Recession proof marketing

What has history taught us?

A report by John Quelch and Katherine Kocz studied recessions since the 1970s to understand how people behave and what they buy during these times. They discovered that when people spend less, companies also reduce their marketing budgets. 

However, simply cutting back on spend isn’t the best way to ride out the downturn. If businesses fail to understand consumer thinking and their true needs during a recession, they miss out on opportunities to reach their target audience.

Identify new customer segments

With a recession looming, it’s important to recognize that purchasing decisions are not solely based on price. Consumers also consider factors such as trust, the future impact of a purchase and how it aligns with their lifestyle. So, while marketing during a recession is challenging, it’s not impossible. 

The initial step is to identify new customer segments that emerge during this period. We were fortunate enough to get some great insight on this at BrightonSEO, where guest lecturer Sarah Clarke discussed the different types of consumer spending and how these trends change during a recession. She also shared tailored conversion tactics that businesses can employ to encourage consumer action. It was a really useful, thought-provoking session. 

So, here’s what we learned and what we’re applying to our campaign strategies.

Step 1: Consumer categories during a recession

During a recession, consumers tend to fall into the following four categories, due to changes in their financial circumstances, priorities and behaviour.

1. Slam on the brakes: People who cut all spending that's unnecessary during a recession belong to this category. These consumers reduce all their spending and postpone some purchases entirely as they feel the deep impact of the recession.
    
2. Pained but patient: A large number of people fall into this category. These people are hopeful about the future but concerned about maintaining consumption habits and lifestyle.
    
3. Comfortably well-off: The top 5% of people, as well as some others who have money saved up, are not too worried about the recession and are still spending money as usual.
    
4. Live for today: These people tend to be a younger demographic and carry on spending as usual and don’t particularly worry about the recession, saving or spending.

Step 2: Product Categories During A Recession

After assigning consumers to certain categories, we can then look at categorising products/services into a similar breakdown of four areas.

Essentials: Things that are necessary for people's survival and well-being. Examples include food, housing and healthcare. These are the items people cannot do without, even during difficult times.

Treats: These are small indulgences or enjoyable items that people may justify purchasing on a situational basis. They provide immediate gratification and a sense of comfort amidst the challenges of a recession.

Postponables: These are items that can be put off until they become essential or the recession ends. People prioritise spending on essentials and choose to postpone purchasing these non-essential items until their financial situation improves.

Expendables: These are items that are unnecessary, cannot be justified and are not needed based on the situation. During a recession, consumers are less likely to spend on these discretionary or luxury items as they prioritise their limited resources on essentials.

By considering these four categories of consumption, we gain a better understanding of how consumers make choices about the products they buy during a recession. 

It helps us recognise the varying levels of importance and urgency attached to different types of products in the minds of consumers.

Step 3: Incorporating this information on purchase behaviour change by audience into a marketing strategy

Identifying the categories into which the consumers fall, as well as the necessity of said products/services, can be a great way to highlight which areas will be impacted the most from a recession.

The table below highlights this nicely by suggesting where spending will continue, where it will slow down and where it will likely stop.

Source: by John Quelch and Katherine E. Jocz. The framework above identifies three areas - green, red, and orange - representing stable, declining and mixed markets respectively.

The green areas represent stable markets where a change in marketing strategy isn’t necessary, but where a change in messaging and creative efforts can help you gain small wins.

The red areas show markets that are in decline, where spending should be more strategic and focused on benefits that are important to users in those groups. Similarly, this will highlight areas where we will want to scale back on marketing spend.

The orange areas could be seen as a "sweet spot", where customers could continue converting but just need to be persuaded to do so. This gives us marketers plenty of chances to use effective marketing.

How can we incorporate this information into a marketing strategy?

This understanding of consumer psychology can also be leveraged to help write compelling ad copy that speaks directly to different audiences. 

For example, creating messaging that is calm and trustworthy, yet reassuring enough to convince users to take action during this tricky period.

Basically, we’re going back to the fundamentals of marketing, displaying a compelling ad to a highly relevant audience in their time of need. Now we’re armed with these insights into segments and behaviour, we’re in a strong position to adjust our campaign strategies and our messaging – an approach we’re definitely using here at bbd.

To conclude

You could argue it's more important than ever to make sure that every penny being spent on marketing at present is being spent wisely. Taking the time to understand consumer psychology and buying habits is a great place to start when budget planning and looking for key areas of focus.