You’ve worked hard to build your business, but you’re getting concerned about the things you can’t control. If the economy enters a recession, do you have the right business survival strategies in your toolbox? You want to be proactive so that you’re ready - especially considering recent predictions by economists that the US economy is primed to enter a recession.
The good news is that based on our market research, we’ve identified the strategies that recession proof businesses use to prepare for and grow during a recession. In this article we’ll dive into how you may be able to achieve growth in a recession by proactively preparing and marketing your business for your consumer’s mindset during a recession.
The Harvard Business Review published the results of a year-long study of 4,700 publicly traded businesses during three different global recessions. 17% didn’t survive. 80% were still catching-up to their pre-recession strength three years after the economy had recovered. Businesses that aggressively slashed spending without strategically investing in their business growth did not perform well.
9% managed to grow through the recession. How did they do it?
By looking at companies that thrived during past recessions, we discovered that the key to surviving a recession is establishing market share ahead of time and reacting with data-driven marketing strategies that speak to your existing customer’s changing needs during challenging economic times.
When you’re building a marketing strategy for your business, you don’t have to rely on gut instinct alone. During a recession, the ground shifts beneath your feet very rapidly. Consumer sentiment and buying habits change. There are new factors impacting your market that you can’t control.
So, you need fast access to reliable data about your customers. This data should include how they feel, what they want and what they need. You also need to learn what they’re cutting back on or changing in their budget in response to scary headlines in the news.
Based on this data, you can glean insights that help your business earn consumer trust and provide exactly what your customers are looking for in the moment.
The Great Recession (2007-2009) is the most recent example of an economic downturn, exacerbated by the subprime mortgage crisis. It led to the failure of 170,000 small and medium-sized businesses. How did the outliers succeed in growing their business during a recession?
In an interview published on Fast Company the leaders of Match.com offered some insights into how they thrived during the economic downturn - increasing revenue by 25% and active subscribers by 30%.
They invested heavily in product development and marketing. On average, they introduced updates to the platform every two weeks. The online dating sight also fine-tuned their marketing to ensure they were bringing the right people into their community.
Their ongoing digital audits helped them identify their closest online competitors - creating a list of potential acquisitions. Eventually they completed 28 acquisitions by emphasizing their ability to add value to the brands they acquired.
Data-driven acquisitions, investment in a team of 100+ engineers and improved targeting in their marketing campaigns allowed them to grow while other companies were collapsing.
The New York Times highlighted Walmart’s exceptional growth in an article published during the 18th month of the Great Recession. The company’s Chief Merchandising Officer was quoted: “Our sales - it’s like holding up a mirror to our society.”
Discount chains like Walmart may seem like an obvious choice for consumers during a recession, but Bentonville was investing in data-driven marketing and product development to ensure they would meet consumers where they were in the moment.
Their reporting and insights highlighted that consumers were browsing less (sticking to their shopping list). They were less brand loyal (willing to save money by purchasing established store brands). They were also stretching their food dollars by purchasing more pasta (carbs) and less meat (protein).
They also discovered a surge in purchases related to home entertainment and personal health. Entertaining at home is cheaper than going out to a restaurant or leaving town for a vacation. So Walmart doubled-down on their “take and bake” advertising campaigns and offers on home entertainment products (DVDs, TVs, etc.).
Instead of slashing their marketing budget, they calibrated their marketing spend to deliver maximum growth. Walmart did an exceptional job of understanding what their target customers valued most in the moment. As a result, economists regularly point to their brand as an example for businesses worried about recession-proofing.
During a recession, consumers may choose to save more and spend less in the short-term. They may also choose to change their spending habits. But long-term spending is normally stable and can even explode on the other side of a recession. This is important because business owners that were traumatized during the Great Recession (2007-2009) sometimes lose this broader context when recession-proofing their business.
A recession is defined as two or more quarters of decline in Gross Domestic Product (GDP). In other words, the national and/or global economy produces less goods and services from quarter to quarter. The Great Recession is considered more traumatic than other recessions because consumable spending declined in all categories for 15 quarters. However, Business owners should put their recessionary fears into greater context based on past trends.
For example, a relatively brief early 2000s recession lasted from March to November 2001 as a result of the dot-com boom and 9/11. Prior to this, there was a recession in 1990 that lasted until March 1991. Both of these recessions were far milder than the Great Recession.
By looking at a longer view of history, business owners can plan more realistically for a potential recession. The key to surviving a recession is establishing market share ahead of time and reacting with data-driven marketing strategies that speak to your existing customer’s changing needs during challenging economic times.
With current speculation that there is another recession around the corner, there are six steps you can take right now to help protect and even grow your business during a recession.
Remember that during a recession you will have less money to spend. Recession proof businesses make every dollar count by implementing the right people, processes, partners and platforms to get the flywheel moving.
A well-thought-out website is an investment that will generate more organic traffic for your brand over time. The best day to launch a website was yesterday. If you already have a website, focus on search engine optimization (SEO) to help it perform well in searches performed by your customers.
During a recession, consumers are less likely to trust a brand they’ve never heard of before. Building or improving your website in the period before a recession will help you convince nervous consumers that you can be trusted during tough economic times when they are reevaluating their spending decisions..
Email marketing allows you to develop a personal connection with your customers. Grow your list of subscribers and increase brand loyalty by providing personalized communication from your brand in their inbox. You can automate much of this process, which will help you minimize operating costs and increase efficiency. Choosing the right platform is key to this.
Outsourcing your digital marketing can be expensive. During a recession, the goal is to maximize results and minimize unnecessary expenses. By investing in your marketing muscle now, you can benefit from lower marketing costs during a recession.
As a digital marketing consultancy, we believe in teaching mid-sized businesses how to fish so that they have maximum control over expenses. This means the people responsible for your marketing will know more about your business and its customers than anyone else. And their extra time can be leveraged in other areas of your business to provide maximum ROI.
Digital advertising is a great way to generate targeted traffic quickly. However, there are some keywords you’ll want to avoid because they won’t generate sales or relevant traffic to your site. By telling Google to not show your ads for negative keywords, you can minimize wasted ad spend and preserve your marketing dollars for the future.
Social media is a challenging channel for digital marketing. Before a recession hits, you want to position your brand to leverage free, organic traffic opportunities. As social media companies go through IPOs and deal with new pressure from Wall Street to perform, they are aggressively monetizing their platforms with paid advertising.
The majority of traffic generated by brands on social media is now through paid advertising. This is because companies like Facebook and Twitter are adjusting their algorithms to minimize the visibility of posts made by brands unless they are engaged in paid advertising.
Take a hard look at your time and dollars spent on social media. Identify inefficiencies and put that saved time and money to work on better marketing opportunities.
To grow your business in any economic climate, you need reliable Reporting and Insights about your business and your industry. During a recession this is especially important. That’s why smart business owners use data-driven guidance to leapfrog the competition.
Learning about your customers is critical because consumer preferences change when the economy changes. The messaging and targeting that worked before a recession was looming may not be effective today. Leaders need access to current, comprehensive data about their customers so that they can chart the best path forward for their brand.
Match.com and Walmart both offer excellent case studies on thriving during a recession. We combined these insights with our experience to produce the six steps you should take before a recession to protect your business.
If you’re feeling nervous about a potential recession harming your business, the best thing you can do is begin dominating your market share and gathering data about your customers. Decision-making based on reporting and insights, instead of fear will allow you to leapfrog the competition in any economic climate.
This is why consulting is so important. We can help. Our Digital Transformation Audit can provide business owners with a 360-degree view of how their brand is performing across the 8 Channels of Digital Marketing. And our consulting partnership helps prepare your team to implement marketing efforts in-house and identify the best opportunities to grow your brand.
We’re also working on an article that covers what not to do before or during a recession. Sign-up for our email to get this and other valuable insights in your inbox!
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