Why Marketing Companies Fail: They Can’t Answer This Question During Economic Downturns

Way back in 2017 I wrote an article on the long, harrowing road to becoming an independent marketing consultant. Times were good in terms of the business climate at the time, which was partly why I included this particular nugget that now in hindsight seems ominously prophetic:

It’s easy to coast along by not holding yourself accountable for producing results when times are good; when those unfavorable business times set in you’re going to be on the chopping block.

Well, if you’re reading this around the time I’ve published it, winter has arrived.

The effects of COVID-19 on the small business community have been sudden, shocking and heartbreaking. Almost overnight every state in America ordered nonessential businesses to close, while those considered essential such as restaurants were restricted to takeout and delivery. Small businesses have suddenly found themselves fighting for their lives, turning to GoFundMe as a result of the inadequate responses of the government with the Paycheck Protection Program. They’ve had to rapidly adapt to a new normal in a way that I don’t think I’ve ever seen before.

As I noted in a previous post, even as the United States partially reopens with restrictions be in place for a long time, small businesses are going to continue to struggle. People are still being cautious. Restaurants are only at 50% capacity. Most importantly: COVID-19 is still here, and there’s the possibility of a second wave.

In other words the hopeful refrain of many that we could stick this out for a few months and then instantly go back to normal was wishful thinking. Even if we did, millions of lost jobs and billions of dollars in lost revenue won’t be coming back.

We’re in a period of small business contraction. Small business owners are tightening their belts. They’re examining their balance sheets and asking themselves “Do I need this to get by in the immediate future? As a friend and sort-of-colleague aptly told me, nobody is expanding or increasing expenses right now. They need to focus on the next two weeks, maintaining the status quo, and rehiring staff.

Unfortunately, marketing tends to get trimmed very often during downturns and there’s a simple reason for it.

By now you’ve probably figured out the question that countless marketing companies can’t answer, but here’s a relevant story that happened just recently.

A client was thinking of bringing on a marketer to do a significant amount of work. The client asked me to meet him to jointly interview him and discuss a game plan of sorts. The marketer, whom I will refer to as Bob, was nice, and the initial conversation covered the usual bases. Bob went into showman mode: He showed us plans for E-mail opt-ins, promo coupons, a QR code and an app to go with the overhauled website.

I was nagged by skepticism of how he presented each of these, which was when I dropped the $1 million question: “So can you tie your work to revenue with other clients?”

There was a brief pause, and the Bob’s response was “Um?” Following that, the marketer proceeded to review most of what he already covered without actually addressing what I had asked. In other words, no.

The rest of the meeting went on as normal but I immediately noticed that the client’s enthusiasm was wilting. We shook hands and went our separate ways. Later the client texted me to confirm that he was declining Bob’s offer. I quietly removed Bob from the social media accounts.

Something else I mentioned in my marketing consulting article which is now more relevant than ever is that marketing is an investment. If you’re being paid a $500 month retainer for your marketing services, you need to show – every single month – that your actions are either directly or indirectly resulting in a net gain of $501 for your customer. Otherwise it becomes just another expense; and expenses are one of the first things to be cut during any downturn, let alone a worldwide pandemic.

Knowing your expectations is simple at this point. Even if clients don’t actually tell you that this is what they want from marketing, it can be boiled down to these questions.

  1. Can you make us money?
  2. Can you save us money?
  3. Can you improve or streamline a marketing process?

Take note, marketers. If you can’t instantly answer any of those three questions off the top of your heads, you’re going to have a very bad few years coming up.

It’s been easy in the years since I wrote that article to coast by. When times are good it’s easy to just take credit for successful business quarters. It’s not like there’s an impetus for most businesses to critically examine their expenses. After all, money is coming in, bills are getting paid and there are marketers helping spread the word. What they’re doing must be doing.

Except that’s true until it isn’t.

When any kind of downturn hits, especially one on this scale, priorities change. Suddenly the emphasis is surviving on a day to day basis. That’s the point where your clients are going to start looking at the analytics for the app or QR code that they’re paying increasingly precious money for. If there’s no measurable demonstration of how you’re making money, then you’re losing money. Losing money becomes that much more of a problem when money isn’t being made.

If this is sounding hard, there’s a quote for this situation from A League of Their Own: “It’s supposed to be hard. If it wasn’t hard, everyone would do it.” Nobody said this would be easy.

I can speak to this part from personal experience. My marketing tended to thrive when clients were doing well – I would get cut during a bad quarter if I couldn’t sufficiently tie what I was doing to the dollars. To put it bluntly, due to my inexperience at the time, if COVID had happened during the early 2010s it would have wiped me out.

Web hosting puts me in a vastly different situation; what I do is mostly considered an essential service and the results of my work are demonstrable (i.e. the website is still accessible, current and well -positioned among my other responsibilities).

The keyword is demonstrable. Which is why I suspect we’re going to see both a culling and an explosion of marketing companies at the same time.

I suspect the culling is happening as we speak. Marketing companies are suddenly finding themselves unable to justify their expenses, and they’re going to lose clients. I also predict many of them will close due to lack of clear direction or market niche.

At the same time, online advertising has already exploded and will continue to do so. Ironically even as digital marketing companies face a major reckoning the demand for actionable services is going to be higher than ever. Those companies that can answer the questions I outlined above will likely continue to thrive.

This goes for business owners as well. All you need to do to vet the money makers from the expenses is that one simple question. So say it with me: Show your work.