions based on one or two reviews, positive or negative. They look for trends. Try to get as many positive reviews as possible on Yelp, Google, and similar platforms. Related to this, add case studies and client testimonials to the company website.
Although newsletters are not as powerful as they once were, they still have impact and can still improve SOV. In most cases, newsletters are not costly to produce and often can be handled in-house.
Consider PR
One of the most effective ways to improve SOV is to get published in leading publications that cater to the target market. Many publications will accept what are called “thought leadership” articles. These are well-written articles designed to help educate the publication’s readers. The more often people see a company byline—such as the CEO of a construction company—the more likely they will remember that company.
Stay Focused
Finally, it is best to continue to focus your marketing on your target market. For example, a high-end furniture retailer decided to carry less costly furniture and target mid-range to lower-income consumers during the 2008 recession. The company owners believed this would help generate more store traffic and more sales. Marketing was adjusted accordingly. However, those consumers were just trying to make ends meet; purchasing furniture was not on their radar.
A few months later, the company’s former customers, higher-end consumers, realized they could ride out the recession. When they returned to this store, they saw it had changed. The high-end furniture was gone, and so were they.
It would have been better if the company had stayed focused on its target market. The buying habits of a target market may change in a recession. A company’s job is to change with them, so it is there when the customers come back.
