Written By Jon Paget.
LinkedIn is awash with “useful” recession-based marketing advice though it’s often superficial and woolly, simply telling business owners and senior marketers not to slash marketing budgets during troubled times. Whilst true, rarely is any evidence given to back these statements up.
This is an alternative view, designed to surface some of the most useful, important, and practical research-based insights when it comes to marketing in a recession.
Some important context
With the OBR forecasting a 5 to 6 quarter UK recession, times are tough for many. Inflation is making us poorer; investment is dwindling, and uncertainty is creeping in – impacting both B2C and B2B businesses. Many will be fighting lower revenue on one front, and rising costs on another.
Therefore, brands and companies alike are having to rethink their marketing strategies, budgets, and communication channels.
As we’ll see from the research, businesses and brands stand to gain advantage by understanding the lessons from the past. Much of what’s summarised in the following 4 points comes from analysing years’ worth of data (e.g. Dekimpe & Deleersnyder’s research), hundreds of customer journeys (e.g. Google’s Messy Middle framework) or dozens of company’s performances during and after the global financial crisis of 2008-9 (e.g. Peter Field’s work).
What these lessons tell us is that recessions are cyclical, we can forecast their approximate duration and depth, and that despite the hard times, consumers still consume, and advocates still advocate. Businesses still invest. But purchase decisions are more considered, options are more carefully reviewed – the path to purchase becomes very messy indeed.
It’s during these times, the right marketing strategy is the difference between success and failure, long term post-recession growth and stagnation.
4 lessons we can learn from research-led marketing insight
Lesson 1: Brand exposure and a promotional mix matter, even when demand drops off.
Google’s Messy Middle framework is the latest consumer behaviour model to validate the importance of brand exposure (brand-led communication) for long term growth.
Let’s start off with a (very) short intro to the model itself. Any purchase journey starts with a need or a desire. This moment is known as a trigger. We then spend time exploring and then evaluating these options, going back and forth in what Google calls the Messy Middle, until we feel confident enough to make a decision and move to purchase.
It’s a simple, intuitive model that builds on the shoulders of what’s come before. It also has some powerful takeaways.
The Messy Middle indicates just how important brand communication is, surrounding the purchase decision journey and nudging and reminding us about a brand, its values and how it can help its customers (see point 2 for more on the Messy Middle). This is even more important during a recession when a future purchase might be delayed or postponed (see point 4).
When confidence and demand returns, the brands that maintain (or even improve) their exposure (and share of voice) will be best placed to benefit from the post-recession recovery. As Byron Sharp would say, these businesses will have developed (or protected) their mental availability; the ability for someone to recall you at the point of need (i.e. staying front of mind).
This doesn’t mean you shouldn’t review spending. You should. Savvy marketers and businesses will spend their budgets differently during a recession. But the evidence is clear (as can be seen by this excellent piece by Peter Field), maintaining long-term brand-led communication is crucial to brands succeeding post-recession.
Lesson 2: Communicate to and maximise the value of the customers you do have.
The Messy Middle also tells us how reducing the gap between trigger and purchase can reduce the risk of losing business to our competition; reinforcing the need for the right message, at the right time, even during a recession.
Brands and businesses can bring the trigger and purchase closer together by sharpening their proposition. To do this, the Messy Middle identifies 6 shortcuts – or cognitive biases – that we all take to make purchase decisions. Optimise against these to give your brand or business the best possible chance of standing out vs. your competition.
Category heuristics: short descriptions of key product buying criteria that can simplify purchase decisions.
Power of now: the longer you have to wait for a product, the weaker the proposition becomes.
Social proof: recommendations and reviews from others can be very persuasive.
Scarcity bias: as stock or availability of a product decreases, the more desirable it becomes.
Authority bias: can you use the opinion of an expert or trusted source.
Power of free: adding value to a purchase, such as a free gift, even if unrelated to the core offering, can be a powerful motivator. Adding value in this way can be more effective and profitable than cutting prices too.
Lesson 3: The need for strategic long-term planning doesn’t disappear
Recessions are cyclical. Just as they come, they will also go. The OBR is forecasting that the current UK recession will run until early 2024. That means businesses will need to constantly scrutinise their spending and allocation of resources. However, where possible (and where funds permit) brands and businesses also need to plan for the end of the recession.
There is broad agreement, including this 2017 study that looked at 31 different studies on this subject, that maintaining your share of voice and continuing to advertise through a recession often results in improved longer term performance vs. those that don’t.
Add to this the research by Kumar and Pauwels that shows that the best time to launch a new product is just beyond the mid-point of a recession. If the OBR forecast hold true, then Q3 of 2023 marks this point for the current recession.
But wait, I hear you say. That all feels counter intuitive. And it might.
But first consider the effects of everyone else slashing their marketing budget. After all this is what usually happens. The result is less advertising and less communication; customers and businesses seeing fewer products and services, fewer reminders, and fewer nudges. This might extend to a significant period of time, where many businesses will batten down the hatches and ride out the storm. Let’s be clear – this is a dangerous tactic and, as marketing and advertising costs drop as a result, those who continue to communicate and speak to their target market gain greater flexibility and share of voice is easier to maintain or even increase.
Second, a recession causes irregular patterns of behaviour. Many consumers delay spending and change the way they view certain purchases (see point 4). This results in planned forward spending and investment. Put another way, consumers and businesses will start making plans to spend or invest once the worst of the recession is over, often delaying but not cancelling their purchase decisions.
Viewed in this context, the launching of new products and increased advertising seems logical towards the end of a recession; just as confidence returns and this planning phase begins.
But a word of warning – let’s not forget demand can tail off or disappear entirely in a recession. So, short term sales activation is less likely to work. Campaigns during recessions need to therefore play the long game, waiting for consumer confidence to return and perhaps with a different focus (this is another blog post topic in itself).
Lesson 4: Listen to your customers but be wary of changing the fundamentals of your proposition
When times get tough, customers act differently. And brands and businesses need to respond.Quelch and Jocz identify how recessions push consumers into different behavioural patterns (placing customers into 4 segments: Slam on the brakes, Pained but patient, Comfortably well-off and Live for today). They also categorise products and services into buckets (Essentials, Treats, Postponables and Expendables). By understanding your customers and your product / service, brands and businesses can be better prepared to weather the storm and communicate more effectively.
And beware the longer-term impact of short-term actions.
Reducing prices and hard discounting, or completely changing the nature of your business might win some short-term success, but when things bounce back, many will find it difficult to return to pre-recession pricing levels as consumers have got used to lower price points.
Consider too the risks of a business that fundamentally changes their market proposition during a recession. This approach risks alienating the audience(s) who made them successful before the recession. Those customers never really went away, they just perhaps found themselves in the slam on the brakes or pained but patient customer segments we explored above.
In a small number of instances, some businesses might see demand increase during periods of uncertainty. Facebook, Netflix, and Peloton all saw huge increases in demand during the Covid-19 pandemic – all expanded quickly, and all have had to make difficult cost cutting measures during the recovery. The lesson? Follow the longer-term trends, not the fad-like changes to behaviour.
There are of course many other important considerations to factor in and each business and marketplace will have its own unique hurdles and challenges to overcome. But, as this blog post shows, there is much to learn from both previous recessions and research to help brands and businesses navigate these challenges. Taking a long-term view is critical to this approach.
Not sure how to navigate some of these challenges? Open Velocity is experienced in supporting fast growth and tech-led businesses with their marketing. Contact us and we’ll be happy to have an exploratory call where we can discuss things in a little more depth.
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