“While businesses are putting customers under a microscope, their customers are, in turn, examining them more closely than ever.” – Harvard Business Review
Whether we have actually entered a recession yet is still being debated, but we do know we’re going through a significant downturn. When the economy takes a downturn, there is a dramatic shift in the way that people spend their money as a new frugality mind-set grows.
This is true for both customers and businesses. As budgets become tighter, companies are forced to be more strategic with their ad spend. Although event budgets have increased in Q3 this year, all other forms of marketing have decreased, including sales promotions which are down by a whopping 7.5%.
This is an attempt by many companies to focus on retention of clientele rather than acquisition, as they view marketing strategies as a way to gain consumership. Not only is this view of marketing incorrect, but it also means businesses lose out on exponential growth.
Recessions can be great opportunities to perfect marketing methods and get more out of your budget; they are a unique window of opportunity, especially for those who can analyse trends and data well.
Let’s discuss the best ways to market during a downturn.
Understand Customer Habits
Marketing is not just about gaining customers. It also helps you keep them, as consumer values shift.
The reason for this shift is that customers during economic slumps cut back on costs and spend only on the necessities. Indulgence ceases and customer’s lose spending confidence. During the Great Recession, there was a dramatic decline in ICS (Index of Consumer Sentiment), which declined alongside personal spending. The depth of the decline was rivalled only by the low level of consumer confidence reached. People spend more time at home and spend less on services that don’t meet their basic needs.
It’s important to pay attention to the types of media that capture people’s attention, as it means you can reduce costs by focusing on high-yield marketing efforts.
Analytics will not lie to you when it comes to performance, and so, like a good friend, they need to be listened to and trusted. A recession will cause unpredictable behaviour, and therefore, you cannot rely on channel and ad performance remaining the same.
Analytics will let you know when changes happen, which can better equip you for addressing them through new marketing strategies.
Maintain your Market Share
Maintaining your market share during a recession is important because it allows you to capitalise on any opportunities that may arise during the downturn, as well as retain your current customer base.
During the 1980’s recession, those who cut spending increased their market share by 0.7%. However, those who increased their spending more than doubled that with 1.6%(PMS – The Profit Impact Marketing Strategy Database).
Overall, those who invested in ads during the recession and expanded their voice by 8% saw a 38% increase in long term profit growth.(IPA Cases Covering 2008 Recession)
This is because as customer attrition increases, it creates the potential for both positive and negative movement. As customers shop around for better deals, this means you need to work harder at keeping your customers, but it also means customers are more likely to switch over to your brand if presented with the right advertising methods.
Keeping your market share allows you to remain relevant and stay connected with customers, which can lead to increased loyalty and trust in your brand. Additionally, it allows you to capitalise on any potential growth opportunities that may arise.
This can also help to ensure that your company is well-positioned for the eventual recovery.
“An economic bust is defined not only by the extent of the fall in the components of Gross Domestic Product (GDP) but also by the time it takes to fully recover.” – Stamford
Innovating during a recession can be an effective way to protect and even grow your business. Although businesses may need to cut back on costs in order to stay afloat, innovation can help them do this while still keeping a competitive edge.
By creating new products and services, businesses can find ways to differentiate themselves and capture new markets, which can lead to increased profits.
Ever heard of the Battle Creek Toasted Corn Flake Company?
That was the original, and very catchy, name for Kellogg’s.
Their product was cheap and easy to use, which was ideal for the market at the time, as the industrial revolution was creating structured work patterns – people needed to be fuelled for their 9 to 5.
When an economic depression loomed, their competitors stopped advertising, while Kellogg’s continued and even doubled their budget, putting their new invention, Rice Krispies, at the forefront of their radio campaigns.
Kellogg’s profits by 1933 were up 33%, while the surrounding economy continued to decline.
Build Authority and Trust
In 2022, Patagonia, a sustainable clothing brand on a mission to save the planet, was famously donated by the founder Yvon Chouinard to environmental projects. The company is estimated to be worth $3 billion.
The founder believes in the causes Patagonia fights for and was worried that a new owner would not uphold these values. As a result, the profits will now be distributed between environmental causes instead.
Trust is a key factor in any successful business and it is even more important during a recession, as customers become more wary of spending. Building trust helps to create a sense of loyalty, which can lead to repeat purchases and increased revenue. If a consumer believes in the concept you promote, they are far more likely to keep purchasing from you, even during tough times.
Additionally, building trust with employees can help to boost morale and productivity, which can further help businesses stay afloat during a downturn. Assurance with vendors and suppliers can keep costs low, which can help businesses save money and help dissuade production issues.
Patagonia being so involved in sustainable projects and aims proves to their consumers that they are contributing significantly to the environment by purchasing from this company. This means customers don’t have to worry about greenwashing – they can trust in the brand and will therefore return. The same can also be said for workers and stakeholders that are also eco-conscious within the business.
All in all, building trust during a downturn is essential for businesses to remain successful and to continue to grow.
Predicting when a market will be at its most profitable is only truly accurate in hindsight – you’ll never know for certain when the optimal time for marketing in a downturn will be. The downturn itself will be your greatest indicator to start strengthening your methods of advertising.
The best thing for you to do for your company is to focus on customer and consumer trends, take control over customer attrition, build trust with your consumers, and keep your ideas fresh and innovative. This is when substantial, long-term profits can be made.