There's light at the end of the tunnel as economies start the arduous journey toward reopening. Yet as eager is everyone is to get back to "normal" after this pandemic, waves of uncertainty abound and the future remains unclear. At this moment, it's an excellent time to consider strategies for marketing in an economic downturn that can keep your business growing.
Until early 2020, economies were booming. Unemployment and interest rates were low, consumers were buying, and businesses were expanding. When the brakes were suddenly applied in March, and things came to a screeching halt, fears of an economy going from boom to bust suddenly became more real. A recession is almost a certainty as millions are unemployed, businesses are struggling to survive, and governments are forced into heavy-handed measures to keep economies from collapsing. For marketing professionals, this is uncharted territory.
However, an economic slowdown doesn't have to be an existential threat to your business. Research shows that savvy marketers can grow their business and gain market share through periods of economic malaise.
Growth in a Recession
While no two recessions are exactly alike, a Harvard Business Review study focused on the strategies of more than 5,000 US companies across the last four business cycles. They identified a standard set of actions that successfully facilitated growth despite economic uncertainties. In a recession, the study found that companies need to:
- Take action early - It's easy to become complacent and continue business as usual. But research shows that companies that took action early achieved better long-term results than those who failed to act. Just as with the pandemic, countries that acted early and decisively had better outcomes than those that responded late.
- Act now but look towards long-term results - In recessionary periods, short-term actions are required as competitive opportunities develop. Keeping a watchful eye for competitive opportunities can yield long-term advantages to those companies willing to make the needed investments.
- Focus on growth, not just cost-cutting - Cost-cutting and efficiency improvements are essential steps to take during a downturn. However, the study discovered that those companies which balanced their cost-cutting with revenue growth initiatives saw the best returns. In other words, cost-cutting can help you survive short-term pain but can also starve a company's ability to grow, which only prolongs problems.
Given that companies should continue investing in marketing during an economic downturn, what specific actions should they take? As the chart above illustrates, marketing challenges pre-pandemic likely will be changing in a recession. Here are some immediate steps to consider:
- Continue marketing efforts - While there's a temptation to slash marketing budgets, research shows that's a mistake. It may provide some short-term relief, but also leaves your brand weakened and much less profitable post-recession. Of course, marketing plans need to be reworked and adapted for the current climate, but maintaining a healthy level of marketing investment through a recession enables keen businesses to seize market share from competitors.
- Review your segmentation - As buyers reduce spending and set stricter priorities, during recessions, research shows that traditional marketing segmentation approaches prove less useful. Understand the behavior will change, and marketers need to carefully watch their data and external trends to see how segmentation needs to be adjusted.
- Understand changes in behaviors - Customers do generally change their behavior during a recession, but given the historical impact of this pandemic, it's unclear what the effects on buying behavior will be. So your company's previous experience of buying journeys and purchase decision cycles may no longer be valid. It's important to collect new data, pay close attention to what it's telling you, and position yourself to respond quickly.
- Adjust your marketing expenditures - Examine your current marketing plan, what has worked in the past, and any new data you have on buying behavior. Try starting with your most successful previous tactics, but adjust the messaging to reflect the current environment and show empathy toward your customers. It's critical not to be tone-deaf or launch campaigns that could be perceived as insensitive to marketplace realities. Give yourself room to experiment and continue making adjustments until you find what works. It may take time but don't pull-back. Start slowly and put your focus on the data before overspending in any one area.
- Focus on your customers - Many studies have shown that it's cheaper and more profitable to retain your current customers than to acquire new ones. In this post-pandemic period, customers will want to deal with partners they trust and who are empathetic to their situation. Reward customer loyalty and show appreciation for their business. Where possible, offer bonuses, add-ons, special rates, or financing to incentivize purchases while showing an understanding that money is tight for everyone. This time is an opportunity to demonstrate the values of your brand to your customers.
- Analyze and optimize - Digital marketing will be the predominant marketing channel going forward. You should already be collecting performance data from your marketing funnel and conducting A/B tests to continually refine your messaging and increase the ROI of your campaigns. A recession is a great time to take your optimization up another level. Make sure you have the tools in place to track campaign performance. If you don't have a CRM, now is a great time to get one. Without useful data and the ability to rapidly optimize your efforts, you'll be flying blindly in uncertain conditions.
It's both a scary time for marketers and an exciting one. The reality of cost-cutting, layoffs, and economic uncertainties is real. For many business owners, they are still trying to figure out how to restart their businesses. But smart companies know that without revenue, their future is bleak. Marketing is the engine that drives growth, and in this challenging environment, marketing in an economic downturn becomes even more critical. The challenge will be to proceed with caution, analyze as you go, and optimize quickly. Don't be afraid to experiment because chances are, what worked before might not work as well now. However, in the end, the economy will come back, and buyers will start spending again. Smart companies understand this and will play the long game by continuing their investments in marketing today.