As inflation numbers continue to rise and the Fed increases interest rates to fight it, fears of a looming “r-word” are keeping marketers and c-suite leaders up at night. Like any good business person, they’re asking themselves questions like: How can I recession-proof my business? Is my brand one that consumers see as essential to their daily lives? Are we noble enough to pivot at a moment’s notice?
If we learned anything from The Great Recession of 2008 and the COVID Pandemic that locked down the world in 2020, it’s that marketing matters. With uncertainty clouding forecasts for the rest of this year and into 2023, here’s what brands need to know to win in an uncertain economy.
The Four Segments of Consumers
It’s more important than ever to know your core consumer. During the 2008-2009 recession, the Harvard Business Review outlined 4 segments of consumers every recession creates:
- Slam-on-the-brakes: Reduces all types of spending via elimination, postponement, decrease and/or substitution.
- Pained-but-patient: Economizes in all areas while maintaining a semblance of the normal standard of living.
- Comfortably well-off: Continues to consume at pre-recession levels albeit more selectively.
- Live-for-today: Business as usual; delays purchase of big-ticket items.
Whether these segments will evolve in the near future remains to be seen, but just as during the 2020 lockdown, brands should categorize products and services into one of the buckets below and prepare to adjust marketing plans accordingly:
- Must-haves: Food, water, shelter, healthcare, transportation. These are essential for daily living, and consumers in every segment will continue to prioritize them above all else. During a recession, however, they will be more price sensitive, open to substitution, and in some cases, brand loyal.
- Like-to-haves: A fancy cup of coffee, a nice meal. These are small comforts and splurges that consumers use to get them through moments of hardship. These treats are often justified by cuts made in other expense areas.
- Nice-to-haves: Think of these as non-essential maintenance buys such as a new car or braces for the little ones. While consumers will delay these purchases for as long as possible during an economic downturn, their product interest and consideration continue for an extended period.
- Would-love-to-haves: Cosmetic procedures, gaming system, a kitchen remodel. These are the purchases consumers in any segment can do without. Simply put, if they can’t justify spending the money, they won’t.
Getting to the Win
In preparation for gaining ground during an economic recession, each brand should be evaluating What’s Important Now (WIN). Creating a winning game plan is important because strategic increases in marketing investment during a recession tend to improve financial performance throughout the following year. Plus, it’s often done at a lower cost to brands than in a non-recession economy.
Though cuts to marketing are often the first play for companies avoiding layoffs, this approach simply acts as a short-term solution and creates a wealth of future hurdles such as lost market share, eventual layoffs, and a worsening financial picture. The smartest brands are contrarians, which choose to tilt these opportunities in their favor. Expect to increase your share of voice by maintaining your marketing spend or increasing your investment to capture market share from those competitors who pull back.
Kick Off Assessment
Take an honest look at where your brand is today. Do a side-by-side comparison of the products and services provided. Where are the outliers? Where top performers are found, increase promotion. Where the lagging performers are, consider sunsetting the offering.
Take another look at your core customer and how they’re changing. Has the way they use your product shifted? Are you essential to their daily lives or a reprieve from their daily lives?
Do the same assessment exercise with marketing tactics and platforms. Pour resources into the channels that consistently deliver and eliminate those that are underperforming.
Call Audibles
Now is the time to take new concepts off the shelf and create actionable, real-world launch plans that can be implemented at a moment’s notice. While innovations like Curbside Pickup were not born out of the pandemic, they did see exponential growth overnight and are credited as the reason many restaurants, grocery stores, and others were able to continue doing business during the lockdown. Nimbleness is key.
Play Your Game
Another challenge brand marketers will need to address head-on is the need to build trust and credibility. In an economic downturn, consumer confidence is expected to decline. Don’t ignore it. Speak to it. Be ready to redefine your brand’s value proposition. Make the case for why your brand is the best option out there at this time. Create the story and tell it in as many places as possible.
The “r-word” can seem intimidating for businesses of any size, especially when it’s constantly making headlines and providing content for op-eds and think pieces. Remember, your business goals shouldn’t just be to survive, but to grow, no matter the economy. A successful business is ready for any economic circumstance.
With the right planning, the “r-word” can present opportunities for growth and change, and you can find new consumers and markets. Start by understanding the basics of recession economics and marketing. Then, take the necessary steps to safeguard your business. Finally, invest in marketing and in your business’s future. Taking these steps can help ensure your long-term success.