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    Analysis

    Small and Medium Businesses are Riding the Economic Tides

    Abstract

    • With the downturn of the economy, advertisers are cutting their spend on brand awareness initiatives
    • Despite expectations, small and medium businesses have cut their ad budgets less than larger ones.
    • SMBs have been focused on performance initiatives since prior to the pandemic, perhaps accounting for their ability to weather the economic shifts.

    Interest rates are increasing (again) and the US is bracing for a recession. With these headlines, the advertising industry is bracing for cuts, from employees to ad budgets. It may stand to reason that small and medium businesses (SMB) would be the first to feel the cutbacks. However, SMB marketers are currently weathering the storm better than their larger counterparts.

    According to The Wall Street Journal, brand advertising will be the first to be cut. As brands evaluate where they can make cuts to their budgets, broad awareness plays are taking a backseat. Instead, brands are opting to focus on their performance buys, efforts that translate directly into KPIs, essential during lean times. Others have abandoned the task of building their pipeline altogether and instead are focusing on messaging their existing customers. This strategy may work in the short term, but there is the risk of a long-term decline or stagnation.

    Fewer SMBs have cut their spending compared to their larger counterparts, which may come as a surprise to many. According to RBC analysts, only a quarter of SMBs has cut back on spending, while larger businesses far outpace that. This may be because SMBs have already focused on performance marketing, focusing their attention on online advertising rather than broader awareness plays. 

    The economic trajectory may have a longer-term effect, forcing the smaller budgeted SMBs to cut back on their spending. Compared to the pandemic-era fueled increase in advertising by these groups, there may be an adjustment if the inflation rate remains high. Still, for now, SMBs have been riding the economic uncertainties, taking advantage of the digital tools at their fingertips. 

    SMBs are Using Advertising to Drive Sales

    According to Statista, even before the economic swings of the pandemic, SMBs have had a keen focus on performance over awareness. According to a survey done in 2019, over half of the respondents said they were looking to drive sales or retain customers as opposed to just 12% looking to raise awareness. This may be why, as a group, SMBs have yet to reduce their spending; the return on investment of performance marketing allows them to weather the ups and downs of the economy.

    SMB marketers are still keeping a watchful eye on their campaigns. Almost half of respondents to an eMarketer study said that they monitor their campaigns weekly, or even constantly to ensure that they are making the appropriate moves for their business. From new testing to the effects of economic swings, SMB marketers are keeping a watchful eye on their initiatives and making the most out of their efficacious budgets.

    Conclusion

    While SMBs may seem to be in a more precarious position with the downturn of the economy, their focused approach to performance-driven initiatives has given them the tenacity to withstand some of the turbulence. 

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