During hard times, people are generally reluctant to start new businesses or expand the business they are currently in. This is simply not a viable strategy. As we have seen throughout history, cost cutting will not get you very far and only yields short term results. No business has ever cut its way to greatness.
When the economy is bad, you still need to make the effort to continuously innovate and market yourself. Reducing costs will not work for very long. You can, however, allocate your costs in a manner that will offer better value. For example, if you have two different marketing campaigns with one outperforming the other, you can reduce or eliminate the one that’s underperforming and add to the campaign in which you’re getting better results from.
What you should not do, however, is cut your advertising budget when the lifetime value of the new customers you’re getting is higher than what you’re spending. No matter how great your current clients are, you will constantly be losing clients over time. If you run a great business, this will happen slowly. The point is that you will always need a stream of new business. Because of this, you will always need to allocate resources to advertising.
In fact, you can improve your position in your market. If your competitors are either closing or cutting costs, your business could fill that void. The mediocre businesses will go out of business first. Best Buy, for example, prospered when Circuit City went out of business.
Keep in mind also that many great business get started in hard economic times. Apple and Microsoft are two examples of this. In times like today, opportunity costs are low. This means that there are a lack of alternatives. More people choose to pursue their dream because the steady employment option has been taken away. This leaves the choices to either do nothing or start something great.