You’ve worked hard to grow demand for your brand, but you’re getting concerned about the things you can’t control. Enter the threat of an economic downturn. If you listen to the news it feels like the next recession has been one week away for months now.
In tough times like recessions, people tend to be more careful with their spending. As a result, brands may have to make adjustments like lowering prices, delaying new projects, and cutting budgets.
According to research from the Harvard Business Journal, companies that respond to recessions by better serving their customer's changing needs, fine-tuning their budgets (instead of slashing them), and optimizing their marketing strategies and products to respond to shifting demands are more likely to thrive during and after a recession.
In this article, I’ll share insights about how to optimize your marketing during a recession and provide tools to help your brand weather the storm.
Continuing to invest in marketing during a recession helps you maintain a strong brand that customers recognize and trust. This can help you greatly reduce business risk during hard times.
The Harvard Business Review published the results of a year-long study of 4,700 publicly traded businesses during three different global recessions. Here’s what they found:
Only 9% of brands 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 continue to engage your loyal customers, as they can act as a lifeline, helping your brand stay afloat and thrive. To sustain organic growth and generate revenue, marketing must remain a priority even during a recession.
Follow these steps to learn how to prepare your business for a recession and create a recession-proof marketing strategy.
Marketing budgets are often the first to get slashed. From market research to demand generation, massive budget cuts are made at rapid speeds. Why? Because it's an easy short-term solution. Unfortunately, it can have long-term negative effects on your brand's health.
In an economic downturn, it’s smart to reevaluate and reallocate your budgets. But brands cannot afford to turn off their marketing machine altogether. Instead, they should optimize and adjust their marketing strategies to best suit the current economic landscape. Consider these do’s and don’t when starting to evaluate your budget.
The brands that succeed in economic downturns are the ones that adapt their campaigns, channels, and strategies - not eliminate them. You should cut wasteful spending, but you can’t throw the baby out with the bath water.
Unfortunately, marketing and communications budgets get affected disproportionately in hard times. When a brand's survival is at stake, it’s easier to cut advertising or content marketing costs, versus operation or production costs. When you're looking at your marketing budget, ask yourself these questions:
When reviewing your recession marketing strategies and budget, it’s important to have a long-term view in order to maintain your brand's overall health.
Brands should push their value proposition to loyal customers in order to grow their market share, instead of making short-term pivots that are out of alignment with their brand (ex. a luxury brand that offers their products at a steep discount).
Evolving and adapting on some level is okay, but some short-term moves can cause long-term impacts on your brand's reputation.
Long-Term Strategies
Short-Term Pitfalls
Understanding the market is crucial in developing an effective recession-proof marketing strategy. During a recession, consumers understandably start to clamp down on their wallets.
They’re forced to prioritize their purchasing decisions and reduce spending. Marketers need to focus on understanding their customers' psychology and shopping patterns and find creative ways to better serve them.
Brands that invest in understanding consumer behavior will thrive. As the recession starts to materialize, new customer segments will develop based on how customers are feeling about their spending power and economic position. The Harvard Business Review outlines four new possible segments:
Brands that seek to understand these new segments and update their strategies and product offerings to match their consumers' new psychology and habits can survive in the current downturn and prosper afterward.
In the previous section, we discussed four new customer segments that will emerge during the downturn. Here are some tools to help you identify which segment your customers will migrate to and to make sure your entire team is rowing in the same direction.
During a recession, gathering data directly from your customers through surveys can provide valuable insights into their evolving needs and spending habits. This information can help you adjust your marketing strategy, brand positioning, and messaging to meet your customers' changing demands, ultimately driving loyalty and revenue.
When faced with a recession, it is important to understand your target audience thoroughly. A helpful tool for gaining this understanding is creating customer personas. These are detailed descriptions of your ideal customers, created from deep knowledge and market research about your existing or desired audience. By using personas, businesses can tailor their messaging and offerings to better meet the needs of their audience during difficult economic times.
After identifying your new customer segments and documenting them into personas, it’s time to create or fine-tune your customer experience strategy to meet their needs. Your strategy should focus on enhancing the overall experience, identifying customer needs, and defining the desired customer experience across all touch points. The ultimate goal is to create a positive and memorable experience that builds customer loyalty and drives business growth.
During the recession, it will be important to invest in market research. This data can help you and your team decide what marketing tactics to employ. From the perspective of your customers, it will help you understand and track how customers are reassessing priorities, shifting their budgets, switching among brands and products, and redefining value.
During an economic downturn, it can be tempting to drop prices or expand your target audience in order to increase revenue. This can be a useful strategy, but brands should tread lightly when considering exploring brand strategies that eliminate their core customer.
It’s critical to assess your brands, products, and services. This will help you determine which areas require additional focus, which ones may not survive, and which ones are well-positioned to succeed both during and after the economic downturn.
Using the four categories below, sort your products or services into these buckets.
Now let’s take a look at how the customer segments we discussed earlier, Slam-On-the-Brakes, Pained-But-Patient, Comfortably-Well-Off, and Live-For-Today, may react to your products or services based on the category they belong to.
Monitoring how customers adjust their priorities, redistribute their funds, switch brands, and redefine value is crucial. This matrix can help you better understand when, where, and why you may want to pivot your brand positioning or serve as proof that you should stay the course.
Brands can use this framework to identify their customer's evolving needs better and make strategic decisions about what products to keep and which ones to cut loose. The key is to keep your eyes on your core customer, what segment they fall into, and what product or service categories best serve them.
When times get tough and budgets need to be adjusted, you need to look at your entire marketing operation in order to optimize in creative ways. At Fratzke, we’ve created the Five Ps Framework in order to simplify your marketing operation into five key areas. Let’s take a look.
The Five Ps Framework includes:
When preparing your recession marketing strategy, we recommend auditing all five areas and giving them a score from 1 - 5, the highest score being a five, and the lowest being one. Here’s how we think about scoring.
Take the time to audit each of the Five Ps. Face the cold hard facts, where necessary, and celebrate the wins where they exist. Here are some potential outcomes of your Marketing Operations Audit.
By performing a marketing operations audit, you can get a 360 view of your department and be armed with data to make the right decisions and budget cuts.
In addition to better understanding your customers, a marketing benchmark audit can help you understand how your digital marketing is performing compared to industry standards so that you can shore up your opportunities and invest your time and money in the channels that are driving conversions and revenue.
Typically, during a recession, an audit can also help identify how to optimize lower-cost marketing channels like your website, search engine visibility, email, and social media. Follow these steps to perform a digital marketing audit for your business.
How to Run Your Digital Marketing Audit
Use our list of Digital Benchmarks to get the most out of your audit.
A digital marketing audit will dive into each of these digital channels. Auditing each of these channels helps you understand how your customers prefer to be engaged and provide a holistic picture of your brand’s digital reach. Each channel has unique characteristics. Without performing a digital audit, you’re just throwing darts at the board – blindfolded.
Now that you’ve done the work to gather data about your customer, your products and services, your marketing operations, and channel performance, it’s time to put together your strategy. Follow these steps to document your plan before sharing it with peers, stakeholders, and your team. When it comes to developing a winning recession marketing plan - it’s important to keep it simple.
When it comes to marketing in a recession your strategy cannot be set and forget it. You need to continue to monitor your performance with regular marketing analytics and reporting.
Cut through the noise and pick the KPIs that matter most. Here are some metrics to consider.
RELATED: For more KPIs check out our full list of Digital Marketing Benchmarks
One way to start planning is to research what experts are predicting based on trends and data. Here is a video featuring five predictions for marketing during a recession from our Partners and Head of Client Success, James Fratzke.
Businesses that survive the recession by focusing on their customer's needs and by investing in brand building will be positioned for a strong recovery. However, it will be paramount for these brands to remember what they learned about their customers during the recession, since their needs may be changed long term.
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.
Long-term spending is normally stable and can even explode on the other side of a recession. This is important because marketers that were traumatized during the Great Recession (2007-2009) sometimes lose this broader context when recession-proofing their business.
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 site also fine-tuned its 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 said: “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.
A recession is a significant, widespread, and extended economic downturn signaled by two consecutive quarters of economic contraction.
In a recent survey, 70 percent of Americans say they believe a recession is imminent. Not all experts agree on the timing, or if it will happen at all, but here are some of the leading indicators a downturn is coming:
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Are you struggling to prepare your brand's recession marketing strategy? Fratzke is here to help. If you’d like to learn more about strategic consulting services, contact us to start the conversation. We’d love to talk. We also have a free resource - Action Plan For Marketing In A Recession, which you can download here.
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