Covid-19, inflation, a threat of recession, and the war in Ukraine continue to wreak havoc on the U.S. economy. According to the International Monetary Fund, rigid monetary policies and reduced household spending are also reducing economic growth to 2.3 percent in 2022 and 1 percent in 2023.
In an economic downturn, consumer confidence dips. Businesses, in turn, become cautious about where they spend their budgets. Marketing and advertising usually get the first cut. But is that the right move for small businesses?
Uncertainty and turbulence mean less cash coming in the door, so a reduction in spending seems rational at first. For businesses of any size and in any industry, it’s sensible not to be liberal with spending. Isn’t it? In personal finance, pulling back on spending makes a lot of sense. But in business finance, keeping money may lead to losses.
Doing business during a recession
Some of the biggest brands in the world aren’t deterred when the economy slows down. They may even identify opportunities that fulfill one of the following results:
- Expand the business
- Raise sales
- Develop new products or services
Businesses founded during a recession
Some of the most successful companies today were even founded during a U.S. recession:
- General Motors (1908 recession)
- Burger King (1950s recession)
- Microsoft (1973-1975 oil embargo)
- Mailchimp (2001 recession)
- AirBnB (2007-2009 recession)
- Warby Parker (2007-2009 recession)
A recession is hardly a barrier for businesses; it’s challenging to operate a commercial organization when times are tough, but given the right plan, a company can survive if not thrive.
Mailchimp went through two recessions. In 2001, it offered small businesses an affordable email software option. In 2008, it shifted its business model to freemium.
In the same year, another brand managed to weather the economic crisis: Lego. Instead of pulling back on expenses, Lego expanded and, as a result, raised revenues in Europe and Asia.
How marketing helps in an economic downturn
A McGraw-Hill study on 600 companies across 16 industries that advertised amid a recession further substantiates favorable outcomes. According to the study, businesses that continued to advertise during an economic downturn saw their sales jump by 275 percent, whereas companies that cut their ad budgets saw only 19 percent.
Consider what would happen if you stopped advertising or didn’t do any marketing during a recession. Your company likely loses its online presence, potentially giving way to other businesses that may be able to fill the market gap. Instead of cutting your marketing and advertising budget, making the most of your budget may be a better option.
Consumers remember which businesses were active during a recession, and when the economy eventually bounces back, those are likely the businesses they’ll turn to when they need a product or service.
Top-of-mind awareness is not the only advantage you’ll gain from marketing during a recession. In the big picture of things, brands with continued online presence demonstrate strength and stability in uncertain and turbulent times. And that is always a favorable impression for any brand.
So marketing during a recession isn’t just about making your sales and revenue projections. Branding development is also a key result. And brand equity pays off big in the long run because it influences customer retention, sales volume, and profit margins.
But how is it done? How do you do well through digital marketing amid a recession?
What’s a good strategy for digital marketing in a recession?
Mailchimp, Lego, and other brands recognized the changes in consumer patterns and adjusted their strategies according to those changes. Whereas some businesses contained their expenditures, the visionary brands understood how to mitigate the damage of a recession. They were both flexible and ready to adjust and well prepared.
Tips on marketing during a recession
1. Figure out which products or services offer opportunities
Evaluating your products or services is crucial to your marketing and advertising strategies when the economic environment changes. Determine which are likely to perform poorly, sustain sales, flourish, or expire.
You may also find products or services that are already failing even before the recession. Focus your marketing resources on relevant items and still connect with your customers.
2. Market to your loyal customers
Your existing customers are your best assets when the economy slows down. It’s easier and cheaper to market to loyal customers because they trust your brand and customer retention is five times more economical than winning new ones.
If you don’t have a loyalty discount, develop a referral program. Stay in touch with emails that thank them for their support. Take care of loyal customers and take care of your business.
3. Respond to new customer segments
Customers react differently to a new economic environment, creating new priorities. In every customer segment, people sort through services or products into the following categories:
- Essentials – necessities for survival
- Treats – indulgences that are justifiable
- Postponables – desired purchases that may be put off
- Expendables – unnecessary and may be eliminated
Most consumers (save for those who belong to the well-off segments), will be price sensitive. Even those with favorite brands may switch to less-preferred affordable alternatives.
Understand how customers behave during a recession and adjust your strategies accordingly.
4. Budget for online channels that deliver results
You track marketing and advertising performance in normal times; tracking is especially important in a recession since it informs you which online channels perform better. Once you know which ones, you can then allocate your marketing and advertising budget accordingly.
Maybe you’ll want to spend more on branding and cut back on display ads. You could bolster organic SEO efforts if you discover opportunities in a global market. And maybe it’s time to add an e-commerce component to your retail business.
5. Don’t lose sight of your brand
In uncertain and financially difficult times, it may be easy to redirect all marketing efforts down-market, even when the target has always been the upper-income segments.
Your fundamental positioning in the market should never suffer in a recession.
When marketing in a recession, stick with your branding. An economic downturn isn’t forever. It’s a difficult period, but it’ll eventually end. But never shift away from your base customer. Marketing to your customers is cheaper than appealing to new ones.
6. Invest in digital marketing tactics that have worked for others
Sometimes, what works for one business could work for another. The beauty of digital marketing is that it’s not expensive, yet it has the potential to deliver lucrative results.
For example, consider the Dollar Shave Club’s viral video. Made on a budget of $4,500 in 2012 (in a recession), the marketing video prompted 12,000 sign-ups to its subscription service within 48 hours of its launch. To date, that video has gained 26 million views and continues to provide marketing opportunities for the brand.
Dollar Shave Club’s marketing worked so well that Gilette ended up cutting its prices by 12 percent and launching its subscription service to strengthen its market share.
It’s worthwhile to study the success of other brands and apply it to match the goals and value proposition of your business.
7. Get creative
Recessions have seen some innovations in terms of products and services. Consider how some businesses were born in an economic downturn.
Innovative entrepreneurs never waste a recession because they discover new ways to meet customers' needs or come up with new products that turn out to be moneymakers:
- Warby Parker, created during the Great Recession, knew people needed a more accessible and affordable option to get their prescription glasses online.
- Netflix developed its streaming on-demand video service to make it through the 2000 recession.
- Walt and Roy Disney rebranded their company with an animation of Mickey Mouse in “Steamboat Willie,” lifting people’s spirits during the Great Depression.
8. Encourage your customers
Match the tone of your marketing and advertising campaigns to be sensitive to the times. Yes, you run a business, and making money is crucial to survival. Some people lost their jobs, and others may be dealing with debt. The brand that sends a positive message during a recession is one people will remember.
Build an emotional connection with your consumers. Be responsive to their needs. Emotional ads have a strong correlation with high click-through rates and engagement.
9. Say and do the right thing
Consumers are warier of companies that focus on earning sales and haven’t done much to improve a difficult situation.
During COVID-19, people look to brands that committed to helping communities. Companies are judged on how they run their business, manage their people and serve their customers amid the public health crisis. This perception carries over any uncertainty, from a pandemic to a recession. And how your consumers see your business in those critical periods will impact your reputation long after a pandemic or recession.
The key to a good reputation is that it will have been built and maintained before a recession. Because a good reputation means you’ve strengthened your business against an economic downturn. With it, you gain pricing power and brand loyalty; customers depend on the quality of your products and services in uncertain times.
Recession-proof your business with digital marketing
Digital marketing has a significant role to play in the survival and success of your business during a recession.
Although consumers are price sensitive and some businesses are pulling back on expenditures, your brand must make smart investments to retain its position in the market. And do so before the economy slows down because a business that is well prepared for a downturn has a better chance of living through the uncertainty and turbulence of the time.