The warning signs of a recession are all around. Economic growth slowed down earlier this year, Treasury yields are down, freight shipments are slowing, and 60% of economists surveyed by the NABE expect a recession by the end of 2020.
Marketers would do well to heed the early warnings. Recession-proofing takes time and steady effort, and you will hit unforeseen speed bumps. With a head start, you can overcome those obstacles to ensure you have strong promotional offers, strategic product segmentation, and new creative ready in the wings when you need them.
Proactivity can also make you nimbler. "Set it and forget it" is an excellent strategy for your Crock-Pot, but it's an outdated approach for marketing. In our "tradigital" media ecosystem, we need to build for agility. Many traditionally minded media companies—those that rely on ads for revenue—can't shift quickly enough and might not make it through.
Tight times mean tighter budgets
To understand the need for a proactive recessionary plan, consider the effects of a recession on consumer behavior and brands' media planning strategies.
As a recession rolls in, consumers make drastic changes to their spending habits:
- Limiting excessive purchases or finding substitutions: Consumers will ditch luxury products, go off-brand for daily needs, and drop some planned purchases entirely.
- Shifting fitness or meal plans: Subscribers might decide they can plan their own meals or find cheaper alternatives online.
- Trimming tech: Customers might cut the cord on their cable subscriptions or shift their mobile phone plans to be more data-heavy as a substitute for home Internet access.
- Rethinking travel plans: Many will choose a staycation or camping trip over more lavish getaways.
- Saving money: That rainy-day fund looks a lot more sensible in a downpour.
As consumer spending tightens, media budgets eventually follow suit. After the 2008 crash, ad spending across all media fell 13%. Marketers tend to shift toward cheaper digital mediums instead of large TV buys or direct marketing.
Those same marketers will also look for lower-cost production alternatives—using an iPhone to capture 4K video rather than investing in a high-end production crew will do just fine, right? People will seek solutions that fit a tighter budget while being able to provide fresh ad creative consistently. In the meantime, budget-crunched clients or C-suites will expect higher productivity for less.
Prepare for the worst
Whatever the economic climate, planning and exercising foresight is critical to your success. The following five tactics will ensure you're ready for the ups and downs.
1. Understand shifting consumer behaviors
Deepening your understanding of how a recession will affect the behavior of your target consumers enables you to respond to those changes more effectively.
Consider the fitness industry. Gym memberships are usually one of the first expenses consumers cut from their budgets. Knowing this—along with the reasons for these decisions—might encourage gyms to improve their member experiences or emphasize relationships with trainers.
2. Consider product/offering segmentations
During a recession, consumers are looking for ways to save money. To stay relevant, think about new ways to offer your product that focus on lower price points. Service-based businesses such as gyms, car washes, or subscription-based programs will take a bigger hit in a downturn when customers explore at-home substitutes. How could you tweak your product or service to provide that lower-cost alternative?
As a practical example for brick-and-mortar fitness brands, for instance, you might offer a lower-cost online program that members can follow at home in place of in-person fitness classes. You could also provide short-term discounts to members who are unemployed due to the economic downturn, allowing you to keep them as consumers during a hard financial climate.
In a recession, some revenue is better than no revenue.
3. Get creative with promotions
Timely promotions can grab budget-conscious customers during a downturn. Starbucks got creative during the 2008 recession by offering a free pastry with any coffee purchase before 10:30 AM. More than 1 million patrons showed up in Starbucks stores across the US to take advantage of the deal.
Think about your opportunities. Finding a way to offer something free (think Amazon's free shipping) is a big draw, but even discounts of 5-10% can help you stand out without sacrificing your bottom line.
Don't become overly dependent on those promotions, though. The long-term effect of ongoing discounts and freebies can deteriorate your brand. Instead, pinpoint valuable short-term opportunities to generate sales without devaluing your offerings.
4. Fish with bait rather than a net
During a downturn, you need to narrow your targets. Less expensive digital advertising channels are more precise and yield much more data that you can use for optimization and targeting, ultimately increasing the effectiveness of your campaigns.
Many of those tools have powerful CRM capabilities. For example, Google Ads' Customer Match or Facebook can find "customer lookalikes" and increase the power of your media campaigns. My company once used Google's AI and machine-learning to help a financial services client increase sales 18%. There are many tools at marketers' disposal to ensure efficient and effective performance—even when budgets are tight.
5. Demonstrate empathy
Remember that your customers feel the pains of a recession just as much as your brand does. Put yourself in their shoes so you can craft marketing messages that empathize with their challenges.
Consumers will be more discerning about their buying choices when money is tight. It's perhaps not the ideal moment to lead with a $10,000 price tag as your main selling point. If you can't avoid a high price, find ways to highlight your financing or rebate offers. Meet customers where they are, which will help you build credibility and ensure your brand remains relevant in a changing market.
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If the economists are right, a recession might be right around the corner. This is no time to panic, though. With a little proactivity, your marketing plan can guide you safely through the storm while addressing your customers' needs.
Continue reading "It's Coming: Is Your Brand Prepared for an Economic Downturn?" ... Read the full article
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