Here, we will take a look at the benefits and drawbacks of these two options and what you can do to get the best results from both.
How to Approach Marketing in a Recession
Many companies mistakenly cut back on their marketing budgets when a downturn hits. In some cases, budget cuts in this area will be necessary, but it is important to make those cuts it in the right way, and to do it conservatively. Otherwise, businesses run the risk of losing customers in the long run, and make themselves vulnerable in the case of PR crises, which affected 41% of US organisations post-COVID-19.
It is essential to continue marketing activities in order to survive a downturn, and many companies have turned recessions into opportunities, including Amazon, Target and Toyota. These companies have demonstrated how one can see increased revenues during the economy’s worst lows.
Whilst reducing costs will arise as a priority during a downturn, a wise company will closely inspect customer needs and where they are shifting and respond with appropriate strategies and methods of customer targeting.
Looking at the market’s changing demands can propel success during a time where the word success itself may seem unutterable. This article will review the impact of a recession on marketing, and how to adapt strategy to a recessionary environment.
The Impact of a Recession on Marketing
During a recession, consumer spending decreases due to reduced buying power, increased basic expenses and, for some, a lessened income. They must enforce stricter priorities and non-essential spending is therefore reduced. This is one factor that deters some businesses from investing in launching any new marketing campaigns.
However, the more productive response is to re-visit the strategy in order to target those customers who are not as restricted in their spending, among other strategies, which will be addressed below.
A recession can also present the opportunity for a company to take advantage of decreased competition. They can use this time to differentiate themselves and position themselves as industry leaders.
How to Adapt to a Recessionary Environment
Adapting to a recessionary environment has its challenges, but is nonetheless possible. The first step is to reassess budget allocation and plan for how to leverage funds for maximum impact. Cutting back on certain areas may be necessary, as well as reallocating resources to focus on areas that will have the most impact.
It is well known that customer retention is cheaper than acquisition, making it essential to focus on existing customers and maintaining relationships with them. Companies should consider focusing on increasing engagement among their customer base in affordable ways and providing added value.
They should also focus on using pre-existing resources for new objectives. Repurposing content such as blog posts or videos from previous or ongoing marketing campaigns will help to achieve marketing goals at a lower cost than producing new material.
Maintaining a focus on the long-term is essential. Many businesses simply assume that customers will resume their former habits when the economy improves, and this is a mistake. Again, actively focusing on customer retention and maintaining a strong online presence is vital for any business that wants to see consistent purchasing behaviour during and after a recession.
Strategies for Marketing During a Recession
Reassessing a budget starts with identifying areas where a business can cut back, such as the employment of new personnel, and freezing new salary increases, expansions and new acquisitions. Wherever possible, renegotiating contracts with suppliers and vendors in order to get better terms could make a difference, and outsourcing certain activities may be required.
Making changes to operations is another factor in cost reduction. Streamlining processes and eliminating unnecessary steps saves time and resources which, at-scale, adds up to significant savings. Using marketing automation software is one way to achieve this end. Other areas in which to cut back include travel expenses and non-essential services.
In terms of reducing marketing budgets specifically, the key is to be conscientious about the areas in which to cut back and avoid making haphazard decisions that may have undesirable consequences on ROI.
While many businesses will be tempted to reduce their advertising budget, for example, it is important to maintain visibility to prevent the brand slipping out of the consumer’s awareness. Begin with a thorough marketing audit to gain a detailed overview of which activities have a good ROI and which can be reduced or stopped altogether.
Focus on Established Customers
As mentioned, focusing on customer retention is key, and companies should provide value and building loyalty as much as possible.
Improving CLV can be a timely undertaking during contracted periods. Some of the best ways to do so is through aligning with customer values, emphasising customer experience with elevated customer care, and offering personalised communication such as personalised product recommendations. Empathising with consumers and using humour where appropriate will also help to build emotional engagement.
Creating an omnichannel experience where a brand offers a consistent and seamless experience across all platforms will help them to differentiate themselves. Omnichannel is growing in popularity but is not mainstream yet, so finding ways to provide it at a reasonable cost could make a difference. Aside from its long-term benefits, this strategy has shown to bring about short-term results; a 494% increase in sales, according to one analysis.
Conduct Market Research
Since customer needs change as drastically as the economy does during a downturn, Customer Insights (CI) data is crucial for identifying the best ways to target and retain customers.
By inspecting the data about customer demand, a business can choose to stop producing whichever goods are not selling well and put more resources into what customers are likely to continue spending money on.
Psychological segmentation is another factor to consider. Instead of categorising customers based on the usual demographics, it is more useful to classify them based on their likely spending behaviour.
Some consumers will panic and rein in on all spending wherever possible. Others will maintain their usual lifestyle and live in the moment, unconcerned about long-term consequences. Others will exist in between, being more conservative with spending but not in a drastic way. Understanding the behaviours and attitudes of these groups allows for the most appropriate and effective targeting.
Conducting new market research to gain insight into the changes in behaviour is important and should be considered during budget allocation. Even a simple customer survey can bring about useful insights, and combined with an incentive, helps develop customer loyalty at the same time. IN addition, keep on top of third-party research into emerging marketing trends.
Discounts and promotions can be a great way to attract new customers and increase sales during a recession, as well as increase the loyalty of existing customers. To best utilise this strategy, any and all data available can be closely examined to determine which products or services are most in-demand and what sort of offers may most appeal to the people’s shifting needs. The right promotions can make all the difference in appealing to the public during times when their priorities are changing.
Leverage Social Media
During a recession, customers are less likely to engage in costly activities and more likely to spend time on their devices. Expanding their social media following is an excellent way for companies to reach new audiences and build brand awareness. Since the world has shifted into the digital realm so much over the past few years due to the 2020 COVID-19 lockdowns, any business wanting to drive growth and success will surely take advantage of these platforms to reach the people where they are.
Companies should focus on creating quality content and engaging with customers to ensure loyalty and repeat business. Some good examples of engaging social media content are creating contests, giveaways and challenges where users have to tag their friends or share the brand’s posts to participate.
If a business has not yet explored these creative forms of social media content and is only posting articles and updates, now is the time to experiment in order to build stronger emotional engagement between the brand and its existing clients.
Any economic crisis stirs up concerns about security, and this will have a knock-on effect on performance due to the associated stress. To maintain the usual productivity levels, it is therefore essential to reduce feelings of uncertainty or fears about job loss wherever possible.
Should staff have cause for concern, employers must prioritise having an honest, transparent and timely discourse with them. Good leaders should put forth compassion and demonstrate fair treatment (a choice which inevitably reflects on the business’s reputation).
Examples of Companies That Thrived During a Recession
There are several examples of companies that have been able to thrive during a recession. For example, Netflix was able to capitalise on the economic downturn in 2008 and emerged as a major player in the streaming industry. Similarly, Apple launched the iPhone during a recession and became a leader in the mobile industry.
Amazon also leveraged the economic downturn of 2008 to expand its business and become a leader in the e-commerce industry. After the 2020 Q1 recession due to COVID-19, Amazon actually increased its marketing, and saw a 15% increase in profits, while a great number of companies were operating in damage control mode, or simply shutting down.
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Navigating a recession can be challenging, but it is possible to use resources effectively to drive real growth in the worst of economic climates.
Companies should focus on leveraging existing resources, increasing CLV, continuing advertising and maintaining a strong online presence, and taking advantage of discounts and special offers reflective of the customers’ evolving needs. Segmenting based on spending habits and attitudes rather than the standard demographics allows for a more accurate picture.
Overall, focusing on the long-term and being strategic about budget reductions is key. Assess which marketing efforts have good ROI and make changes accordingly.
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