When the going gets tough, the tough keep marketing.
Economies ebb and flow like tides – they see record highs and devastating lows. And when things get really low, many marketers find themselves in deep waters. Customers start restricting their spending, profits begin shrinking, and demand ends up falling… and all that leads to a business cutting costs to save money.
Often, a first instinct is to slash marketing expenditures or reallocate to other departments they feel are more beneficial. But history has shown that that’s a mistake. By adjusting strategies and using a scalpel instead of a pickaxe, a business can ride out the hard times – and we’re here to talk about how.
What We’ve Learned From Previous Crises
In the wake of the 2008 recession, the U.S. saw its entire ad market drop by 13%. Businesses lost confidence in the economy and the spending power of their consumer base. With the prospect of reduced profits ahead, many executives made the decision to cut back on variable costs such as advertising and marketing in the hopes of riding out the hard times.
However, hindsight is 20/20, and marketers have learned a lot since the last major economic downturn.
Marketing in a recession
It’s understandable that the knee-jerk reaction to looming losses in sales is to cut costs wherever possible. However, the research shows that cutting ad spending actually creates a negative impact on long-term results. During the 2008 financial crisis, around 60% of brands that halted all their TV advertising saw their brand use decrease by 24% and brand image decrease by 28%.
Consumers might not be spending as much, but they’re still well aware of who’s marketing and who’s not. That consistent exposure means the consumer will retain that awareness once the economy starts recovering. Moreover, reduced spending doesn’t mean no spending entirely – and so customers will opt to purchase from brands still advertising, since these are the only ones visible in the market.
These are concepts that have held true even in the post-WWI recession. Roland Vaile studied 250 major U.S. companies during that time period, and tracked their marketing strategies. Businesses that maintained or increased their marketing budgets in the recession saw 20% more sales in the aftermath. Meanwhile, those who reduced spending saw sales drop by 7%.
Simply put: companies should sacrifice profits in the short-term for gains in the long-term. Sales might dip as consumers spend less, and profit margins will shrink due to less revenue. But sustained marketing despite the circumstances means your business will be better positioned when the rough waters fall still.
Consumer types and consumption categories
People will react differently to a financial crisis depending on their lifestyle, psychology, and economic standing. While there is a broad spectrum for these reactions, consumers will generally take one of four actions:
- Stop Spending: These people feel the most vulnerable to economic downturns. They will reduce spending on all fronts by postponing, limiting, or outright eliminating purchases.
- Economize Efficiently: The more patient consumers will limit their expenditures, but less drastically. They have some sense of stability, although they will still postpone or substitute purchases as they feel necessary.
- Purchase Perceptively: For more comfortably well-off consumers, they often continue spending as usual. They may be a bit more discerning or selective about their expenses, and may compromise on the luxuries or non-necessities. But they’ll feel secure in their ability to ride things out.
- YOLO: Young, urban consumers and those with similar spending habits are least likely to change their consumption behaviour. They spend more on experiences versus longevity and material goods. The biggest shift for these consumers will be extending timetables on high-cost purchases or switching to more affordable brands.
All four groups will sort products and services into four different categories, namely:
- Essentials: Things necessary for survival, such as food, water, shelter, medications, and utilities. Transportation and clothing are also likely to fall under this category.
- Postponables: Certain items are not necessary in the immediate future, so consumers can put off purchasing these products or services until they are more financially secure.
- Comforts: These are non-necessities that can still be justified as purchases since they improve quality of life in the short-term.
- Luxuries: Some products or services are simply unnecessary, or may feel excessive and imprudent given the economic circumstances.
It’s essential to understand these classifications in order to determine your company’s marketing strategy. Brands need to identify the consumer type(s) that makes up their audience, and the categories in which their products fall.
Work Smart, Not Hard
The idea is to optimize your strategies so you’re maximizing your results without expending maximum effort. By remaining flexible and aware of industry circumstances, you’ll act with more efficiency.
One way to work smart is to outsource your marketing efforts, whether just one position or wholesale. A company might benefit from Fractional CMO services, for example, since it removes the cost of a full-time marketing officer. Alternatively, brands can contract a marketing management agency to execute their strategies at a consistent and high level.
Another way to work smart is to keep an eye on the competition. It’s well worth tracking the marketing efforts of your brand rivals so you can take advantage of any gaps in their strategies. Look at Airbnb and VRBO – when Airbnb reduced their ad spend during the COVID-19 pandemic, VRBO stepped up their own advertising game. As a result, VRBO saw a 61% recovery in bookings versus Airbnb’s 15% loss.
And of course, it’s essential to plan for recovery. Recessions don’t last forever (although it may feel like they do), and your strategies during a financial crisis should leave you in a stable position when the economy improves.
Strategies for Marketing in an Economic Downturn
History has shown time and again that even in recessions, businesses can sustain themselves and even find opportunities to grow. Here are a few strategies to employ if the economy is hitting your industry hard.
#1 — Prove your brand value
A brand that gets remembered is a brand that gets bought – and proven value makes you memorable. After all, consumers aren’t likely to keep your products or services in mind if you don’t positively impact their lives.
Find ways to show customers that your products or services are useful or valuable in their lives – that they can and should justify purchasing from your business with their limited disposable income. Give them reasons to make room for you in their budgets. And do this by empathizing with their struggles and understanding what they need most.
#2 — Emphasize the building blocks
When the going gets tough, go back to basics. Look at the baseline metrics and fundamentals: your product pages, email campaigns, and even customer personas and journeys. It’s easy to establish benchmarks and track trends, and moreover, easy to make adjustments in order to adapt to the circumstances.
Ask yourselves: What’s at the core of your marketing strategy? What are your foundations? What is drawing your customers in and what keeps them coming back? Find all the little things that you’ve built your brand on, and bring them to the forefront.
#3 — Streamline product portfolios and promotions
Many businesses will benefit from taking a long, hard look at their product or service lines and evaluating their audience appeal. Economic downturns lead to declining demand, so it’s in a company’s best interest to review fringe products or marginally-performing services. An excessively complex product portfolio can bleed money through wasted resources in marketing, production, and storage.
Of course, this doesn’t mean gutting your product line entirely or downgrading on quality. It’s essential to retain core products and services in order to retain your customer base. Moreover, brands can even take the initiative to innovate in order to seize attention and motivate purchases.
It’s also good to remember that while promotions and discounts may increase short-term sales, they have limited effectiveness. Constantly reducing prices sets a bad precedent with your customers and may lead to your brand and its offers getting devalued.
#4 — Personalize the approach, narrow the audience
Many companies approach marketing from a marketer’s perspective – thinking about how to advertise and promote based on the company’s needs and intentions. But in circumstances like these, it’s more beneficial to approach things from the consumer perspective.
Think about the consumer type of your audience and what their spending habits will be. Think about how to personalize your marketing message so it resonates with your audience and makes them feel seen. And think about how to focus on that audience and keep it narrowed – you don’t cast wider nets in a storm.
#5 — Reassess channels and focus
Step one for marketers when the economy starts going south is to reassess all the channels and analyze their performances. Look at where you’re spending your marketing budget: digital channels, billboards, magazine spreads, or street posters. Then choose where you want to commit your focus – ideally, in areas that are more cost-effective.
One avenue that could be particularly effective during an economic downturn is digital marketing. Consumers are more likely to spend time online during financially unstable times, so digital marketing channels become more valuable. Businesses can leverage avenues like social media, email marketing services, and search engine optimization (SEO) for cost-effective ways to reach their target audience.
Brand Equity is More Valuable than Profit
The stubborn truth is that quick-profit strategies will hurt more in the long run than holding firm and proving your value. When you’re putting together spreadsheets and tallying the numbers, you won’t find equity on the list. But brands are built over years, not financial quarters and returns on investment – and it’s more difficult to to recover equity after you’ve taken a hit.
Economic recessions are not permanent, and consumer behaviours change with the financial ebb and flow. But if a company remains consistent, then it’s more likely to retain its customers. Branding and equity are not just logos or products – they encompass the way consumers perceive and interact with a company and its identity. And that will affect whether your audience will continue to buy from your business or not.
When times are hard, people will fall back on brands they trust – especially ones that come recommended. And these brands that remain consistent see potential revenue increases of up to 33%. The message is clear: in both good times and bad, strong brands will continue to deliver.
Make the Most of Your Marketing Budget
When economies begin to slow down, marketing departments should remember: emphasize brand value, go back to basics, and focus on what works. Recessions don’t last forever, but your strategies during that time will set the tone for the aftermath. Put your customers first and put a premium on your brand equity, and you’ll see the effects beyond the spreadsheets – long after the economy recovers.
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