Is Public Relations Recession Proof?
With economic challenges on everyone’s mind, we’re asking the question, is public relations recession proof? We know the economy can be a fragile thing. It’s all good when the line is moving upwards. But when it moves too far south, you’ve got yourself a recession and life gets tough.
People spend less, borrowing stops, and businesses scramble to cut costs to stay afloat. The result? Wage cuts, lay-offs and companies going bust. All while the price of everything goes up. Some industries feel the pain more than others. People still need to eat, drink, and stay warm. So supermarkets and electricity suppliers do ok. But what about public relations?
In times of economic downturn, is PR a business essential or a luxury your company can’t afford?
To PR or not to PR?
It’s no secret that marketing and PR budgets are often the first to be cut during times of economic uncertainty. But is that sensible or short sighted?
We say the latter. And Axia Public Relations agrees.
‘When your income decreases, your company usually cuts the ‘extras’ first. One of the first things some companies cut is marketing. But smart companies know this is not a wise decision.’
In this post, we’re going to explore the impact of a recession on public relations, and how public relations can impact a recession.
We’ll look at:
- What a recession is and what causes them
- The impact of a recession on businesses
- The consequences of ditching your PR department during times of financial hardship
- How PR can help you ride the storm.
What is a recession?
The economy is inherently cyclical. It goes through periods of expansion, followed by contractions known as recessions.
According to Investopedia, a recession is ‘a ‘significant, widespread, and prolonged downturn in economic activity’. A recession is said to occur when the country’s gross domestic product (GDP) declines for two consecutive quarters.
What causes a recession?
It’s hard to pinpoint exactly what causes a recession. But contributing factors include stock market crashes, economic shocks, and asset bubbles bursting.
Let’s look at these in a little more detail.
Stock market crashes
A short, sharp fall in stock prices can lead to a recession. Take the infamous Wall Street Crash of 1929 for example. The collapse of the New York Stock Exchange was one of the key contributors to The Great Depression.
Economic shocks are events that have an unexpected effect on the economy, such as wars or pandemics.
The COVID-19 pandemic tipped the UK into its ‘largest recession on record’ in 2020, as businesses were forced to cut back or close to stop the spread of the virus.
Take a look back at how companies used PR to boost their profiles during the pandemic: Company’s Go Kind During the Coronavirus Pandemic.
Asset bubbles bursting
During an economic boom, businesses boost production to meet rising demand for products and services. But what goes up, must come down. When the bubble bursts, demand fizzles out, and businesses are left with stock they can’t shift.
Some consider the housing bubble burst of 2007 to be a leading contributor to the recession that followed.
The impact of recession on businesses
Recessions aren’t fun for anyone, least of all businesses. Here are just a few of the ways they feel the burn.
Nothing hurts a business quite as much as when the cash register stops ringing. But during a recession, consumer confidence drops. People tighten their purse strings and spend less.
Cash flow dries up
As we all know, cash flow is the lifeblood of any business. But recessions cause bottlenecks in the system. Delays in payments from cash-strapped customers and vendors can make it difficult for businesses to meet their financial obligations, such as paying their employees and suppliers.
Tightened credit conditions
It’s not just consumers that become more cautious with their spending during an economic downturn.
Lenders tend to tighten their lending criteria when assessing the creditworthiness of loan applicants. As a result, some businesses are unable to access capital. At the same time, tightening credit conditions can result in increased borrowing costs. A double whammy.
When sales stall and demand drops, businesses cut costs wherever they can.
Depending on how badly a business has been hit, the first casualties are often the workforce. If you consider the average company spends 64% of its total expenditure on its employees, you can understand why.
Other belt tightening measures that businesses take include cuts in capital spending, production, and operating costs.
And of course, budget cuts.
As we said earlier, marketing and PR budgets are often the first to be slashed in a rocky economy, as they’re often viewed as non-essential costs.
However, this thinking is flawed. Marketing and PR are crucial for survival.
‘Companies that cut their marketing budgets due to recession not only make it harder to retain customers but also to bring back new and existing customers once economic growth returns’.
With that said, let’s delve deeper into the reasons why cutting public relations during a recession is a mistake.
Why you need to invest in PR during a downturn
Numbers don’t lie, right? Then the stats quoted by marketing data and analytics company, Analytic Partners in their Rules of Recession report prove that pausing your PR and marketing activity during a recession is bad for business.
The report says:
‘60% of brands that increased their marketing investment during the last recession saw ROI improvements.’
They go on to say:
‘Those who slashed spend risked losing 15% of their business to competitors who boosted theirs.’
With those statistics in mind, let’s look at the reasons why marketing and PR investment is crucial during a recession.
Keep people talking
You know that saying ‘out of sight, out of mind?’ That applies here. If you’re not visible, people will forget you exist. Or worse, assume you’ve gone bankrupt.
As this Publicist article says:
‘In so many previous cycles, it has been shown that you make your real money with the work you do during the downturn, building for when the economy takes off again. A huge part of that work is making sure you communicate to your audiences. Believe it or not, if you go into heads-down mode and neglect to communicate externally, people will often conclude you have failed and gone out of business.’
Okay, but how can you keep your brand top of consumers’ minds? Simple. By maintaining communication with them.
This is exactly what Starbucks did during the 2008 recession.
During the economic downturn, the global coffee chain was struggling to survive. They were forced to close hundreds of stores as consumers abandoned them in favour of cheaper options such as fast-food chain McDonald’s, who improved their coffee products to compete for market share.
To win back customers, Starbucks launched a campaign called ‘My Starbucks Idea’, an online community where people could share, vote, discuss and put into action ideas on how to enhance the Starbucks experience.
The campaign was a hit. The community-centric experience gave customers a direct line of communication with the brand, helping them build a loyal fan base. Compounded with an active social media marketing strategy, Starbucks successfully transformed its brand image from ‘expensive and detached’ to ‘cool, caring, and value-added’.
They managed to win people back and improve their brand image during the worst recession since The Great Depression. The outcome could have been very different if the brand hadn’t innovated and found a meaningful way to engage with customers.
As Starbucks demonstrated, customer engagement doesn’t have to cost the earth. Social media and email are both highly effective and low-cost communication tools, as is content marketing. A monthly newsletter and regular blog content will keep your comms ticking along without breaking the bank.
Get ahead of the competition
Another reason to invest in PR and marketing during a recession? If you don’t engage with your audience, you risk losing them to the competition.
As Jolene Campbell says in this West Press article,
‘When you stop advertising, participating in social media or reaching out to your customers, you open the door for your competitors to step in. Someone in your business or industry is going to be smart enough to stay the course. It might as well be you.’
Wise words. It’s also worth considering that many of your competitors will slash their PR budgets in a recession.
Keeping your public relations activity running will give you a competitive edge. When the competition goes dark, you can shine under the spotlight. It’s the perfect opportunity to connect with existing customers and increase your following by reaching out in a less crowded arena.
Play the long game
Recessions are tough. But like most things in life, they’re temporary. When things pick up again, the last thing you want is to have to re-establish your brand from the ground up.
Think about it. The short-term gains of cutting your PR budget won’t amount to much if you have to put a ton of time, money and effort into raising brand awareness.
To quote The Institute of Practitioners in Advertising,
‘A short-term reaction is never as effective as long-term investment’.
It might not seem like it when you look at your bank balance during a recession, but staying the course with your PR strategy is best for business.
Stay ahead of a crisis
Disgruntled staff. Unsatisfied customers. Mass redundancies. These are all extreme, but far from impossible situations you may find yourself in as a result of dwindling funds and budget cuts.
You need to be prepared for a crisis. And who better to help you formulate a crisis communications plan than a public relations professional?
As a business owner, you’re not going to want to deal with the stress of crisis management when there are a million other things you need to do to keep your business running.
To get the lowdown on dealing with a crisis, read: Crisis Management in Public Relations.
Elon, what are you doing?
And it’s not just the small startups that are reducing their staff count. The big dogs like Amazon, Meta, Microsoft and Google are slashing personnel too.
As a result, Twitter’s public relations is being managed by one person – Elon himself.
In a series of ill-advised PR moves, Musk reinstated the accounts of previously banned controversial figures, suspended the accounts of journalists who got under his skin, and rubbed people up the wrong way with his outrageous tweets.
‘His questionable judgement and recent actions have turned him into a punchline for late-night TV hosts Stephen Colbert, Jimmy Kimmel and John Oliver who’ve relegated Musk to a list of divisive figures that includes Donald Trump, Marjorie Taylor Greene, Alex Jones and Kanye West.’
Those are names you don’t want to be associated with if you’re trying to grow a brand. If only he hadn’t removed the PR experts from his payroll.
Musk’s numerous PR problems could fill multiple blog posts, but this example alone should highlight the importance of professional public relations for your business.
From one social media platform to another. Read: Facebook PR: The Highs and Lows of a Social Media Giant.
Is public relations recession proof?
Let’s bring things full circle by answering the original question: Is public relations a recession-proof industry?
The short answer is no. But it should be.
As we’ve established, keeping your PR arm running during times of financial hardship can keep your customers on side, help you get ahead of the competition, and manage crises effectively.