Recessions are inevitable in capitalist economies. While they force customers to reevaluate their spending habits, they also force businesses to choose the expenditures they’ll retain, reduce, or eliminate.
Unfortunately, marketing budgets are often the first casualty for businesses that are looking to reduce costs. The c-suite sees this as an area to cut marketing costs because of the following:
- Unlike sales, marketing is often perceived as a cost center instead of a revenue driver.
- The fact that marketers use terms like “marketing spend” and “cost per customer” further supports the narrative that it’s a cost center.
- Since it’s hard to tie some marketing campaigns directly to revenue, it is usually hard to justify an increase in investment.
- Some leaders struggle to see how marketing affects important aspects like market share, brand recognition, and community building.
On the contrary, recessions are the best time to lean on marketing, but with a more strategic approach. You need to prove to c-suite executives why the business needs to invest in specific campaigns.
You also need to present your business as a solid option to customers who are living through the bearish market. Marketers need to be empathetic in their communications with customers and showcase the value of their products or services.
ELK Marketing has put together an in-depth guide into how recessions impact marketing, the importance of marketing in a recession, and the best marketing strategies during a recession.
What Happens to Marketing in a Recession?
Most businesses will prioritize funding the sales, production, and procurement departments over marketing during a recession. As a marketer, you’ll likely have fewer marketing dollars to work with and pressure to prove the effectiveness of your department.
This situation makes it necessary for you to adopt strategies that drive revenue to the business while justifying the need for increased marketing budgets.
A recession will impact your department in multiple ways:
There’s Pressure to Prove ROI
In a bullish market, customers have high purchasing power. They’re more willing to spend on products and services, resulting in a coincidental increase in sales. There’s less pressure to prove marketing ROI when customers are streaming into the business.
When recessions hit, the same customers hold on to their wallets tight. Since lead generation becomes tougher in a bearish economy, marketers need to prove why specific sales campaigns are a better investment than others.
You’ll need to attribute revenue to specific marketing campaigns. You can do it by embracing the following:
- Revenue-based marketing goals.
- Optimized CRM lead tracking.
- Properly configured attribution software.
- Quality customer surveys
The more you can attribute revenue to specific marketing campaigns, the easier it will be to justify an increase in your marketing budget.
Targeting Needs To Accommodate Changing Consumer Behaviors
Consumers have reduced confidence in their financial future during a recession. In turn, they’ll spend less, choose alternative products, and even start shopping for discounts.
Such changes in consumer behavior mean that you’ll need to update your customer targeting policies. Pre-recession buyer personas will not be an accurate representation of your current customer mindset.
If you increase spending on an ad campaign using these personas, you’re likely to be less successful than during the pre-recession period.
You’ll need to conduct customer surveys to have a granular understanding of what customers want. These surveys will reduce wastage and improve revenue attribution.
Value-Based Marketing Becomes Important
Recessions make customers price sensitive. Customers will want to squeeze as much value as possible from the money they spend.
This mindset means that feature-based marketing won’t work well in a recession. Customers are less interested in the features your products have. They’ll want to know the value and experiences they’ll get from your products or services.
Marketers will need to change their messaging to reflect the product’s values instead of its features. The trick is to first understand your customers’ immediate needs and link them back to what your product can do for them.
Communicate Value Through Customer Success Stories
Customer success stories are among the best ways to communicate your product’s or service’s value. They show the consumer what your product has done to others. For B2B businesses, they prove to decision-makers that the product will fulfill their immediate need.
Make sure that you’re posting customer success stories beyond your website. Request customers for video case studies to post on your socials. Invite happy customers to talk during conferences and corporate events.
Market More to Bottom-of-the-Funnel Customers
Your business needs to generate as much revenue as possible during a recession. As a result, marketers need to focus more on ready buyers. They should be forwarding hot leads to sales teams to keep the business running.
While you should create top-of-the-funnel marketing campaigns to spread brand awareness, you need to focus more on bottom-of-the-funnel campaigns that drive revenue to the business.
You can improve how you market to such buyers by the following:
- Improving your targeting: Target buyer personas that show the greatest interest in making an immediate purchase.
- Creating bottom-of-the-funnel content: Produce content that proves to potential customers why they need to choose you over the competition. Some of the best content types to create are case studies, product comparisons, customer reviews, and industry reports.
- Aligning your goals with vendors: If you rely on vendors for lead generation, be certain they understand the type of leads you’re looking for.
Why Marketing Is Important in a Recession
Marketing plays a multifaceted role during a recession. If all marketing dollars are optimized, they can help you ride out the downturn and come out of the other side stronger.
A recession isn’t the time to cut down marketing spending. It’s time to reevaluate marketing efforts to bring more revenue and visibility to the business.
Your business will benefit in the following ways by investing in recession marketing:
Maintain Market and Mindshare
It’s easy to lose market and mindshare when you aren’t marketing your business effectively.
Customers know that your business exists because you’ve been marketing to them. While they might not become customers immediately, they could become customers in the future.
When you reduce marketing budgets, it becomes tough to remain in the minds of prospective customers. They’ll easily choose competitors that are focusing on marketing their business over you.
Capitalize on Competitors’ Customer Churn
Customers readjust their priorities during a recession. Their current vendors might not fulfill their needs, which is why they’ll be willing to jump ship.
Most customers will look for products or services that:
- Offer better value for the same price.
- Offer more value, even if they’re priced more.
- Are the cheaper option.
In other cases, the options customers were used to will be absent, especially when a competitor goes out of business.
Investing in marketing helps you present your business as a solid alternative to customers that churn from competitors. Embrace value-based messaging to attract such customers.
Protect Your Customers From Competitors
Clever competitors will assess your marketing campaigns for gaps they can exploit. If you’re investing less in your marketing, they’ll assume that you’ve been weakened. Most will target the customer segments that you’re ignoring.
Investing in marketing allows you to successfully fight off competitors. It ensures that you can create marketing campaigns that help you retain current customers and attract new ones.
Since resources are limited during a recession, you must pick your battles. Fine-tune marketing campaigns to address gaps, and reduce your focus on nonessential campaigns.
Improve Visibility Into Marketing Dynamics
Reducing your marketing investment impairs your understanding of the market. It becomes tough to predict what customers want, how competitors will react, and new opportunities your business can capitalize on.
Whether the market is bullish or bearish, having visibility into marketing dynamics makes it easy to remain competitive.
By investing in marketing, you’ll be empowering your marketing team through persona development surveys, competition analysis, CRM tracking, app analytics, and website analytics. All these channels provide invaluable data that improve your competitiveness and bottom line.
Succeed at Customer Retention
Customer confidence takes a hit during recessions. They’re unsure of whether their favorite businesses will outlive the recession. They’ll look for signs that your business is doing OK to decide whether to keep buying from it.
For instance, customers will walk away from a subscription-based business if they feel it won’t be around for long.
If your business is ending partnerships or postponing events, customers might take this as a sign that your business is going down. Such moves will reduce the confidence they have in you.
Continued investment in marketing showcases your business as one that can keep delivering to customers despite the downturn. In turn, most customers will stick around.
What Is a Good Marketing Strategy During a Recession?
Marketing your business during a recession calls for fine-tuned marketing strategies to address shifting marketing dynamics. Your marketing department’s priorities are:
- Providing revenue: Ensure that every marketing dollar you spend generates revenue for the business.
- Understanding the market: Keep tabs on what is happening in the market. How are competitors faring? Are there new opportunities for marketing your business?
- Communicating effectively with customers: Understand your customers’ current mindsets and pain points to communicate in an empathetic manner.
- Building brand awareness: Keep your business in the minds of potential customers.
Some of the best strategies for marketing during a recession are as follows:
Focus on the Right Metrics
When resources are scarce, you’ll need to prove that you’re using marketing dollars in the right places. That’s why you need to focus on metrics that drive revenue to your business.
Tracking a campaign’s metrics will help you gauge when a campaign is working, when to double down, and when to stop funding the campaign. It will also help you understand the intricate parts of your business and market.
For instance, by tracking data, you can get insights on:
- Customer mindset: Depending on how customers react to your campaign, you can identify their current states of mind and pain points.
- Competition: You can keep tabs on how specific competitor campaigns affect your market share. The right metrics will also help you identify market gaps that you can fill before the competition does.
- Content production: Metrics that provide insights into your customers’ mindsets will help you create resounding content. It will be easier to create content that’s based on the right tone and voice.
Steer clear of vanity metrics. Since every dollar needs to count, focus on metrics that will eventually improve the bottom line.
Find Out What Customers Want
Recessions change customer behaviors, so your pre-recession personas might be outdated.
For instance, most of your ideal customers will avoid shopping in certain malls or websites, so placing ads there won’t be as effective. Others will want products that are cheaper or those that offer more value for the same price.
Establish strategies to find out what customers really want. For starters, talk to your sales team to understand the kind of conversations they’re having with customers. Are customers frustrated? Are they demanding more from the product?
You should also conduct social listening. Visit the social media sites and forums that your customers are on and look for indicators of changes in their behavior. For instance, you can find out the struggles they’re going through that your business can solve.
Lastly, conduct direct interviews with customers. You can do this face-to-face or through online questionnaires. Be sure to include some open-ended questions for a more holistic understanding of your customer’s pain points.
Conduct Competitor Analysis
Recessions present great opportunities for getting ahead of the competition. For starters, your competition could have reduced their marketing budgets, ignoring some important parts of their market share.
Second, they may lose customers who are looking for better products. Customers might be disgruntled by the pricing of the competitor’s products or their value proposition. Once you identify such customers, you can adapt your marketing campaigns to address their pain points.
Third, your competitors’ marketing strategy might be to reduce their spending on specific channels like social media or SEO. You can increase your spending on these channels to get ahead. Best of all, once you dominate a specific channel during the recession, competitors will have to struggle to regain market share post-recession.
Keep tabs on what your competitors are doing and their mistakes, which present a lot of opportunities.
Invest in Brand-Building Initiatives
Building your brand during a recession is wise. Businesses with strong brands enjoy more effective and affordable marketing campaigns. Best of all, the brand you build will outlast the recession, ensuring that your business comes out stronger than before.
Some of the benefits you’ll enjoy from a strong brand are:
- Awareness: When more potential customers are aware of your brands, it becomes easier to start sales conversations with them.
- Loyalty: A strong brand attracts loyal customers, increasing the chances of repeat business.
- Referrals: Customers will be more willing to refer your brand to friends, colleagues, and family members once they feel they can trust it.
While you’ll want to market directly to ready-to-buy customers, investing in brand-building initiatives will keep your business in the minds of potential customers.
Invest in Customer Loyalty
When facing an economic downturn, you need every customer you can get. It’s cheaper to retain your current customers than attract new ones. That’s why you need to invest in solid customer loyalty programs.
First, address customers’ price objections as soon as you can. You need to learn the reasons behind their sentiments. Do they need a better price point or value proposition? If possible, offer discounts and incentives to retain your customers.
Second, optimize your customer experience. Most customers want a smooth purchase journey and post-sale support. Eliminate any friction in both areas. You can conduct customer surveys to identify how to improve customer experiences.
Third, personalize your product, service, and communication for your customers. Customers will feel appreciated when you thank them for their business.
You can also do small things like wishing them a happy birthday or offering them discounts during holidays that are specific to their region. Such moves make customers feel seen.
What Businesses/Industries Do Well During a Recession?
Recessions affect businesses differently. While some businesses are hit hard, others are recession-proof. The latter are typically businesses that supply basic needs. For such businesses, customers will be looking for cheaper alternatives instead of trying to cut spending on them.
If you’re in the following industries, you’re likely to be minimally affected by a recession:
Groceries and Food Stores
The food industry thrives during economic downturns. While customers do reduce their spending on specific products, there’s a limit to how much they can cut food costs.
Hotels and restaurants are typically hit hard during recessions, as people prefer cooking at home to eating out.
Profit margins generally remain the same for grocery and food stores. Customers will look for bargains and discounted items, but the demand for food increases.
Accounting and Tax Services
It’s tempting for people to save dollars by doing the bookkeeping in-house, but that can lead to costly mistakes. Failing to file taxes the right way can result in fines and problems with the law.
On the other hand, businesses are looking to improve cash flows and reduce waste during a recession. Since accounting firms are bookkeeping experts, businesses need them to manage their scarce resources.
Information technology businesses are responsible for the smooth running of most companies. They help automate processes, improve productivity, and optimize communication.
For instance, during the start of the pandemic, businesses like Zoom facilitated the pivot toward remote work. They also helped with the flow of information between organizations and their partners and workforce.
There will always be demand for IT businesses.
Healthcare Service Providers
Whether there’s a recession or not, people will need healthcare. Besides constant demand, the healthcare industry’s price inelasticity makes it recession-proof. Most people will cut costs in other areas to ensure that they can pay for health emergencies.
Auto Maintenance and Utility Services
Companies that deal with auto and utility repairs are less likely to be hit hard by the pandemic. Engines and faucets are bound to break down during a recession. While some people will rely on DIY crafts to save cash, some repairs will be beyond them.
For instance, a homeowner’s pipes might freeze over and burst during winter. They can only rely on a plumber to deal with those repairs.
The other businesses that will be protected from the recession are those that sell utility repair tools.
When recessions hit, customers will either have to buy fewer items or look for cheaper alternatives. There’s a limit to how much people can reduce the number of groceries or toiletries they typically use in a month.
The best option is to look for cheaper goods, which is why discount retailers thrive during a recession. Customers will be looking for cheaper soaps, cereals, and even clothes.
Freight and Logistics
People will need to move goods around whether there’s a recession or not. Businesses will need to move their products from warehouses to distributors or customers. You’ll also need a way to send parcels to loved ones. While people reduce travel, businesses that deal with the movement of goods will thrive in a recession.
Marketing Will Help Your Businesses Ride Out a Recession
Contrary to the common belief, a recession is the worst time to reduce investment in marketing. The marketing department is invaluable in generating quality leads for the business. It can also help you understand the market, customers, and competition.
The trick is to be more strategic in how you use your marketing dollars. Every marketing campaign needs to lead to revenue for the business. You also need to embrace messaging that shows customers you understand their pain points and can help them get through the recession.
If you want help optimizing your marketing dollars, Contact Us at ELK Marketing today to learn what our agency can do for you. Our team of digital marketers will use the best digital marketing practices to help grow your business.