Why cutting the comms budget during times of crisis is a mistake

Scissors cutting the word "budget"

When confronted with an economic fallout, businesses will find themselves with a familiar dilemma: where can budgets be cut? Typically marketing budgets tend to be one of the first to feel the tightened purse strings. Here we explain why slashing the communications budget could end up costing you more in the long run.

As we sit on the edge of the new financial year, the cost of living crisis continues to tighten its claws in businesses of all sizes. Rising rent, utilities, insurance and labour costs pair with supply chain disruptions and reduced consumer spending; the result is a grip that seems unrelenting. 

And it’s not just consumers watching the pennies; investors and banks are tightening their purse strings too, triggered by the most recent stock market crash and inflation hitting a new 40-year record. 

Startups, scale-ups and even larger businesses in need of a boost in capital are now finding investment rounds exceptionally tough as investors become increasingly risk-adverse and funding options dwindle. Many business owners and entrepreneurs are under immense pressure to stay afloat amidst current cost concerns. 

However, while there’s no denying the level of uncertainty in the economy at the minute, financial concerns will not plague businesses forever. Economists still believe the UK will narrowly avoid a recession and that by next year, the crisis will have eased significantly. 

Despite cost concerns being short-term, it’s not uncommon to see companies cut their budgets in order to minimise expenses and prepare for the worst during times of crisis. Unfortunately, one of the areas that often gets overlooked during these times is the communications budget. 

Lacking a clear understanding of the value of effective communication during a crisis, however, is a dangerous situation to find yourself in. Reducing or cutting comms out altogether essentially removes the ability to communicate effectively with your customers, employees and investors. This can have severe consequences, impacting reputation and bottom line in the long-term. 

If past periods of financial uncertainty have taught us anything, companies that invest in communication during a crisis are often the ones that come out on top in the long run and here’s why:

Maintain trust

Companies that continue to invest in their communications during times of crisis demonstrate their commitment to transparency, accountability, and responsibility, which can go a long way in building and maintaining trust. 

Trust can also support customer retention. After all, when a crisis hits, people naturally look to the companies and brands they trust for guidance and reassurance. If you’re not communicating with your stakeholders, customers, and employees, you’re not only missing an opportunity, but may risk customers being drawn elsewhere.

Take the 2008 global financial crisis; many companies, particularly in the financial sector, were hit hard. Predictably, they began cutting costs in an effort to survive, with the communications budget often the first to go. However, in failing to communicate effectively with stakeholders, the result was a complete lack of transparency, which in turn, eroded trust and confidence in the companies. In the end, many seemingly powerful companies folded and those that didn’t found it more difficult to recover.

American investment bank Lehman Brothers – which famously collapsed in 2008 with a bankruptcy filing that was the largest in US history – is a prime example of this. In the months leading up to its bankruptcy, the company cut back on its communications with investors and customers, leaving them in the dark about its financial health. This lack of transparency contributed to the loss of confidence in the company, making its eventual collapse all the more likely.

In contrast, financial services firm Goldman Sachs – an investment bank of similar size – maintained its communication efforts and transparency during the same time, despite the challenges the crisis brought. This helped to reassure investors and customers that the company was taking steps to address the situation and the bank was better able to weather the storm.

Protect reputation

It’s no surprise to see reputation next on the list. Aside from its people, a business’ reputation is arguably its most valuable asset, and it’s essential to protect it during times of crisis. If you’re not communicating with your stakeholders, customers, and employees during a crisis, there are no two ways about it –  you’re putting your reputation at real risk. Negative rumours and misinformation can spread quickly, and without clear and consistent messaging, your brand may suffer irreparable damage.

Imagine there is a PR crisis, for example – what happens when resources are not available to react promptly, because the comms budget has been reduced or cut completely? Many in the comms industry will remember the major PR crisis United Airlines endured back in 2017, caused by video footage of a passenger being forcibly removed from an overbooked flight quickly going viral. As a result, the American airline faced intense scrutiny and criticism from both the public and the media. However, making the situation far worse was United Airlines’ slow and inadequate response to the crisis, with many observers noting that the company simply didn’t have the resources available to react promptly and effectively.

Indeed, this lack of preparedness was almost certainly partly down to the fact that United Airlines had been cutting costs in the years leading up to the crisis, including reducing its comms budget and staff. Unable to respond effectively to the intense backlash and negative media coverage, of course its reputation suffered.

Compare this example to online grocery delivery service Ocado’s comms strategy after it experienced a major fire at its customer fulfilment centre in 2019. With the loss of customer orders and significant damage to the facility, the incident led to concerns from customers and investors about the company’s ability to fulfil future orders and maintain its reputation for reliability. 

However,  Ocado responded quickly and transparently to the crisis, issuing regular updates on the situation through press releases, social media, and updates on their website. Not only was the company open about the extent of the damage, the impact on customer orders, and their efforts to restore operations, but it also took steps to reassure customers and investors by announcing plans to partner with other retailers to maintain delivery services.

It was this quick response and effective crisis management that ultimately helped protect Ocado’s reputation and position as a leader in the online grocery delivery market.

Seize opportunities

Finally, it’s important to talk about seizing the opportunities with your stakeholders, customers, and employees that wouldn’t typically exist during ‘normal’ times. For example, if your company is implementing new safety protocols or offering special discounts or promotions, communicating these messages can help to build goodwill and trust. 

What’s more, times of crisis often see fewer brands marketing their products, which means less competition for those who continue with their marketing efforts. 

British multinational telecommunications firm BT Group, for example, increased its communication efforts during the 2008 financial crisis by launching a new advertising campaign “BT Family”. The campaign featured a series of adverts that emphasised BT’s reliability and customer service, highlighting the company’s commitment to helping customers stay connected during challenging times. The advertisements also highlighted BT’s technological innovations, such as the launch of its new fibre optic network.

Facing significant challenges due to the financial crisis, including decreased consumer spending, the “BT Family” campaign was able to turn things around for the company, and was successful in helping strengthen its brand reputation. It was also praised for its positive messaging and emphasis on customer service, helping to solidify BT’s position as a leading provider of telecommunications services in the UK.

Over in the US there are countless examples of the same thing happening; companies cleverly seizing opportunities during challenging times with the help of comms. Coca-Cola, for example, used its marketing and communication channels to support communities and frontline workers during the COVID-19 pandemic. 

The company launched a campaign to donate advertising space to public health organisations and created a $13.5 million fund to support local organisations and businesses impacted by the pandemic. Coca-Cola also used its social media channels to share positive and inspiring messages with its customers, which helped to build goodwill and strengthen the brand’s reputation.

From crisis to prosperity

In a nutshell, there is a lot we can learn from past recessions. History shows us time and time again that the companies that have kept investing in their marketing efforts during times of crisis are the ones to come out on top. 

Maintaining trust, protecting your reputation, and seizing opportunities are all reasons why brands need to continue investing in their comms strategies during times of crisis. But it’s also essential to remember that crisis communication is not just about responding to the immediate situation – it’s about laying the foundation for long-term recovery and growth. 

This makes putting a strong crisis communications plan in place and continuing investment in comms strategies during times of crisis not just nice to have, but essential.

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