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Another 1987 style economic crisis could happen - are marketers prepared?


By Gordon Young | Editor-in-Chief

October 11, 2023 | 6 min read

Gordon Young, founder of The Drum, reflects on the difficulties of the 1987 crash and asks... are marketers ready for another?


These are turbulent times. As war in the Middle East looms, energy prices spike and governments drown in debt, you can’t help surveying the future with an increasing sense of dread.

However, those attending the International Monetary Fund annual shindig in Marrakech do not share the sentiment.

”Our projections are increasingly consistent with a soft-landing [in the global economy],” said Pierre-Olivier Gourinchas, the IMF’s chief economist.

Let’s hope he is right. But others fear current economic pressures are akin to the conditions that led to the 1987 Black Monday stock market crash. They are parallels. Bond markets are falling, debt is increasing, and equity markets seem over-stretched. If the IMF has got it wrong, the consequences would be dire.

A crash on the scale of 1987 would see soaring interest rates hitting mortgage holders and indebted companies, especially in property. The government would be hard hit and not be as well placed to intervene.

Years of profligate spending and money printing means they have already blown any fiscal ballast. They will be in no position to help steady the ship. So the consequences of a 1987 crash - which did not see the UK enter recession until the 90s - could impact faster and harder. In the spirit of hoping for the best and preparing for the worst, it is worth asking what lessons the marketing sector can draw from the 1987 crash.

What strategies will help weather a potential storm?

Budget Constraints: Many companies had to tighten their belts due to financial uncertainty in the late 80s - and the first budget cut was always marketing. On the one hand, marketers learned to do more with less and prioritize cost-effective strategies. Of course, they also learned businesses that continued to invest in marketing during the downturn tended to emerge stronger than those who cut too deeply. Coca-Cola and Nike are two good examples.

Emphasis on ROI: The crash emphasized the need for measurable returns on marketing investment. Marketers began to focus more on data-driven approaches to prove the effectiveness of campaigns. The John Wanamaker era of ‘Half the money I spend on advertising is wasted; the trouble is I don’t know which half’ was coming to an end. With technological advances marketers are better placed to focus on effectiveness.

Diversification: Companies started to diversify their marketing channels to reduce risk. This demand drove the rise of digital advertising in the 1990s. Today, with the rise of retail media, content marketing and experiential brands are better equipped than ever.

Consumer behavior: The crash impacted consumer behavior, and companies had to adapt to their changing preferences. More emphasis was placed on value-oriented messaging, trends already apparent in markets such as the UK with the rise of discount retailers. It also fell to marketers to offer consumers some respite from the doom and gloom by producing more creative and entertaining work. The years around 1987 were seen as a golden creative era. And of course in a downturn companies have to win market share from competitors to grow. In a cut-throat world cut-through is key.

Globalization: The 1987 crash was a global event, highlighting how interconnected the world’s markets were. Despite all the current talk about deglobalization this is more true than ever. MacDonald continued its international expansion throughout the late 80s and 90s, maintaining growth by building global reach. Today, it is a strategy pursued by some UK media owners, such as the Mirror and Independent, who have launched in the US. But for other businesses, it is worth remembering that new technology means you do not need to be big to be global.

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The key lesson of the late 80s and early 90s was that among all the turmoil; there were opportunities. However, adaptability and agility were key traits. Companies need to embrace both change and emerging technologies. Back in the day, it was the rise of the PC and Windows. Now it’s AI. But even if the IMF is right, and we are headed for a soft landing, it’s probably time to fasten your seatbelts and prepare for an interesting ride.

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