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Is Advertising First to Go During A Recession?
Although it seems that talks about a recession have quieted down within the past few months, there still seems to be a portion of employees that are being laid off. The unemployment rate has dropped significantly since the start of the pandemic and the beginning of this year, yet inflation is still high, and it is expected mortgage rates will continue to grow.
It seems that the majority of lay-offs happened in the peak of summer in July, but companies are still protecting their losses from the possible effects of a recession. It is critical to understand what companies are quick to cut during a recession, and often it times it’s the budget for advertising and marketing.
Budget cut depends heavily on the marketing and advertising usage for the company, whether the company has an in-house department or outsources via an agency. Let’s walk through both scenarios to understand how they can affect agency and in-house professionals.
The premise of an agency is to have multiple departments like Advertising, PR, Digital Marketing, etc., and do advertising work for branded clients that do not have an internal department. Agency work is often fast-paced because an Account Manager or UX Designer will work for multiple companies simultaneously.
When there is talk of a recession, these large brands and companies cut budgets for outsourced work, which is frequently an advertising budget. Companies either reduce their spending from the agency or they will altogether withdraw from using an agency for advertising.
Agencies let go of their employees because there is not enough business to continue to staff everyone.
In-house employees work for the team internally. Most of the time, there is a small marketing/advertising within the company, and employees wear different hats. If the company is a big brand, it is common if the company has a team of strategists to oversee the company’s vision, but they will hire an agency to execute the work.
When a recession is about to hit, the company will drop in-house advertising and junior employees and limit budget spending on ads. The more senior employees in this department will have to pick up more work to cover the tasks of the junior employees.
Unfortunately, advertising and marketing budgets are some of the worst to be cut because it seems to have the opposite effect. Often companies believe that cutting this budget will help them save money over time, but it turns out that cutting these types of budgets reduces awareness and potential customers.
Research from the International Conference on Eurasian Economies discovered that brands that continue to advertise during a recession gain loyal customers because of their dedication and solidarity through tough times.
We hope that you are not affected by layoffs, and if you, unfortunately, are, we are here to help you find a new position. Visit our jobs page to get in touch with our recruiters today about our open opportunities.