When your practice struggles financially, the initial urge might be to reduce costs, including marketing expenditures. But when you step back and view your practice more objectively within the broader economic conditions, you might recognize the need for a more thoughtful strategy and a different approach. Historical trends provide lessons to medical practices seeking ways to recover from the COVID-19 pandemic’s impact on their bottom line. Winners happened to be those businesses and practices that went against the current, either maintain marketing expenditures or increasing them. Therefore, your medical practice’s key to successfully emerging from the recession is continued investments in marketing and, more significantly today, digital marketing.
Cyclical Nature of the Economy
Over time, a country’s economic activity experiences periods of expansion and contraction. Determining which stage an economy is in requires analysis of the gross domestic product (GDP), national rates of employment, level of retail sales, and amount of personal income. Business cycles progress through a set pattern, but the length of each phase in this pattern varies. These cycles are demarcated by periods of economic expansion and contraction: also referred to as peaks and troughs, respectively. Historically, U.S. business cycles average about six years.
Closely tracking the trends in cycles reveals that there are six stages an economy goes through.
Expansion
During the expansion period, employment levels, business profits, wages, and overall demand and supply are high. The money supply moves continuously and uninterrupted. Consumer confidence is high, and so is spending.
Peak
At some point, the economy reaches its maximum growth level, known as the peak.
Recession
At the end of the peak, a recession begins, and economic activity shrinks. Recessions typically experience high unemployment, negative economic growth, fewer sales as consumer demand declines, stagnation or drop in income, and less production output.
Depression
Depression furthers the declines of recession, with significant decreases in employment, investment, production, and consumer confidence.
Trough
The trough represents the lowest point in the economy.
Recovery
The recovery phase begins the improvement in the economy, as economic activity begins to increase. Low prices contribute to increased levels of demand, and production and employment levels start to rise. Investment, confidence, and spending also start to increase. This is the final stage of a complete business cycle.
Key Takeaways:
- The economy predictably experiences ups and downs as it progresses through multiple stages: expansion, peak, recession, depression, trough, and recovery.
- These stages make a complete business cycle.
Signs of Economic Recession
In the United States, the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) maintains a chronology of business cycles. The NBER tracks various indicators every month to determine the economy’s point in the business cycle. According to the NBER, the United States entered the beginning of a recession in March 2020, based on the significant decline in economic activity throughout the economy, including record-level unemployment and a sharp drop in industrial production.
The peak in the U.S. economy’s monthly economic activity occurred in February, marking the end of a 128-month period that was the longest expansion in the history of U.S. business cycles.
The COVID-19 public health emergency inspired a decline in employment and production of unprecedented magnitude that reaches across the entire economy. This recession has different dynamics than prior recessions, due to the pandemic, and might last for a briefer time. But the disease’s progression, governmental responses to the pandemic, and individual behaviors cannot be known with any certainty. What is known is that the expansion stage is an economy’s normal state, with most recessions brief, lasting from six months to a year or two.
Key Takeaway:
- The United States entered a recession, fueled by the COVID-19 pandemic, in March 2020.
Marketing Spending During a Recession
When a recession begins, overall spending tends to shrink. Businesses’ finances start to suffer. Thus, to balance less revenue, the budgets begin to allocate less spending. Perks and plans for expansion are among the first areas that a company cuts, along with marketing. Ad spending dropped about 12% in 2009, the last year of the most recent recession. Some experts estimate that ad spend likely will shrink by 30 to 60% through 2020. A survey of marketers found that 90% either are delaying or revising their marketing budgets.
Most business managers tend to believe that spending funds on marketing efforts during a time when customers are spending less just cuts into profits. In the short term, this could be accurate. Reducing marketing spending in a recession might protect immediate profits, but only briefly. But neglecting marketing during an economic downturn results in a weakened brand and fewer profits post-recession.
Savvy business owners realize that marketing expenditures have the potential to contribute to profits in the longer term. The evidence clearly and consistently shows that it pays to maintain or even increase investments in marketing during an economic downturn. The rationale is that while others reduce their spending on marketing, there is a greater opportunity to have a share of voice when competitors go silent. Expert marketing consultants often teach their clients to actually increase advertising spending during recessions to take advantage of the lower cost.
Key Takeaway:
- Most businesses reduce marketing spending during economic downturns, though continuing or increasing marketing would be better for the long term.
- Increasing spending can help increase awareness and take advantage of cheaper marketing costs.
Counter-Cyclical Strategy for Advertising and Marketing
Most people and businesses follow a pro-cyclical approach to spending and investment. Their behaviors correspond with the stage of the business cycle. For example, when there is economic expansion and prosperity, many individuals and companies will engage in behavior that falls in line with that growth and serves to extend the period. Consumers buy more things, and companies invest more in areas like marketing. During an economic recession, the majority pro-cyclically cut their spending and reduce their investments.
A counter-cyclical strategy does not cut spending during times of economic contraction, and businesses that use a counter-cyclical strategy are more likely to survive. (At Doctor Genius, we follow a counter-cyclical strategy.) A century of research supports this approach. For example, a McGraw-Hill Research study examined 600 companies from 1980 to 1985. The businesses that maintained or increased their level of advertising expenditures during the recession experienced significantly higher sales when the economy recovered than companies that decreased ad spending. Specifically, aggressive advertisers during the recession had sales 256% higher than the companies that chose not to advertise.
A few examples follow.
Kellogg’s triumph over Post
Post entered the Great Depression as the category leader in the ready-to-eat cereal market. During the depression, Post significantly cut its advertising budget while Kellogg’s followed a counter-cyclical approach, doubling its advertising spend. Kellogg’s heavily invested in radio advertisements and introduced a new cereal, Rice Krispies. Kellogg’s overtook Post as the category leader, growing its profits by 30%.
Toyota’s rise to the top imported carmaker
The energy crisis triggered a 17-month recession from 1973-75. Toyota’s sales of its fuel-efficient cars were strong, but the company resisted the temptation to reduce its ad budget when the economic downturn came. By 1976, Toyota surpassed all competitors to become the top imported carmaker in the United States.
Target’s recession success
Harvard Business Review analyzed the strategies and corporate performance of thousands of companies during three global recessions, finding only about 9% flourished after a slowdown in terms of sales and profits growth. These companies balanced cutting costs to survive the recession and investing for the post-recession. The companies most successful after the recession focused more on operational efficiency improvements and spent more on marketing, research and development, and new assets.
One example of a company that successfully balanced short-term needs with long-term planning is Target. Target responded to the 2000 recession with a reduction in its operating costs, narrowing distribution margins, and a 20% increase in its sales and marketing budget. The company’s sales grew by 40% over the course of the recession, and its profit margin increased to 10% in the three years after the recession.
Key Takeaways:
- A counter-cyclical strategy does not cut spending during a recession.
- Research from several recessions in U.S. history demonstrates that companies following a counter-cyclical approach to marketing are more likely to succeed than competitors who cut advertising spending.
Why a Counter-Cyclical Marketing Strategy Works
A counter-cyclical approach that increases marketing spending during a downturn makes sense and is effective for several reasons.
Gain market voice and market share
A recession provides opportunities to gain market share and market leadership. Businesses that maintain their marketing budget while competitors cut theirs automatically increase their share of voice. Share of voice leads to gaining market share and long-term benefits. Additionally, your message is more likely to be heard when fewer competitors advertise. You can amplify your online presence and market voice through several means, which Doctor Genius can help you utilize.
Keep brand current in consumer minds.
Maintaining or increasing marketing efforts keeps your company in the forethought of consumers. When purchase decisions are made, a customer is more likely to choose your brand, since it is more easily remembered in consumer minds.
Retain brand loyalty.
The primary source of cash flow and practice growth is a loyal customer base. Developing and then maintaining a strong brand, one that patients recognize and trust, is one of the best ways to minimize business risk. Continued marketing outreach even during an economic downturn works to keep loyal customers.
Convey confidence and stability.
When consumers observe a company that continues to advertise during a down economy, the impression usually made is of a stable and confident company. Business decision-makers feel more positive about that company’s commitment to its products and services.
Increase relative spending.
During a recession, the cost of advertising space falls, the battle to appear in search results becomes less aggressive, and fewer companies invest in a good SEO content strategy. Even if your marketing spending remains the same, your relative spending will increase. You will get more advertising distribution, with less competition. A recession is a good time to invest in marketing because you get more for your money.
A cyclical approach, in which the business cuts marketing costs in economic recessions, damages the business’s long-term chances for success. Not advertising decreases brand awareness, lowers search result rankings, and diminishes brand loyalty. These are very expensive to regain once lost, especially once the economy recovers and competition again increases.
Key Takeaways:
- Counter-cyclical marketing investment brings a greater share of voice and market share, builds brand recognition and loyalty, conveys confidence, and increases the amount of relative spending.
- Cyclical marketing weakens a company’s market position and makes regaining that position after the recession more challenging and more expensive.
Marketing Steps to Take During a Recession
Spending alone does not bring benefits. Rather, the spending must be strategic. Benefits come to the practices that are responsive to the market fluctuations and changes in their patients’ circumstances and behaviors.
During the COVID-19 crisis, patients’ daily activities have changed, and so too must medical practices. Small offices’ marketing strategies must adapt to changes in circumstances and behaviors. For example, as the majority of Americans sheltered in place with limited physical interactions, the reliance on virtual networks grew. More and more people are spending greater amounts of time in front of a screen. Conventional marketing tactics will not work in unconventional times. To reach your patients, you need to go where they are spending much of their time: online.
Help your patients find you online by following some fundamentals of digital marketing:
- Focus on gaining social media presence and engagement.
- Create videos useful to your patients and potential patients.
- Improve the search engine optimization (SEO) of your website and blog.
Adjust your SEO strategies. To more easily be found during online searches, your practice requires good SEO practices that are up-to-date to reflect not only Google’s changes in its ranking algorithms but your patients’ and potential patients’ shifting needs.
During a recession, consumer spending and priorities shift. You need to recognize the changes in your patients’ interests and intentions, and you must adjust your marketing strategies and messaging. The pandemic behind the recession further complicates efforts, adding an additional layer of concerns and considerations.
One should also increase the frequency of posts and the range of content published. As Nielson reports, time online has increased by 215%. This is true despite a reported decrease in online marketing by traditional retails. In other words, this means that there is an opportunity to increase one’s share of voice during this downturn that has the capacity to reap demonstrable growth. As we’ve reported on during previous blogs, our clients have seen record highs in views. Clients at our higher tiers have seen this effect amplified as they post content more frequently and in a wider breadth of formats.
Key Takeaways:
- Having a marketing plan that bolsters the frequency and category of content during this time can improve ranking substantially during the COVID recession.
- Your marketing budget should remain the same or increase during the recession.
- Your practice needs digital marketing, including social media and website with an SEO focus.
- Understand how patients’ priorities have shifted and adjust marketing accordingly.
Doctor Genius is the digital marketing and software company that can help medical and dental practices get an edge over competitors. During financially challenging times, this competitive advantage becomes even more critical to your continued success. Doctor Genius can help you develop a practice recovery blueprint, your plan for your practice to reopen. In addition to the specific health practices to be followed and the logistics required to keep staff and patients safe, your plan should include increased frequency of communication with your patients and staff and digital marketing actions. Reach out to our support team to find out how we can help your practice.
Doctor Genius, located at 2 S Pointe Dr #200, Lake Forest, CA 92630, provides a range of services for practice success. We seek to meet our clients’ needs by providing a variety of marketing, SEO, practice optimization tools, and coaching to transform the healthcare experience. Though we work to provide the most accurate information, the content found on this website is solely intended for entertainment purposes. Therefore, we cannot guarantee that the information provided is entirely correct. You may not use the information on this site to cure, prevent, or diagnose a perceived medical issue. If you have healthcare-related needs, please speak directly to a healthcare professional. Never self-perform medical treatments discussed on this website. All images displayed are also for entertainment purposes only, and personal experiences may differ. Please note that the business tactics mentioned on this site might not be applicable to your industry or practice.
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