RULES FOR MARKETING IN A RECESSION
Is your marketing strategy ready for the next recession?
Recessions have a nasty habit of destroying unprepared or ill-equipped businesses. In the last one, more than 400,000 small businesses went bankrupt or permanently closed. If you want to prevent your business from suffering the same fate, you need to craft a recession marketing strategy now—not when the stocks dip, not when a recession is formally announced—now. That way, you’re ready for pivots and budget shifts when the market slides.
If you choose not to heed this advice… well—it was nice knowing you.
This may be the first time you’ve had to keep a business afloat during an economic downturn. So, to help you out, we dove into the most successful recession marketing strategies and distilled them into five main rules for you to follow:
- Don’t arbitrarily cut your marketing budget
- Do a deep dive of your target audience’s recession behavior
- Analyze and track everything—now
- Focus on existing customers
- Increase conversion rates by testing, tweaking, and repeating
If you stay the course and follow these five rules, you’re more prepared for the next recession than most businesses. Have any questions at the end or want to get started with digital marketing services for your business? We’re a phone call (or contact form) away.
(Disclaimer: There are plenty of reasons your business can go under during a recession that have nothing to do with your marketing plan. I highly recommend you read this article by Harvard Business Review to start planning your business strategy during a recession.)
Recession Marketing Rule #1: Don’t Arbitrarily Cut Your Marketing Budget
When a recession hits, marketing is typically one of the first places business owners are tempted to cut. This is a mistake. It’s well documented that slashing the marketing budget in a downturn will only help defend profits in the very short term. Ultimately the brand will emerge from the downturn weaker and much less profitable.
Building and maintaining a brand that consumers recognize and trust is one of the best ways to reduce risk when the economy takes a turn for the worst. That’s why, in each recession cycle, the companies with a strong brand presence have come out on top.
And, consider this:
Cutting the budget for marketing during a recession is a gut reaction many inexperienced business owners (and even experienced ones as well) will make. If your competitors are cutting budgets, you’ll see an even greater long-term return on your marketing investments.
Instead of making deep reactionary cuts, objectively look at where you’re spending money and what kind of return you’re getting on that money. The key word here is objectively. I once knew a business owner who INSISTED on having a big advertisement with his face on it on the big screen at hockey games (I’m 100% not joking). Did it bring in clients? No. Did it give him an ego boost? You betcha.
In a recession, that kind of mistake can take your business from boom to bust in the blink of an eye.
Recession Marketing Rule #2: Do a Deep-Dive of Your Target Audience’s Recession Behaviore
The success of your recession marketing strategy will hinge on this, and I am not exaggerating.
I’ll show you why—the following is a true story:
A Midwest business owner in the luxury automobile industry thought he had marketing during a recession all figured out because his business grew when the dot-com bubble burst. He had an MBA from a top-tier school and watched the market like a hawk.
When the subprime mortgage crisis grew, he wasn’t worried. He thought he knew his customers and the modern buyer’s journey. He assumed that when the next recession hit, his customers would skip the high-luxury lines and go for more mid-grade luxury vehicles as they did in the previous downturn. So, he stocked up on lower-priced luxury cars and tailored his marketing strategy to convey frugality.
He didn’t do a deep-dive of his current target audience and how they behaved during a recession. If he had, he would have learned that this time around his target audience wouldn’t necessarily curb their automobile spending habits. The new cars he’d stocked up on alienated his existing wealthy customer base but were still too expensive for the remainder of the local population.
His existing clients started shopping at competing dealerships and his business took a revenue hit that he would spend the next four years digging himself out of.
People change as the world around them changes. What your target audience needs in one decade may not be true in the next one. Keep the same thing from happening to you by really diving into your target audience and finding out their motivations and behavior trends during an economic downturn.
To get started, follow this model by Harvard Business Review:
Think of your customers as falling into four groups:
Feels most vulnerable and hardest hit financially. This group reduces all types of spending by eliminating, postponing, decreasing, or substituting purchases. Although lower-income consumers typically fall into this segment, anxious higher-income consumers can as well.
Tend to be resilient and optimistic about the long term but less confident about the prospects for recovery in the near term. Like slam-on-the-brakes consumers, they economize in all areas, though less aggressively. They constitute the largest segment and include the great majority of households unscathed by unemployment, representing a wide range of income levels.
Comfortably Well-Off Consumers:
Feel secure about their ability to ride out current and future bumps in the economy. They consume at near-prerecession levels, though now they tend to be a little more selective (and less conspicuous) about their purchases. The segment consists primarily of people in the top 5% income bracket. It also includes those who are less wealthy but feel confident about the stability of their finances.
Carries on as usual and for the most part remains unconcerned about savings. The consumers in this group respond to the recession mainly by extending their timetables for making major purchases. Typically urban and younger, they are more likely to spend on experiences rather than stuff (with the exception of consumer electronics). They’re unlikely to change their consumption behavior unless they become unemployed.
Regardless of which group consumers belong to, they prioritize consumption by sorting products and services into four categories:
- Essentials are necessary for survival or perceived as central to well-being.
- Treats are indulgences whose immediate purchase is considered justifiable.
- Postponables are needed or desired items whose purchase can be reasonably put off.
- Expendables are perceived as unnecessary or unjustifiable.
Remember our automobile dealership owner? It turned out that his target audience was comprised of consumers in the “comfortably-well-off” and “live-for-today” categories who saw luxury cars as Treats (and to an extent, Postponables).
This time around, you can bet he’s already done that deep-dive. To take it a step further, he reached out to his most loyal customers and interviewed them to find out their specific motives and plans for spending in the next recession. He’s tailored his recession marketing strategy to offer loyalty rewards and more referral bonuses and started an email marketing newsletter to stay in constant communication.
Recession Marketing Pro Tip: The trick to successful advertising during a recession lies in consumer psychology and emotion. A recession is a trying time for most consumers, and there’s an undercurrent of fear, worry, and stress beneath the surface. By tapping into and appealing to the emotional side of consumers you have a better chance of connecting with and persuading them.
Research shows that ad campaigns that focus on emotional engagement tend to be more profitable than ad campaigns that focus on rational messages (such as low prices or special offers), even when times are tough.
Recession Marketing Rule #3: Analyze and Track Everything (NOW.)
Blue Corona was started during the Great Recession. When you think about the core of what we do, it makes sense that we grew while other businesses were struggling: Digital marketing allows for more precise, specific, and measurable campaigns. This leads to better, more quantifiable results than traditional advertising campaigns—and it all starts with the right tracking and analytics.
To track things accurately, you need Google Analytics, a call tracking program (don’t have one? Check out ours.), and someone to help you combine that data with your sales data. That way, you can identify the best-performing marketing strategies and ones that you can cut without seeing any real dip in branding or sales.
During a recession, knowing exactly what return each marketing investment is providing and why will be your key to not just survival, but growth. Digital marketing has long been accepted as the best low-cost, high-return marketing strategy, largely due to measurability and targeting capabilities.
As ad targeting capabilities mature and AI and machine learning advance, you’ll have an easier time reaching the audiences you want and delivering meaningful ad campaigns that can be directly tied to your bottom line.
Recession Marketing Rule #4: Focus on Existing Customers
Regardless of your industry, your brand’s biggest asset during a recession will be your existing customer base.
Make sure your marketing strategies are focused on your most valuable, happy, loyal customers. Bend over backward to keep them happy, and be sure to reward their loyalty. These happy customers will repay you in the form of recommendations and reviews, especially if you can use analytics and data to show how you’re benefitting their company during rough times.
Recession Marketing Rule #5: Boost Conversion Rates by Testing, Tweaking, and Repeating
You can’t MAKE people alter their spending habits. The best you can do is figure out the formula that nudges them further and further along the buyer’s journey. The only way to do this is by tracking your efforts, tweaking your campaigns, pivoting your strategy when necessary, and repeating the process.
We have a mantra here at Blue Corona: Track > Test > Tweak > Repeat. Everything you do on the web can—and should—be tracked. You can’t win the game if you don’t know the score. Tracking and capturing more accurate and granular information about the performance of each of your marketing strategies allows you to see opportunities and problem areas your competitors cannot.
Once you’ve gathered enough data, test different tweaks to your strategies. You can’t get better results if you don’t test new strategies and evaluate old ones. Run tests to find the most cost-effective strategies you can dial up and leverage. Once you’ve got your results, repeat the process.
What you’re doing is refining your recession marketing strategy and distilling it to only include the very best-performing campaigns. Sometimes you’ll find you need to drop everything and pivot—and that’s okay. The business owners and marketing managers that thrive in recessions are the ones who are adaptive and able to pivot easily.