A Down Economy… Crisis or Opportunity?
If you believe and follow the economists and pundits, preparing for a period of persistent economic uncertainty is wise. Whether deep, shallow or a soft landing is anyone’s guess and the exact timing of its impact is long overdue as on average we experience a recession every 10 years with the summer of 2009 the last full-blown version.
By incorporating a ‘never let a good crisis go to waste’ mindset, this presents tremendous opportunity as brands need to be forward thinking and focused not on survival but building the business. Sure your team and leadership is feeling uneasy, fearful and possibly panicking as sales slow down and costs to acquire new customers climb. With many companies facing increased cash flow challenges and rising costs to borrow, the debate to spend versus cut and what is ‘investing’ versus another expense line item on the balance sheet, can spark strong opinions in your 2024 planning sessions.
Taking a Customer-Centric Approach
As household budgets become tighter, priorities reset and spending reduced, consumers are increasingly searching for value and brands they trust. This happens to coincide with ongoing shifts in how people consume media along with a corresponding set of changes in how brands can expect to interact and connect with customers.
Due to the onset of consumer empowerment, channel proliferation and the adoption of emerging technologies, the customer journey is changing rapidly and is neither linear nor hierarchical. Meeting the consumer on their terms has never been more important especially during this kind of inflationary environment. There’s a lot of potential risk if your value proposition is not really honed in amongst your core customer base as we need to think about this through the prism of a continuous loop of discovery.
Being driven by access to better customer data and taking a more holistic view across all moments and touch points enables leading brands to unlock new and untapped opportunities by fully meeting evolving customer expectations for a more personalized experience. As an example, this type of thinking enabled us to reimagine the Mazda dealership experience by launching a live virtual showroom equipped with lifestyle and activity items that showcased the benefits and capabilities of the MX-30. The digital transformation ensured in-market handraisers could appreciate how the vehicle meets their needs without ever leaving their home.
Prospects could schedule one-on-one tours with a Mazda ambassador, or join a group tour, sharing insights into the benefits, features, tips and tricks. Questions weren’t only answered, but demonstrated using relevant features that engaged utility, adventure and family-focused drivers. Most live experiences reached nearly 10,000 visitors with many spending nearly 20 minutes inside the interactive garage discovering Mazda driving technologies.
How do we set the stage for even greater long term success?
During turbulent times, the need to spend smarter and be more measured and accountable comes to the forefront. History has shown that pulling back on ad spending and reducing marketing efforts does more harm than good. A Nielsen study found that some brands weren’t spending enough to drive the maximum ROI in advance of the recession. Cutting back when you’re already underspending won’t leave companies in the best position to weather the storm or have momentum to reap the returns you’re looking for.
Armed with an understanding that maximum ROI depends on specific spending levels, the study revealed that 50% of paid media investments are actually too low to drive maximum payback and they’re 50% below what they should be to generate the best possible results to break through.
The latest ROI Genome Intelligence Report by Analytic Partners confirmed 60% of brands that increased media investment during the last recession saw ROI improvements. While brands that increased paid advertising saw a 17% rise in incremental sales, those that cut spending risked losing 15% of business to competitors that boosted their spending. The report also found that brand messaging outperforms performance messaging 80% of the time.
According to Stacy Malone, VP of Global Business Marketing at Pinterest, “Agility is so important, and really focusing on it as the key marketing skill of our time. That means having a plan but revisiting it regularly, testing and learning, and really expecting the unexpected.’
Purposeful Adaptation to Weather The Storm
A common theme for successful companies is to navigate downturns with decisive moves and clarifying their value proposition to meet the moment.
While some brands are more insulated from recessions,, it’s critical to consider a necessary brand strategy pivot by asking:
Are universal consumer truths still relevant and aligned with my brand’s purpose?
Is my product value proposition still in sync with the category purchase drivers?
Do people view my solution as functional or is there a stronger emotional connection?
The likely outcome is a refreshed strategy to guide your future brand investment while ensuring you have the fundamentals in position to be a catalyst for new growth.
The Harvard Business Review (HBR) examined and shared their view on consumer psychology during recessionary times and how this drives behavioural adjustments. Rather than the traditional demographic segmentation, the first step in responding is to take into consideration consumer’s emotional reactions to the economic environment using psychological factors which they classified into four key groups:
The slam-on-the-brakes segment 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, particularly if health or income circumstances change for the worse.
Pained-but-patient consumers tend to be resilient and optimistic about the long term but less confident about the prospects for recovery in the near term or their ability to maintain their standard of living. 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. Should news get worse, pained-but-patient consumers increasingly migrate into the slam-on-the-brakes segment.
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
The live-for-today segment 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 rent than to own, and they spend on experiences rather than stuff (with the exception of consumer electronics). They’re unlikely to change their consumption behavior unless they become unemployed.
Take These Steps to Overcome the Challenges
During downturns, marketers must balance efforts to reduce costs and stimulate short-term sales against investments in long-term brand awareness.
According to ICAEW Insights, companies that invested in branding during the 2008/9 financial crisis gained 3.5 times more brand visibility than those that cut budgets. By carefully considering individual circumstances and category context, increasing branding efforts during a recession builds awareness, enhances brand value and increases loyalty while helping gain a competitive advantage as a sound investment for the long term.
Our proven playbook to recession proof your business and realize your growth potential starts with:
Retesting your assumptions, always listen to your customers, interpret the signals to ensure your messaging is on point and in lock step with changes in consumer habits.
Investing in delivering best in class customer experiences that are personalized based on their evolving needs.
Adjusting spend to strike a balance between brand and demand tactics to deliver great returns
Auditing your owned content marketing channels and concentrate resources on those that deliver results while being opportunistic in SEO and social to remain a leader
Being agile, testing, learning and optimizing in real time
Helping you navigate these new approaches requires a proven partner to drive your business forward. We are dedicated to helping our clients get the marketing solutions they deserve to remain successful and deliver transformative results. For a fresh perspective, let’s connect to accelerate your growth and set your organization up for long term success.
Sources:
https://www.nielsen.com/insights/2022/its-true-you-really-do-need-to-spend-money-to-make-money/