When a recession looms, the conventional wisdom is to pull back, cut costs, and go conservative. For startups, this often leads to the short-sighted decision of reducing an activity that brings them the most public attention and holds the promise of spurring new revenue: cutting their marketing and communications spending.
As the Harvard Business Review reminds us, “Companies that have bounced back most strongly from previous recessions usually did not cut their marketing spend, and in many cases actually increased it.”
This concept of weathering a recession with your marketing and communications activities intact results from a variety of factors
The most notable of which is that the news doesn’t stop during a recession, nor does the climate crisis. So, climate tech and energy transition companies that pull back on marketing and communications cede media attention to their competitors. Savvy startups know this.
During previous economic downturns, not only did cleantech startups face budget cuts, but they also faced a lack of investment activity. But this is not Cleantech 1.0.
As Bloomberg reported in September, things are different this time around. In fact, according to Mark Cupta, managing director of Prelude Ventures.
“2022 is on pace to eclipse every other year in venture-capital fundraising” with the trend “amplified” for climate investing, he says. The Bloomberg article notes that every climate startup Prelude has recently backed has received highly competitive investor bids in funding rounds.
“There’s still a very robust, potentially recession-proof, segment within climate tech for people who are trying to solve really hard problems,” Cupta says.
Another venture capitalist, Peter Gajdoš, the climate lead at Fifth Wall, believes the cleantech sector now operates outside regular market cycles.
“Climate doesn’t care about inflation. The oceans are warming up. The forests are burning,” Gajdoš said. “These problems are still there, and someone needs to solve them, which creates opportunities.”
This is why we believe Technica Communications weathered the initial economic downturn sparked by the COVID-19 pandemic so well. We didn’t lose a single client; we picked some up. Companies who worked with us recognized the value a strong communications strategy brought to their bottom line, and they valued it more than the expenses they cut.
Companies that narrow their options by restricting marketing and communications spending to make it through a recession do themselves a disservice and weaken themselves against competitors
Without as many companies touting their achievements, journalists and publications lack content. Yet, there will always be a need for news and content. Reporters still need to “feed the beast” with daily news pieces. They have to report on something. If companies are not touting their achievements, how will reporters know?
The same goes for climate tech investors. Startups must actively market their technology to gain the notice of VCs that still have funds to allocate and close those deals that are in due diligence. The number of VC funds focused on climate has risen significantly in the past few years. That makes the competition for those funding dollars even more fierce. But, without a marketing or communications team, it becomes more challenging to message your successes for VC commitment.
Because there will be a vacuum of mainstream companies following this ill-advised tactic, any recession is an opportunity for climate tech startups to double down on visibility to help increase investment activity and sales.
Keep playing the field
The climate tech industry is obligated to maintain awareness of the climate crisis and its solutions to lead humanity in preventing disastrous climate breakdown. And with warnings from UN secretary-general António Guterres at this year’s annual U.N. climate conference, known as COP27, that the world needs to “cooperate or perish,” it’s more critical than ever for climate-focused companies to continue to play the field.
Climate tech startups understand the urgency and risk of taking action now to reduce the worst effects of the climate crisis. They must cover their bases and maintain or increase their marketing activities to generate new sales, new projects, and new customers to prove their solutions are the ones that will make a positive impact on the climate.
First base—marketing equals increased sales
Marketing exists to grow revenue, and committing to a well-oiled promotional machine is committing to revenue. And the numbers don’t lie. Marketing Dive reports that more than half (60 percent) of brands that increased media investment during the last recession saw ROI improvements, according to the latest ROI Genome Intelligence Report by marketing intelligence provider Analytic Partners.
Second base—marketing cost-savings is an illusion
Reducing marketing and communications spending brings only hard cost savings—essentially budget line items. However, there’s more to cutting marketing spend than cost savings alone. When economic recovery comes back, companies that went down the ill-advised path of reducing marketing budgets may find that competitors have eclipsed them or that it is more challenging to be heard in an increasingly noisy climate tech marketplace.
Third base—marketing lends to brand purpose
Increasingly, brand purpose is a corporate characteristic valued equally by consumers and corporate employees. Year after year, research has demonstrated that companies with a brand purpose outperform competitors and have more enthusiastic employees. A Harvard Business Review study found that when companies had an articulated purpose widely understood in the organization, they had better growth than companies that hadn’t developed or leveraged their purpose. Specifically, 52 percent of purpose-driven companies experienced over 10 percent growth compared with 42 percent of non-purpose-driven companies.
Comparatively to corporations in other sectors, cleantech companies have the advantage of showing that change for a worthy cause, decarbonization, will ensure a livable planet for future generations, help everyone be more energy independent, and ultimately save money. Keeping a steady stream of information creates a resonant brand purpose that encourages stakeholders to engage with the business from the standpoint of its value.
Home—marketing with the end goal in mind
In a perfect world, cleantech startups would have infinite funding to market their solutions. While this is not the case, the good news is that companies are now getting more help from the US government, which should help offset recession pains.
According to the World Economic Forum, between the IRA and the Infrastructure Investment and Jobs Act, which was adopted in late 2021, the US government has committed to $479 billion in new climate and energy spending across the board. This legislation will materially change the economics of industrial decarbonization and boost jobs and sales in climate tech.
I have yet to meet a single person who does not want a livable planet for future generations. We all have the same end goal in mind. Now, it’s time to ensure that marketing and communications budget cuts do not become the trees that hide the forest of opportunities. Companies that brave the storm with their complete programs intact might find themselves recession-proof and poised to thrive once the storm passes.