Startup Marketing in a Recession

Dieter Rappold
5 min readMar 19, 2020
Image by Pexels from Pixabay

Or in other words: “a crisis is a terrible thing to waste” as economist Paul Romer once said. The Corona Virus is the black swan of 2020, or not so much? After more than a decade of economic growth and a roaring bull market everyone was waiting for the changing tides and COVID-19 is just the trigger that made it happen. The first COVID-19 Case happened in China in November 2019 and as of March 19th, we count +240,000 confirmed infections globally. On Feb 12th the DowJones hit a high of +29,500 points and within more than a month it crashed below 20,000 by March 19th a loss of +30%. And this is just the beginning.

Time to rethink your marketing budget

If you are an ambitious startup somewhere at Seed stage trying to get to your Series-A within the next 12–18 months you probably had a very aggressive budget planning for 2020 aiming for a 3–4x YoY growth and some significant investment in Marketing and Sales as well as hiring people to achieve that. Well, now it is time to re-evaluate and come up with some serious crisis management for your Marketing efforts.

General approach

  1. Be quick. After 10 years of boom, it is hard to believe that times can change. Acting slow is often caused because we have a hard time to change existing patterns of behaviour. In an escalating crisis wasting that time is mission-critical.
  2. Take a long term perspective. Downturns require short term actions but like with the North star metric of yours, keep an eye on the future and identify substantial competitive opportunities.
  3. Don’t forget about growth initiatives. When everybody else goes into hibernation mode your market still remembers who stood strong and was there. Although strict cost-cutting and efficiency improvements are inescapable, make use of new opportunities.

An HBR article about an analysis of 5,000 companies across the last four business cycles showed that 14% of the companies who followed these three general rules could even grow sales and improve their EBIT margin during downturns.

Image by Peter H from Pixabay

Specific operational best practices

We always have the chance to learn from history and others who mastered severe crisis. And there are some pragmatic hands-on learnings, best practices and benchmarks for these kinds of situations we want to share with you.

  1. Love your existing customers

In times of saturated markets and rising CACs your existing customer base gets ever more important. Loyal customers are the primary, enduring source of cash-flow and organic growth. Prioritize campaigns and efforts that focus on repeat purchase, cross-selling and upselling. Kickstarting your customer loyalty program and investing in your CRM activities might be a great idea and pay high dividends in the long run.

2. Re-focus on high ROI and growth

In boom times the spending spree is all around and we try to adopt many channels, approaches, formats and growth hacks, some with better ROI than others. Now it is the time to radically prioritize and focus on those efforts that deliver the highest ROI and propensity for growth. As a rule of thumb take 90% from the remaining marketing budget and focus on the top 3 initiatives with the highest ROI and cut the rest.

3. Go organic

A lot of your Marketing budget goes into paid media — cutting that will help you to lower your marketing expenditure significantly. But even in times of diminishing organic reach on platforms like Facebook, there are plenty of options to improve on your organic traffic. Lockdown time is clean-up time: work on your content strategy, create some evergreen pieces of useful content or do a technical SEO check of your own assets. That is always a great investment.

4. Don’t forget the brand

Brand is the biggest value driver for every later stage startup, therefore better start building that early. Even in the hardest downturns, one should not neglect the brand. Brands reduce complexity, they reassure buying decisions, they are emotional leaders and build an emotional connection with your customer base thus bolstering trust.

5. Understand recession psychology

Besides hard quantitative factors like disposable income, recessions are driven by emotions like fear and eroding confidence that will lead to fundamental adjustments in behavior. The first step of responding is understanding a new way of segmenting your market based on behavior. Another HBR article came up with a very insightful methodology and valuable tactical advice.

Based on that segmentation, tailor your tactics within the same model

Conclusion

Very often Marketing budgets are cut disproportionately in times of crisis because they can be cut quickly and very often without letting people go. Try to take a differentiated approach and distinguish between the necessary and the wasteful. Triage your brands, products and services based on survival prospects. Trim your budget like a surgeon and cut loose poor performers and eliminate low yield tactics. Use these times to get company-wide buy-in for revising marketing strategies. Then you are in a great position to wait and lookout for new opportunities that emerge from the ashes.

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About the author

Dieter Rappold is a serial entrepreneur, angel investor and co-founder of Speedinvest Pirates, the growth Marketing part of the Speedinvest platform. He is an expert in digital marketing and growth with almost 20 years of experience in the industry. As a renowned keynote speaker in the field he holds several standing lectures at Universities for Digital Marketing, Social Media Marketing and Content Strategy.

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Dieter Rappold

serial entrepreneur, angel investor, into growth marketing, content strategy and always driven by curiosity. Speedinvest Pirates, tubics.com, smint.com