Marketing in a Recession
When times are tough and sales are down, marketers have to adjust ... but what should they do?
With the world still suffering from the hangover from the Covid 19 pandemic, coupled with the war in Ukraine, escalating fuel prices, and the resultant increase in inflation - consumers around the world are taking financial strain and having to 'tighten their belts'. It is not business as usual with companies competing aggressively for a share of a shrinking wallet.
What should marketers do to adjust and to ensure they survive during these unprecedented times?
Any downturn in the markets will invariably have a significant impact on us as marketers - however if history has taught us anything, is that no two recessions are exactly the same. In fact, one can argue that a downturn in this new post Covid world presents entirely new and unique challenges - just think about how our shopping habits have changed, how remote working is a permanent reality for many, and how even our media consumption habits are also now very different.
Having said that, there are certainly some learnings we can garner from previous tough times.
Here are 7 things that marketers should do to weather the storm and possibly even come out stronger when the economy normalises.
Step 1: Take Stock
Depending on what industry you operate in, what goods or services you provide as well as who your customers are, will influence how severely a downturn will impact you and what fine tuning to your business and marketing strategies will be required. so, take a long hard look at your consumers and what need or requirement your product fulfils in their lives. As times become tougher and budgets tighter, consumer priorities will change - they may continue unabated with their product choices, they may eliminate certain purchases altogether (most notably luxury items like holidays, jewelry and electronics), or they may substitute brand or product selections with cheaper options.
This table from an article in the Harvard Business Review illustrates really well how different types of consumers react to different market conditions.
Review how past economic cycles impacted your industry and more specifically your sales. Did people buy fewer products or buy less frequently? Were all your brands affected equally or were some more resilient or even more vulnerable? What promotion or pricing strategies did you implement - how successful were they?
By objectively analysing historical and current performance metrics will help you make better, more informed decisions. Extend your desktop research to your supply chain - how secure are your providers, can they be relied upon, can you negotiate better payment or other terms that you in turn, may need to pass on to the consumer
Step 2: Review your marketing budget
For the vast majority of businesses, a recession means two things: 1) lower sales and 2) budget cuts. Marketing is often a soft target which results in expenditure being slashed across the board - this indiscriminate cost cutting can however be a costly mistake.
Sure, for your business to survive will likely necessitate containing costs - however failing to support brands can have a long term negative outcome. Marketers have to play a careful balancing act between brand support and retail/sales-focused marketing efforts.
There is an argument that when your competitors cut their budgets it gives you an opportunity to increase your visibility, bring your brand to the forefront and even increase sales. Sure, there is merit to maintaining (or even increasing) your marketing spend - my personal experience however is that this seldom goes down well internally - marketing, like all other departments, is more often than not requested (even instructed) to find savings. At the risk of making myself unpopular, I do believe that marketing often has 'fat' that can be trimmed. I am not for one moment supporting across-the-board slashing of the marketing budget, I do however think that marketing spend can be more focused and directed at moving the dial.
This is where this intricate balancing act of brand versus sales comes into play. Personally I support a) allocating the majority of your spend initially to hard-working sales-focused spend; b) maintaining (albeit less) spend towards brand-maintenance. , and c) ensuring that your retail efforts work hard and have strong brand alignment. Although this may seem like a no-brainer, so many brands believe that by using the right colours, logo, font, etc the is job done. This is a cop-out .... brands can work much harder two align the two.
When looking at what areas of your budget can be trimmed, consider the following;
Start with the easy cuts - we all have those expense line items that we use as our marketing 'slush fund'. They may not seem like much initially - but trust me, they add up.
Align your spend against the brands (and campaigns) that your metric review (step 1) revealed would get you your best return. Cut those campaigns or projects that are not generating sales, those digital campaigns that are not getting clicks - or those print campaigns that do not create leads.
Prioritise your spend against what is mission critical (necessary right now) versus what is nice-to-have or can be put off in the short-medium term.
Review your media strategy - can your money work harder and more effectively using certain, less expensive media types / platforms. Explore digital more where you get bang-for-your-buck, it is measurable and highly targeted.
Build content for multiple applications. Avoid the temptation to constantly generate new creative - rather refresh existing creative and even templatize your content if possible.
Partner with your vendors - your supply chain participants - look at developing joint campaigns.
Measure your marketing efforts against predetermined KPI's. The pressure to prove marketing ROI will only increase. Be prepared.
Step 3: Focus on existing customers
We all know how how much more cost-effective it is to retain an existing customer than to attract and acquire a new one. This is even more important in difficult times when consumers are less likely to try new or unfamiliar brands and prefer to stick with the 'safer', more trusted option. So focus on existing customers and keep them happy.
Step 4: Streamline your offering
This involves simplifying your product portfolio and avoiding excessive complexity and 'trivial' differences and customisation of product lines. When consumers are forced to be more frugal, they often times will sacrifice 'frills' and marginal customisation in favor of simplicity and value for money. Overly complex and broad product lines can result in slow-moving inventory - which is costly to manufacture, store and market.
Step 5: Improve affordability and availability
A recession invariably means consumers become more price conscious and shop around for the best deals, and businesses start to increasingly compete on price. Easy-to-use or redeem discounts and cash-back promotions are undoubtedly very effective and we as marketers will constantly be challenged to increase the quantum and frequency of temporary price reductions.
Despite price cutting increasing sales (in the short term at least), marketers need to carefully consider the following;
Price discounts often lead to costly competitor price wars. How sustainable are these price deals?
If the price deals last for an extended period, consumers 'reset' their market price expectation downwards. This creates a pricing challenge when the economy strengthens and you need to normalise pricing.
Brand reputation, especially with premium products may suffer long term from price cuts.
Explore other 'creative' ways of improving affordability without implementing standard price cutting - yet still making them easy to understand and impactful. Consider free delivery (availability), extended warranties, bulk pricing (buy 3 items and get the cheapest one free), delayed financing options, etc.
Although these 'alternative' pricing options may be more complex to implement, - they really are worth investigating especially when the economic outlook is bleak and we have to plan to settle in for the long haul.
Step 6: Build trust and show genuine empathy
As I already mentioned in step 3, customers often turn to tried and tested brands during tough times. This is driven by firstly, perceived risk and fear - the fear of making a mistake and wasting money (better the devil you know than ...). And secondly, stressed and worried consumers need to feel safe, and therefor, find comfort amongst familiar and trusted brands.
Marketers can use reassuring messages that reinforce the emotional connection with the brand and demonstrate empathy. These messages must be supported by actions that demonstrate that the company is on the customer's side. Provide a sense of understanding and togetherness - 'we understand how tough things are ...', 'together we will get through this...'.
Empathy is the ability to understand and share the feelings of others. For brands, it is about placing the customer at the core - seeing the world through the eyes of your customers and creating an authentic and meaningful connection.
The key to empathetic marketing is to remember that empathy has to be rooted in authenticity - you have to be genuine and not use emotional campaigns to manipulate your customers.
It is also imperative that you understand your customer - their wants and needs, and, in turbulent times get to know their pain points. Use storytelling, slice-of-life, engaging, educational, or interactive content to break through the clutter, establish trust and establish a meaningful connection.
Step 7: And finally - remain vigilant
It is vital that during a downturn you remain vigilant - keep your ear to the ground and be alert for changes in the environment. Your competitors will be facing the same challenges, how they react could create a significant threat or a significant opportunity. If you have not put the right environmental scanning processes and systems in place - there is every chance you could get caught napping at the wheel.
As American businesswoman, Mary Kay Ash said - " There are three types of people in this world: those who make things happen, those who watch things happen, and those who wonder what happened.”
Noeleen Bruton is the previous Group Marketing Director of Tsogo Sun who, together with Debbie Combrink, opened Marketing Grit, a specialist boutique marketing and digital agency. Marketing Grit’s services include strategic marketing consulting, digital marketing, as well as digital implementation including paid digital and social media.