Marketing During a Recession: Navigating an Economic Downturn
Learn how to navigate recession marketing with a strategy that works. Discover which tactics to use during an economic downturn to survive tough times.
May 27, 2023
Introduction
The possibility of a recession has kept consumers on edge in recent months. But whether an economic downturn occurs now or in the future, such an event is inevitable at some point. The organizations that are least prepared for the uncertainty risk losing the most.
So, what can companies do to ensure that their marketing strategies are designed to help them thrive in an uncertain economy?
In this article, we've identified cost-effective ways marketers can turn a recessionary period into a business growth opportunity.
How Long Will a Recession Last?
While there's no way to know how long a recession will go on, history gives us a clue. The average length of previous recessions is almost 14 months. The most recent recession, fueled by COVID-19, lasted just over two months. It's also worth noting that the average time spent in crisis has declined since the Great Depression of the 1930s.
Historical averages do not guarantee future performance. But we can confidently estimate that businesses should be prepared for a recession to last roughly two years.
Now, let’s look at how business strategy changes during a recession and what companies can do to adjust.
Prepare for the Aftermath of a Recession in Advance
I live in the southeastern United States. Almost every year, a hurricane threatens our coast. Unlike a pandemic or other natural disasters, we have time to prepare, despite the short notice. But hurricane shutters and a dozen cans of soup do nothing to reduce the massive damage inflicted by these monster storms.
While most people are concerned with how to weather the storm, navigating the aftermath is often just as difficult. It's not uncommon for weeks or months to pass before life returns to normal.
The same is true for a recession. Businesses must not only manage the financial crisis as it is happening, but the recovery period as well.
The moment they sense a crisis is brewing, the first thing companies tend to do is make a wide range of business decisions that involve cost-cutting. Jobs and expansion are among the first areas targeted for budget cuts. Some companies even stop marketing. While these moves can save money in the short term, businesses stand to lose more than they save because they're unable to predict when the economy is poised for a recovery. The delay can be costly. Businesses often lag behind as the economy recovers. As a result, they risk losing a portion of market share and revenue. Such losses can damage any brand in the long run, even if the regression is temporary.
The organizations that anticipate a change in consumer behavior beforehand will have an advantage over many of their competitors. So, brands must consider how their target audience will respond to them in a downturn. You can start by talking with your current customer base. Use the opportunity to develop relationships with existing customers while also assessing consumer confidence and market conditions.
Prepare for the Shift in Consumer Mindset During a Recession
Emotions run high in uncertain times. People worry about the values of property, investment accounts, and interest rates. Every time they turn on the television or log onto the Internet, they're flooded with one negative forecast after another.
Eventually, this takes a mental, emotional, and even physical toll. People begin to think the worst and develop negative attitudes. Consumers' buying habits change. They spend less money, make purchasing decisions judiciously, or put them off altogether. Many folks are concerned with paying the mortgage and keeping food on the table. Those who are more fortunate are still sensitive about how they spend disposable income. It's not uncommon for people to cut back in one area to make room for another.
Businesses come under even more scrutiny for the way they operate. Customers evaluate the quality of products and services to a greater degree. So, all of your advertising campaigns, customer service processes, product offerings, and other business practices will be under a magnifying glass.
Be ready for this change in consumer decision-making. Brands must show people they genuinely care about their problems by demonstrating more empathy and concern—especially in a marketing message.
Content Marketing Strategies During a Recession
Content marketing is increasingly important during a recession because it helps brands subtly attract attention instead of relying on traditional advertising. This is the perfect opportunity to develop relevant content based on the challenges your target customers are having and how your product or service can help them during a difficult time. This is an effective way to connect with customers based on their needs, which builds trust between the audience and the brand.
One effective content strategy to focus on during a recession is to educate customers rather than trying to sell products or services directly. You can create helpful blog posts, videos, or even webinars that teach people something valuable while promoting your brand. This is another way to build trust with potential customers who may be desperate for sound advice during financial hardship. Content is also a great way to help your business increase traffic to its website and other marketing channels.
Creating value-added experiences for your customer base on social media is also an effective marketing strategy. Launch special offers, giveaways, and contests as part of an ongoing engagement campaign that will keep followers coming back. To be successful, brands must adopt the right marketing strategies to avoid messaging tactics that may sound critical or invasive.
You can use data from previous recessions and market research to create more tailored content based around customer needs and preferences.
Don’t Cut the Current Marketing Budget Too Much
Most successful brands know that marketing is a necessity, not a luxury. Yet, in an economic slowdown, one of the first cost-cutting moves is to trim marketing budgets. But the cons of reducing dollars spent on marketing efforts in a recession almost always outweigh the pros.
This is especially true for businesses with longer sales cycles.
This period between brand awareness and conversion is known as the sales cycle. The sales cycle will vary from one sector to another (and often, from business to business).
While cutting the marketing or advertising budget may save some money in the near term, the effects of making cuts lag. As an example, let’s assume your sales cycle is 90 days. If you cut back on marketing in a recession, you can expect to gain fewer customers. Unless you have done some in-depth analysis, you may not know the actual negative impact on customer acquisition for at least three months.
Even if you have estimated the negative impact, there's something else to consider. Earlier in this post, I wrote about changes in consumer mindsets during and after an economic crisis or downturn. This shift in thinking could significantly affect the results of your marketing efforts as well.
During a recession, it will be more challenging to acquire each new customer. So, you'll have to exert even more effort to promote your business than before. If you're forced to cut the marketing budget or advertising spending, consider creative ways to get customers organically.
Focus on Performance Marketing
A performance marketing plan is essential during a weak economy. This strategy is usually associated with digital marketing tactics and places an emphasis on short-term results. Though results-driven marketing is always critical, it's more important than ever during economic downturns.
A performance marketing strategy requires specific audience segmentation coupled with empathetic messaging campaigns that appeal directly to the audience. Another benefit of this strategy is that it has a higher return on investment (ROI). The ability to measure results in small increments allows companies to identify what tactics are working and which ones need to be improved or eliminated. This enables brands to quickly adjust their campaign strategy and conserve marketing resources. It also gives them the flexibility to keep up with changing consumer trends.
Direct Response Marketing
Direct marketing campaigns can be effective during a recession. These campaigns are design to reach a highly targeted audience, such as current and potential customers within a specific demographic or psychographic. A successful direct marketing campaign will include a mix of elements such as compelling visuals, promotional language, desirable offers, benefits rather than features, testimonials from satisfied customers, the ability to track results, and properly segmenting the customer list so that only qualified leads are contacted each time.
With performance-based campaigns, brands can discover new ways to reach their best customers.
Create Customer Loyalty Programs
Creating customer incentives is another effective recession business strategy. Customers are always looking for more value. Incentive programs cost less than advertising but provide companies with a higher customer retention rate.
Companies can set up reward systems such as points for each purchase, birthday deals, and exclusive business membership promotions. These programs encourage customers to continue buying from you instead of seeking cheaper alternatives from competitors.
Personalization is a key ingredient for these campaigns. Thank you cards, sending small gifts, and emails are examples of how personalization can be used. Making a special effort to show people how much you appreciate their business is one of the best ways to develop loyal customers.
Brands could also consider providing free sample products or offering free product trials. Reducing fees on customers is another bold move to build loyalty. Lower fees are effective for consumer product companies, service businesses, and brands that sell business apps subscriptions.
By creating these programs, companies can develop long-term relationships with their customers by continuously rewarding them based on their preferences and experiences.
Discount Prices at Your Own Risk
Cutting prices is another tactic many business owners use to generate leads and sales during tough economic times. However, many organizations overlook the actual impact discounting has on revenue.
To illustrate, let’s assume you acquire 50 new customers over 30 days and that gross revenue per customer is $1,500. If the total cost of goods and services (COGS) is $1,050, the net profit is $450.
Using these figures, your gross revenue from 50 new customers is $75,000, COGS is $52,500, and net profit is $22,500 per month.
Expressed as an equation:
50 new customers x $1,500 gross revenue = $75,000 – $52,500 (COGS) = $22,500 (net profit)
Now, let’s say you reduce prices by 10% to get more customers. Your gross revenue is now $1,350 ($1,500 – 10% = $1,350).
What impact would this have on net profit?
Remember, your COGS (cost of goods and services) remains constant at $1,050 per customer, so your net profit is now $15,000 per month.
Expressed as an equation: 50 new customers x $1,350 = $67,500 – $52,500 COGS ($250 x 30) = $15,000
You are now making $7,500 less per month than you did before. Although you reduced prices by 10%, the decrease in net profit is 33.3%.
Again, here are the results expressed as an equation:
$22,500 (gross revenue at original price) – $15,000 (gross revenue at discounted price) = $7,500 / $22,500 = 33.33%
But the situation could be even worse.
Remember, the way people think about purchases will change. It may become more challenging to acquire each new customer. Your sales cycle may also get longer, and your conversion rate could decrease because making sales will be more difficult. The costs of promoting on websites, social media, advertising, and networking will likely increase during a recession, depending on the platform.
Each one of these factors decreases profit and increases expenses.
Many businesses get into costly price wars in an attempt to offset the challenges of customer acquisition. The thinking is that lower prices will mitigate consumer spending concerns and increase their propensity to buy. While this may seem logical, it makes no sense to do this without having hard-core data to support it. Rather than cutting prices, consider other tactics such as temporary price promotions, flexible payment options, and clever advertising to boost sales.
A Strong Brand Will Be More Valuable in a Recession
If your business doesn't have an active brand strategy, now is the time to develop one. A brand strategy helps you differentiate and position your offer with the target market that needs and wants it most. The clarity a brand strategy gives your business will help you prioritize decisions related to product lines, prices, brand marketing campaigns, and business processes.
Evaluate Your Current Brand Position
A recession forces change. Now is the time to re-evaluate everything you've been doing and adjust for the future. For example, you may discover it's time to change the customer segment you have been targeting. Perhaps the people you're currently serving are no longer the best fit for your business model going forward.
You may also consider modifying your products and services to better meet the needs of current customers and new segments you choose to pursue. The same applies to your marketing, customer experience, and sales processes.
Make transitions gradually to avoid confusing the audience, but without delay. Waiting too long could leave you lagging behind the competition.
Your Brand Promise
Your brand promise is a summary of what your customers can expect to get from your company every time they interact with it. A brand promise incorporates elements of a Universal Value Proposition, but also includes other unstated features. It's comprised of the tangible benefits and experiential feelings customers receive from your product or service.
Take a look at the promise you're making to customers and make sure it aligns with any directional changes in your business’s branding and marketing.
Manage Customer Expectations Diligently
People will be more sensitive about spending money in an economic recession and will expect even more from the companies they do business with.
Quality is always essential, but during periods of financial difficulty, quality separates the brands that prosper from those that barely stay afloat or fail. Managing your customers’ expectations is one aspect of providing quality and building a loyal customer base.
Don’t make assumptions. Find out what customers want from your products or services. Discover what they like and don’t like about your competitors’ offers. If possible, ask people who choose not to buy from you why they stopped short or chose a competitor. Customer feedback is essential data for improving brand performance.
Opportunities Abound in a Recession—If You Look for Them
While it's true that some circumstances are out of your control, recessions provide opportunities for growth--if look for them.
You'll have to determine what that means for your brand, but here are just a few examples of potential opportunities you might find during a recession:
- Create additional revenue by developing new products and services or additions to current ones
- New customer segments you have not yet targeted
- Adjustments to current processes and systems
- Changes to shipping, manufacturing, and storage that result in cost savings. (Warning: never cut costs at the expense of quality!)
- Complete projects that have been delayed
- Plan for a return to normal—what will that look like for your business?
- New strategies and tactics for marketing and promoting your business on digital channels
- Evaluate contracts with vendors, suppliers, and marketing investments—is it time for a change?
- Analyze data—take note of trends, what works and what doesn’t?
Recession-Proof Your Business with a Brand Audit
As businesses around the world prepare for a recession, many company leaders are wondering how they can plan marketing strategies that will help them grow and survive in a weakened economy.
During a recession, companies must assess their communication strategy and adjust it to resonate with customers in tough times. A brand audit helps you evaluate what's working and what isn't. Companies can identify areas where they need to improve and make changes to their messaging to better connect with customers.
A brand audit can also help organizations manage marketing costs. During a recession, it's important to be conscious of expenses and make sure that every dollar spent on marketing is being used effectively. An audit, companies can help you identify areas where to cut costs or allocate resources more efficiently to recession-proof your business.
Are you ready to find out how a brand audit can transform your business?
Our brand audit process is a comprehensive analysis designed to help companies increase ROI and reduce marketing expenses.
- Increase ROI on lead generation and sales conversions.
- Reduce marketing expenses.
- Strengthen brand positioning to become more competitive.
We guarantee satisfaction or get your money back! Schedule a discovery call with a brand auditor to find out more.
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