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 "Set it and forget it" is an excellent strategy for your Crock-Pot, but it's an outdated approach for marketing.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.