Marketing in Recession: Post COVID-19 Marketing

Besides the health concerns that COVID-19 brought up, the effect of Coronavirus on the economy has been one of the main concerns of everyone around the globe. The old way of doing things has been shaken to the core on all different levels; politics, healthcare, work environment, and education. Marketing is definitely not an exception. As we face the new state of ‘normal’, business owners and marketers try to find a way to speak the new language. Businesses and brands try to create real value as new perceptions are being adopted and new habits are born. Marketing in a recession is a challenge that everyone is going through together. What businesses do now to survive the crisis may reshape the future of business. Yet, the main focus is on surviving the recession and understanding how marketing in recession works.

What Happens During a Recession?

To understand how to approach marketing in recession, you need to step back and understand what recession means. The NBER defines a recession as a significant decline in economic activity spread across the economy and lasting more than a few months. Normally, a recession is visible in real GDP (Gross domestic product), real income, employment, industrial production, and wholesale-retail sales. When the trends fall across these five aspects for several months, it’s officially a recession.

Although no two downturns are exactly the same, there’re certain patterns that usually occur during a recession. Understanding these circumstances and behaviour helps a lot with how your business responds to a financial crisis of this kind. In times of economic prosperity, it’s easy to be fooled that clever advertising and appealing products are the reasons behind the growth rate and increasing sales. Purchases depend on consumers’ having disposable income, feeling confident about their future, trusting in business and the economy, and embracing lifestyles and values that encourage consumption.

Of course, advertising and appealing products are essential for brand loyalty and encouraging sales, but if the consumer’s cash flow is low and they are feel worried about their next paycheck, sales are bound to fall regardless of how appealing your advertising is. Therefore, companies need to understand the evolving consumption patterns and fine-tune their strategies accordingly when the consumers themselves do not have a purchasing power due to an economic crisis.

Generally speaking, consumers set stricter priorities and reduce their spending. As sales start to drop, businesses typically cut costs, reduce prices, and postpone new investments. Marketing expenditures in areas from communications to research are often slashed across the board—but such indiscriminate cost cutting is a mistake. You’ll understand why as you understand the psychology of recession and the different groups that consumers fall into.

Understanding the Psychology of Recession

Ignoring the emotional aspect of recession and economic downturns is the biggest mistake you can make. The issue being financial doesn’t mean that people will always think logically. On the contrary, in times of insecurity, emotions play the biggest part. Unfortunately, these emotions are mostly negative ones. The wave of bad economic news erodes confidence and buying power, driving consumers to adjust their behaviour in fundamental and perhaps permanent ways. In the ensuing meltdown, consumers face piles of bills, stagnant or falling incomes. With many companies laying off their employees, consumers are not willing to take any risk. They’d rather stick to what they know and not be willing to invest in new opportunities. Feelings of adventure and thriving for luxury are frowned upon as many people are struggling to find their basic needs.

The ruling feelings during recession are usually fear and worry about the future. Therefore, purchasing behaviour is motivated by fulfilling the needs at the bottom of Maslow’s hierarchy of needs such as physiological needs and safety needs. Meanwhile, in prosperous times, people are inclined to fulfil top-of-the-pyramid emotions like love and belonging, esteem and recognition, and self-actualisation.

maslow's hierarchy of needs triangle.

A Recession Caused by a Pandemic: Double Trouble

The COVID-19 economic crisis is of a different nature. This economic slump was caused by a global pandemic. So, first of all, it’s not a one nation’s problem or even one region’s problem. That gives it a feeling of universal solidarity as humans face the same problems and the same fate. Another remarkable characteristic of this recession is the fact that feelings of worry are not only fuelled by financial trouble but also there’s fear of getting sick. Health forces itself as the number one priority. COVID-19 raised a debate that compares safety and security represented in shutting down against physiological needs represented in opening up and moving freely. This debate between two central needs both very central to the well-being of society has a great influence over the behaviour of consumers. They have to choose between two essential needs. The third exclusive characteristic of this economic crisis is that lockdown is an emotional roller-coaster for everyone. Mental health remains a big concern on an individual level. This is due to isolation, the sudden change of plans and old habits, the absence of social gatherings, and the fogginess around when and how this will end. That makes the psychological perspective in COVID-19 even more important than it normally is during economic recession.

As a marketer, this seems intimidating and challenging. At first look, it may seem impossible to deliver marketing messages during this time. While it’s not easy to come up with marketing messages that resonate without making it look opportunistic, it’s surely not impossible. However, it requires some time to digest the changes and understand the new reality that consumers are facing. Thus, before making any big decision or setting up a new strategy, you must invest time to understand fully where your consumers are coming from.

Where Consumers Are Coming From

So, having said that, as people respond differently during challenging times, you may face different consumer segments that behave differently. You’ll need to cater for different needs and accommodate to different ways. But regardless of which group your consumers belong to, they prioritize consumption by sorting products and services into these four categories.

Essentials are necessary for survival or perceived as central to well-being such as grocery, hygiene, and medicine.

Treats are indulgences whose immediate purchase is considered justifiable like ready-made food and beauty products.

Postponables are needed or desired items whose purchase can be reasonably put off like travelling, buying a new phone, or paying for a gym subscription.

Expendables are perceived as unnecessary or unjustifiable such as buying a new car or moving to a new house.

Of course, the categorisation submits to the theory of ‘consumer relativity’. The only standard categorisation is that all consumers consider basic levels of food, shelter, and clothing to be essentials, and most would put transportation and medical care in that category. Beyond that, the assignment of particular goods and services to the various categories is highly idiosyncratic.

Marketing in Recession: Segmenting Consumers during Crisis

types of consumers in a recession

Slam-on-the-brakes Consumers

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. For this segment, their inherited brand loyalty will be gone. They will easily switch to other brands that offer a better value for money and lower prices will be a primary factor that influences their purchases.

When it comes to health concerns, slam-on-the-breaks consumers are so shaken by the financial calamity that they may be less cautious about their health. It’s a good idea to come up with awareness campaigns for this segment and encourage them to use hygiene products by offering them at lower prices.

Pained-but-patient Consumers

This group of consumers tend to be resilient and optimistic about the long term but less confident about the prospects for recovery in the near term. Their ability to maintain their standard of living is not as strong as well-off consumers even though they’re not as severely hit as slam-on-the-brakes consumers. 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. As news gets worse, pained-but-patient consumers increasingly migrate into the slam-on-the-brakes segment.

Of course, they’re mainly concerned with covering up the basics but every once in a while they may look for a treat as a getaway. This getaway is usually the only relief they get before getting on with their tough missions. They may wait till their favourite products are on sale. Promotions are something that they look forward to. Health is something that matters to this group of people but as the time passes, they may be less cautious or desperate; especially if the financial situation doesn’t improve.

Comfortably-well-off Consumers

This segment feels 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 showy 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 comfortably retired, for example, or investors who got out of the market early or had their money in low-risk investments such as CDs. Well-off consumers continue to satisfy emotions of belonging and self-actualisation. Although they tend to be more considerate of other people’s difficult situation, so this is the segment that may respond well to marketing messages that promote charitable causes. Their brand loyalty remains unchanged, but they surely appreciate feeling better by buying products for a cause.

Comfortable-well-off consumers are highly concerned with health. They’re willing to dedicate a big portion of money on hygiene and safety products like masks, sanitizers, and cleaning products. However, some may put their social gatherings and business meetings first. Meanwhile, they’d be also looking for immunity boosters like over-the-counter vitamins and supplements. Moreover, the shift of focus towards health is highly likely to change their eating habits and go for healthier food choices. This could start a new wave of healthy eating that will extend to a larger number of consumers. Sporty individuals of this group will look for ways of staying fit at home. Those who work in the fitness industry will need to come up with online programs and outdoor, small group training to offer an alternative to indoor gyms where the infection rate is higher.

Live-for-today Consumers

The live-for-today segment carries on as usual and for the most part remains unconcerned about savings. Consumers in this group respond to the recession mainly by extending their timetables for making major purchases or changes like getting married or having a new child. 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 electronics. They’re unlikely to change their consumption behaviour unless they become unemployed.

This youthful segment that looks for experience rather than substance would be longing for post-lockdown period. They’d be looking forward to tickets and travels at lower prices. They’d also be looking for alternative getaways since concerts, stadium and courts, theatres are still closed up. Another observation is that this group of consumers may be careless about taking precautions and wearing masks as part of their happy-go-lucky attitude.

The Three Shapes of Recession

To better understand the role of marketing in recession, you should know that there’re three types of recessions: V-shaped, U-shaped, and L-shaped. Economists can’t say which one the world will end up with until the recession is over and trend lines start to go up again. However, the goal is to have every nation and every business join efforts to avoid an L-shaped recession; the worst of all. In a V-shaped recession, the economy recovers fast. In our case, that means the virus is contained and the economy strongly rebounds back to growth. In a U-shaped recession, recovery takes a longer time. So, a U-shaped recession is what the world will end up with if the virus recurs so it takes a longer time and the economic recovery isn’t as strong as people continue to social distance. An L-shaped recession, on the other hand, will only happen if the pandemic escalates and the economic recovery is much prolonged. According to McKinsey, here are nine different scenarios:

marketing in a recession three scenarios

“Many leaders currently expect one of the scenarios shaded (A1–A4) to materialize. In each of these, the COVID-19 spread is eventually controlled, and catastrophic structural economic damage is avoided. These scenarios describe a global average, while situations will inevitably vary by country and region. But all four of these scenarios lead to V- or U-shaped recoveries.”

The Role of Marketing in Recession

Marketing plays two vital roles in getting your business through an economic slowdown. First, it can be used to soften the depth of the downturn – the degree to which your growth slows. Second, it can be used to reduce the duration of the recession effect by accelerating your business in the upturn once the economy awakens. In other words, ideally, your marketing plan should have three parts. One for the ride down, one for the ride up, and then a third for the acceleration after.

During downturns, marketers find themselves in rough water. One of their biggest challenges is that they must balance efforts to pare costs and shore up short-term sales against investments in long-term brand health. Streamlining product portfolios, improving affordability, and bolstering trust are three effective ways of meeting these goals. Marketing isn’t optional—it’s a “good cost,” essential to bringing in revenues from these key customers and others.

Marketing in Recession: Should You Cut Down Costs?

Cutting down costs is the first thing that comes to mind during recession. While the concept itself seems wise, yet the execution is what makes a lot of difference. Before cutting down costs, you need to set your priorities straight as cutting down good costs may backfire. Good costs are those that have immediate high returns. Therefore, as a business owner, ask yourself if the costs you’re cutting are good costs or extra costs that can be eliminated. To re-allocate the marketing budget, one must direct the cash flow into the right directions.

Sometimes business owners and upper management consider marketing an extra cost, altogether. This is a big mistake. Some marketing costs are extra, they can be minimised or removed. Meanwhile, others are essential. Therefore, the marketing budget needs to be revised and optimised to fit the new situation. While discussing the implementation of your plan to employ marketing in recession, you’ll get to know the ‘good’ areas of spending.

Marketing in Recession: Should You Consider Re-positioning?

In addition to setting priorities straight, the second puzzling challenge is questioning positioning. When sales start to decline, companies sometimes panic and question their brands’ fundamental proposition or positioning. For instance, marketers catering to middle- or upper-income consumers in the pained-but-patient segment may be tempted to move down-market. This could confuse and alienate loyal customers; it could also provoke stiff resistance from competitors whose operations are geared to a low-cost strategy and who have intimate knowledge of cost-conscious customers.

During recessions it’s more important than ever to remember that loyal customers are the primary, enduring source of cash flow and organic growth. Repositioning is a core component of the brand. It should be handled with care, and should be your last resort with strong reasoning behind it. So, what you should do is learn how to rationalise your benefits and messages to your customers. Articulate once again why your brand still makes sense to your target consumers. Let them know that your business is there through tough times to make their lives easier as they are the centre of your business.

Marketing in Recession: Manifesting Your Marketing Plan

Stage 1: Soften the Downfall

At the point of downfall, things are still unclear. The market is full of uncertainty and the usual ways of doing business are still out of reach. If you still can’t see the horizon, then the downfall phase is not over yet. At this stage, you’ve been pushed out of the airplane and to not open your parachute now will hurt your business down the line. Your parachute is re-evaluating your marketing initiatives and turning off irrelevant campaigns, doing extensive market research of how your consumers are behaving, and staying agile amidst the storm.

Turn Off Irrelevant Campaigns

The post-COVID19 world is different. People are setting different priorities, they’re going through major financial changes and their mental state has been affected. So, if the campaigns you had in mind are no longer relevant, do not be stubborn. Study the new situation and find out how your brand can fit the new narrative. Don’t follow the trend of opportunity in a way that dilutes your brand’s value proposition. Consumers can tell if you’re authentic and sincere or not. Many brands have started selling masks just because masks are selling. Others have succeeded to integrate the reason why they’re making masks now with their brand’s purpose. Take the time to think and figure out how to communicate with your consumers the right way.

Relevant Communication Strategies

Typically, the share of the advertising budget devoted to broadcast media shrinks, whereas the share that goes toward efforts with more-measurable results, such as direct marketing campaigns and online ads, grows. Point-of-purchase marketing—promoting price cuts or generating in-store excitement—also tends to pick up during recessions. During lockdown, however, this may not be applicable. So, it varies from one place to another. Internet advertising, on the other hand, skyrockets during lockdown as people tend to spend most of their time online. Digital advertising is also targeted and relatively cheap, and its performance is easily measured. It’s perfect if your consumers belong to the live-for-today group.

That said, broadcast media still remain important for building mass-market consumer brands. For mass consumption brands like PepsiCo, Unilever, or Procter and Gamble, things are a little different. Although strong brands can be carried for a period on the momentum of previous brand-building investments, no brand can afford to coast solely on earlier efforts. Brands that are out of sight on the television screen will sooner or later be out of mind for a large percentage of consumers. Even with a relatively shrinking budget, big brands may divide their budgets between digital and TV.

Use All the Data You Can Have to Understand Consumer Behaviour 

Millions of employees have lost their jobs and cannot pay their credit cards. Restaurants and shops are only slowly reopening; many cannot pay their rent. Industrial companies can’t make payments on their equipment leases. Landlords have less income and cannot keep up with their mortgages. Suddenly, the world is awash in credit risk. If this won’t affect your consumers’ choices in life, then what will? Market research is often discarded as a luxury. During recession, it’s a necessity.

As the world is changing, you want to hear directly from your customers. How are they feeling? What is their financial situation? Which group do they fall into? Even if most of your consumers are comfortably-well off, do they need re-assurance? How are they willing to maintain their situation for as long as possible? Do they plan to invest their money? For those who have been hit badly, how are they managing? How are they ‘squeezing’? How is all of this affecting your brand being their first choice? There’s so much that you need to know. Market research doesn’t have to be extravagant, any feedback you get from your customers counts as valuable insights. Discounts and incentives are a great way to collect information about your customers as long as you ensure their privacy.

Stay Agile

In these critical times, changes are frequent. You go from the usual nine-to-five routine to work from home to rolling back again. Meanwhile, it’s a rollercoaster on the news. Thus, it’s important to ensure that your teams can focus on the customers and content, and aren’t stuck figuring out the process. Ensure they are set up with everything they need to move forward with. No matter how long this lasts, being agile and keeping your team’s head above the water is a great asset. Moreover, your team’s mental well-being, whether working from home or the office, is something you should always keep an eye on as it highly affects their productivity.

Agile marketing teams always win. There’re many ways to empower your team through the crisis. One thing you could do is conduct weekly or monthly video meetings with the whole team to keep their spirits high and have them on the same page. Short one on one virtual meetings are also great to hear from every team member on an individual basis. That lets you build a strong relationship with all team members. You’ll also find out how they’ve been doing and how they’re handling remote working and what they need to do better. Having your team maintain their productivity amid recession and changes is something that affects the business and their lives positively.

Stage 2: All Efforts to Shorten Duration

Stage two is when you know that the recession will last for some time, so your goal is to get through the phase with the least damage. This is a critical stage as you’ll learn how to survive the recession. Building a resilient relationship with your customers is key to guarantee you won’t lose your key resources and to have these customers as ambassadors once things get better.

A Friend in Need Is a Friend Indeed

When things are slow, a friendship between the business and the customer is built as both sides are trying to get through the worst together.  Your brand delivers meaningful value to their lives. Meanwhile, your customer’s loyalty amid changes is the means of survival to your business. Once the economy starts to pick up, your loyal customers’ purchasing behaviour would be the most rewarding. In other words, customer loyalty is not only crucial during recession, it’s also the fastest way to shorten the duration of recession. You want to be sure that your brand is top of mind as soon as there’s an upturn in the economy.

Focus on understanding the exact concerns of your key customers today. What can your business do now to ensure their loyalty extends further than the recession? You’ll be able to transform that loyalty to business growth once spending behaviour changes. There’s also an opportunity in marketing during recession. It’s a time when the costs to advertise are halved, which creates a possible opportunity for prepared marketers.

A New Wave of Content

If content goes through waves of evolution, lockdown would be one of the biggest changing factors. As all outdoor activities were shut down, everyone went online to look for content and new means of entertainment. The biggest entertainment avenues in the world had their shows available to everyone online. People discovered a new way to show solidarity through content. This has been a global phenomenon. Educational and entertaining content in specific were in great demand as schools were shut down. Overall, the significance of the online community and content creation were truly obvious in our lives. They’re no longer considered secondary or trivial. In some cases, they could be life-saving.

As the world is looking at content and the online community differently, where does your brand stand? How are you evolving your brand’s communication with the audience? If you’re still hard selling, you’re missing on building a real conversation. Your customer should be at the centre of the conversation. Let your audience lead the conversation, talking about yourself doesn’t give them that room. Consumers will remember how you contributed to their lives during hard times.

Don’t Be Afraid to Try Something

As everyone is re-visiting their plans and re-arranging priorities, people are looking for alternatives and new solutions. We’re all trying to maintain the same lifestyle with as little change as possible. That’s why it’s a good time to get creative with how your business can provide value. It may not only be through direct product sales, but could involve services or subscriptions. You could in the end find new revenue streams for your business. Don’t be afraid to offer alternative pricing either, unless it makes you no longer relevant to your loyal customers. Whenever uncertainty prevails, businesses and brands tend to be resistant to changes. While you should be cautious, don’t become stagnant and don’t resist changes that may serve your business.

Stage 3: Earn the Time Back

If you’ve set up your business for growth during the second stage of the recession, you may be able to catch up if the downturn hasn’t been too long. Being top of mind will allow you to tap into the recovering economy.  In other words, your effort and performance during stage two will affect your numbers when the consumer behaviour recuperates and people feel secure enough to spend again.

The Right Time to Spend Comfortably

In the first stage of marketing in recession, you’ve understood how turning off irrelevant campaigns allows you to take time to think and re-direct your communication budget to the right tracks. Only a few brands can afford to spend heavily during the first stage of recession. Most companies opt for low-to-medium budget channels. On the contrary, at stage three, where great improvement has already been noticed and consumers are willing to compensate for their long-missed pleasures, it’s the right time to spend more than ever. 

Other Useful Techniques to Use for Marketing in Recession

Continue to Measure Consumer Behaviour

COVID-19 crisis will likely leave a lasting impact on our behaviour. If the recession lasts for a short while, it will be a lot of changes and ups and downs over a short period of time. That means that consumer behaviour will change rapidly and thus you need to keep up with all the changes. On the other hand, if the recession lasts for a longer period of time, you’ll want to know exactly which behaviours have remained permanent, like working from home, online shopping behaviour, or shifted priorities, and which have returned to what they were before the pandemic. So, in brief, market research and keeping up with market trends will always be useful regardless.

Diversify Your Revenue Streams

On every level, including individuals, businesses, and even governments, we’ve all realised that we simply don’t have enough liquidity to buffer an economic crisis like this one. For governments and companies, one route to take would be to invest in contingency funds for such scenarios in the future. The second route is to think about how you can build more alternative revenue streams for your business. This strategy is called diversification; it’s one of the established four growth strategies. This strategy involves widening the scope of the organisation across different products and market sectors. It encourages entering into new markets or industries which the organisation is not currently in, whilst also creating a new product for the new market.

Streamline Product Portfolios

In many cases, diversification can be highly costly so you must weigh the pros and cons to see how diversification affects your overall profit. It’s not a one-size fits all piece of advice. Some companies need to invest in building new channels for gaining revenues. Meanwhile, others may need to rationalise it. When faced with declining demand, marketers should continue to reduce excessive complexity in product lines that feature too many marginally performing sizes and flavours or trivial differences among product models. Overly broad product lines soak up marketing costs and tie up resources and working capital in slow-moving inventory. In a deeper recession, marketers can benefit by cleaning up their product lines and so should seize the initiative early rather than waiting to be forced into making changes.

Streamlining the product portfolio does not mean shutting down the innovation pipeline. Innovative improvements to core products will grab attention and motivate purchases, particularly of expendable goods and services. Creativity is a great advantage during marketing in recession, yet it’s unwise to waste creative concepts on losing products. Instead, direct your creativity towards improving your star products or to support those that have potential. Do not hesitate to delist products that haven’t been performing well for a long time. Streamlining your portfolio is a smart way to cut down costs. Amid the pandemic, UberEats was forced to shut down in eight markets: Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Ukraine and Uruguay. These markets weren’t performing well before Coronavirus, however, when things started to be rough, they decided that it’s better to streamline their presence and focus the operation costs on profitable markets. Begin by assessing your brands and products or services. Determine which have poor survival prospects, which may suffer declining sales but can be stabilized, and which are likely to flourish during the recession and afterward.

Employing your market insights in the direction of streamlining your product portfolio is a clever strategy. Re-alignment with market conditions requires frequent reforecasting of demand for each item in a product line as customers’ buying habits shift. For instance, slam-on-the-brakes consumers will sacrifice variety or customization in favour of simplicity and lower prices on essentials and treats. In the case of durables purchases that cannot be postponed, pained-but-patient consumers will trade down to models that stress good value rather than enhanced features. Consumers in both segments will reject products with features that diminish durability or increase operating costs.

Improve Affordability

Affordability is a big deal during a recession. Regardless of your consumer segmentation, affordability is something constantly on everyone’s minds during a downturn. Premium brands suffer as well as value brands. Therefore, all businesses will increasingly compete on price. You understood how existing customers, especially loyal ones, are your main source of income during the recession. So, you shouldn’t change your brand’s positioning, unless it’s critical. However, if you own a premium-brand, what you can do is introduce a “fighter brand,” a lower-priced version of the premium offering sold under a different name and backed by minimal advertising.

Fighter brands have been a great, consistent solution used for marketing in recession. In 1991 recession, Anheuser-Busch, introduced its Natural Pilsner brand, priced lower than Budweiser. In the early 1980s downturn, Procter & Gamble developed Banner as a cheaper alternative to Charmin. When the recession ends, the fighter brand can either be quietly withdrawn or continue as a value entry in the overall product line.

On the other side, if your brand already offers good value for low prices, this is your time to shine. You need to back that up with an exceptional distribution network and powerful communication messages. Your brand’s offering is already made to survive tough times, so you don’t need to spend money on tweaking your brand offering. Instead, use that money to build awareness for your brand and invest in improving the customer experience. This will have a huge impact on your business during and post-recession.

Positioning for Recovery

While businesses are putting customers under a microscope, their customers are, in turn, examining them more closely than ever. You want to earn the trust of distressed consumers. How do you want them to perceive your brand post-recession? The shock and anger towards governments, corporates and institutions may accelerate the pre-existing trends toward reduced materialism, commitment to sustainability, higher expectations of corporate social responsibility. If your business hasn’t considered these values in its brand’s essence. This is the right time to position your brand for the future. This will also affect the way you communicate with your target groups. Cynical, cold, and hard-selling communication doesn’t work when people are distressed.

Marketing in Recession: Companies Taking Different Approaches

This isn’t the first time we ever encounter a recession. So, history can teach you good lessons. Which companies survived previous recessions? How did they do it? These are all questions worthy of asking.

The Four Approaches to Marketing in Recession

Different Approaches During Recession

Prevention-focused companies, which make primarily defensive moves and are more concerned than their rivals with avoiding losses and minimizing downside risks.

Promotion-focused companies, which invest more in offensive moves that provide upside benefits than their peers do.

Pragmatic companies, which combine defensive and offensive moves.

Progressive companies, which deploy the optimal combination of defence and offense.

Funny enough, the four approaches that companies adopt for marketing in recession resemble football strategies. Some of them are too defensive without an attacking strategy, while others do the exact opposite. Those who win the game are those that can truly balance to have the best of both worlds.

Reading into Insights from the Past

Harvard Business Review have some startling findings. Seventeen percent of the companies in the study didn’t survive a recession: they went bankrupt, were acquired, or became private. The survivors were painfully slow to recover from the battering. “Only a small number of companies—approximately 9% of our sample—flourished after a slowdown, doing better on key financial parameters than they had before it and outperforming rivals in their industry by at least 10% in terms of sales and profits growth.”

Defensive & Pessimistic Strategies

These numbers look scary. Yet, you would be surprised to know that companies that survived the recession were not the ones who acted defensively. Post-recession winners weren’t the usual suspects. Firms that cut costs faster and deeper than rivals don’t necessarily flourish. They have the lowest probability—21%—of pulling ahead of the competition when times get better.

Several issues stem from that defensive and intimidated mentality. Defensive strategies make winning highly unlikely. Focusing on cutting costs, and only that, makes decision makers approach every initiative with a loss-minimising lens. Overall, that brings employees and executives to have a narrow vision so they resist innovation. Fear-incited decisions are not often wise ones. Another major issue is that defensive companies try to do more of the same with less. Here is where brands fall into the quality trap and deter their loyal consumers that they should capitalise on.

Aggressive & Optimistic Strategies

Optimistic business leaders, on the other hand, find opportunities in a recession. Generally speaking, this is a good way to view things and it’s always good to have a business mentality that turns negatives into positives. However, some business leaders use the recession as an excuse to push change through, get closer to customers who may be ignored by competitors, make strategic investments that have long-term payoffs, and act opportunistically to acquire talent, assets, or businesses that become available during the downturn.

The problem with these aggressive strategies is that they deny changes that are taking place on the ground. They expect sales and profits to grow, meanwhile, consumers are putting more restrictions on their spending. Hopeful brand owners put all their bets on creativity and innovation of new secondary products or modifying trivial attributes. In the meantime, consumers are looking for lower prices and sustainability. Since the pie is shrinking, brands must capture an even larger share from rivals to keep growing. This makes competition really tough. Therefore, being hopeful can be blinding when you expect that the recession will not have a huge impact on consumer behaviour and market trends.

Moreover, optimistic leaders attract employees of the same mentality. When positive groupthink invades an organisation, employees who resist this enthusiasm are marginalised and realities are overlooked. That’s why aggressively-optimistic organisations are often blindsided by poor financial results.

Pragmatic & Progressive Balance

It’s easy to tell that balancing between is the right path to follow. A combination strategy seems easy to execute in theory. A little defence, a little aggression, and there you have it: balance. We all wish it was that simple. In reality, even companies that master that delicate balance, they don’t all follow the exact same strategy.

Companies typically combine three defensive approaches—reducing the number of employees, improving operational efficiency, or both—with three offensive ones: developing new markets, investing in new assets, or both. You’ll get to know a little more on these approaches later.

Pragmatic Companies

Brand managers or decision makers in pragmatic companies recognise that cost cutting is necessary to survive a recession, that investment is equally essential to spur growth, and that they must manage both at the same time if their companies are to emerge as post-recession leaders.

Progressive Companies

Progressive companies are a subset of companies that roar out of recession. They deploy a specific combination of defensive and offensive moves which gives them the highest probability of success—37%—of breaking away from the pack. Progressive businesses reduce costs selectively by focusing more on operational efficiency than their rivals do even as they invest relatively comprehensively in the future by spending on marketing, R&D, and new assets. Their multipronged strategy is the best antidote to a recession.

During recessions, progressive companies develop new markets and invest to enlarge their asset bases. They take advantage of depressed prices to buy property, plants, and equipment. In addition, they stay closely connected to customer needs—a powerful filter through which they make investment decisions.

What Does Operational Efficiency Mean

Operational efficiency is a measure of how much costs are incurred during a given economic or financial activity, where lower costs equals greater efficiency. During a recession, businesses usually consider laying off employees as a method of cutting costs, but does cutting costs that way really help? According to McKinsey, 79% of all companies have cut costs in response to the global economic crisis, but only 53% of executives think that doing so has helped their companies withstand the crisis.

Because it’s not just about headcount; cutting costs isn’t a goal itself. Nevertheless, recession is the right time to re-examine every aspect of your business model—from how you have configured supply chains to how the company is organised and structure. Reducing operating costs on a permanent basis, will allow you to make bigger profits that your competitors, when demand returns.

Steps to Improve Operational Efficiency

Assess your operation: Managers often overlook the value of regularly walking the floor to evaluate areas that are labour-intensive or where traffic may be congested. In addition to this simple step, more formal audits, metrics analysis and even business intelligence tools are useful to evaluating operations. That’s the only way to find out where you can fine-tune.

Remove barriers to success: Perform process analysis to track problems and identify opportunities for improvements. Pareto charts are useful for uncovering extremes and bottlenecks and thus determining where to make changes. This is not a “set-and-forget” mentality, but an ongoing process.

Put people first: Companies that rely solely on cutting the workforce have only an 11% probability of achieving breakaway performance after a downturn. Human resources are at the heart of the business. Morale is usually better at companies that stress on operational efficiency rather than deep staff cuts. Employees appreciate the organisation’s commitment to them so they become keen on cutting costs and they do it creatively.

Besides, companies that are known to do heavy lay-offs have way less employee engagement and productivity. To keep labour focused on productivity, establish five key metrics as common ground. Then, reward top performers while discouraging unproductive habits. Make it everybody’s organisation – opportunity is around every corner. If you leave efficiency up to a single department, you might miss out on valuable insight. One of the best ways to implement a plan for improving operational efficiency is to directly tie it to an incentive program. Rewards give employees a vested interest in the outcome of a project or task. 

Automating repeatable work: Progressive companies lay off employees, too. But they only do it where it truly has meaning. This might come as a surprise, but in professional services, almost every core business process that’s repeatable can be automated, from quote to invoice, starting from project planning and proposal development to knowledge sharing and financial reporting, you name it.

At best, too much administrative hassle just kills time. At worst, it can immobilize your teams, introducing human error and preventing them from succeeding with work they can truly add value to. However, there are certain practices you can apply to turn this ship around. For starters, ask yourself what steps your business takes to deliver the finished product. Think both big and small. Seeing the big picture and being in the know of the smallest detail will help you come up with the final checklist of ‘process offenders’ that need to be automated or entirely cut out.

Digital transformation is one of the main tools of achieving genuine operational efficiency. Technology can optimise the process along the entire value chain going through marketing, product, sales, customer service, delivery, finance, and operations.

Managing employee time transparently: Most employees are not ‘full-time’ productive. Most employees work for eight hours every day, but are they as productive as they should be? When it comes to perfecting processes and procedures, it’s important that you get into the trenches with the team and understand the ins and outs of service or product delivery in your company. Sometimes it would mean shadowing your employees as they work to discern what is sapping value from your company and can be optimised.

Are you 100% sure that nobody is overloaded with work? Do some of your employees sit on the bench? Do you have the right KPIs set for each team member? How do you decide it’s time to hire a new employee? These are central questions that you must answer to make sure the time employees spend at work truly contributes to operational efficiency. Moreover, answering these questions will enable you to see the real potential of your employees. So, instead of hiring a new employee and adding an extra cost, you can fill that position with a current employee that hasn’t been well utilised in their current position.  

Coronavirus Impact on Several Industries

Does recession have the same impact on all industries? In search of successful marketing in recession strategies, one needs to understand how recession affects different industries in different ways. Because this recession is a result of a global pandemic, it’s quite different from previous recessions. Industries that require people meeting and big gatherings are expectedly the most affected during the downturn.

Most Vulnerable Industries

Retail

Typically, the retail industry is hit during recession as individuals start to lose their jobs. So, they start minimising their unnecessary purchases, especially beauty products and expensive clothing. The so-called Coronavirus recession has had a catastrophic effect on the retail industry because not only did they witness a drop in their sales, but also had to completely shut down during lockdown. Only retailers with a strong online presence were able to continue operating through their e-commerce.

The Centre for Retail Research forecasts that department store groups, fashion and footwear, large general stores as well as the smaller independents are most vulnerable. They estimate that in 2020, a total of 20,622 stores will close (against 16,073 in 2019) and job losses will rise to 235,704 people (against 143,128 last year). Retailers need to rapidly consider a range of scenarios of how COVID-19 could impact their customers and their suppliers, as well as their own operations.

marketing in recession-retail industry

During recovery phase, retailers will need to go out of their way to not only provide that safe environment, but to clearly display that they are doing so. From regulating the flow of customers into the store via an automated store access system to safe touchscreens and POS, if customers don’t feel that a retailer is taking this seriously enough then they’ll pass and move onto the next store. On a different note, technology and digital transformation won’t be a luxury. Those will not have an alternative digital platform to drive online sales will be obsolete. Lastly, customer experience inside the store must offer visitors something that online shopping can’t offer. So, they retailers need to get creative. Creativity isn’t another word for technology, yet technology may play a part of it.

Restaurants & Bars

Typically, the food and beverage industry, to which restaurants and bars belong, are among the least vulnerable in a recession. Because, people still want to socialise or have a drink on a Friday night even during a recession. Even if they won’t do it as often, they would still do it. Coronavirus’ restrictions on big gatherings and the new social distancing regulations, have made this almost impossible. Over the whole month of March, bar sales dropped by 60 percent and restaurants by 56.4 percent.

Moreover, social distancing policies by nature reduce traffic and sales. So, even as restaurants and bars re-open, they will still be struggling as they won’t operate with the full capacity. Fast food restaurants, on the other hand, may see a silver lining. They tend to be impacted less during most recessions. Some, actually even thrive under these conditions, as people are more likely to spend less on food and will often turn to cheap, quick alternatives when they can’t afford to eat out at high-dollar, sit-down restaurants.

For this industry to get back on track, marketers and business owners will also need to work out the same three key solutions that the retail industry should follow. Marketing in recession caused by a pandemic means that more effort and investment must go towards improving the customer experience and ensuring their safety. Take a look at this creative French café that went viral for using teddy bears for social distancing.

Marketing in Recession: Post COVID-19 Marketing 1

This brand new ‘quarantine greenhouse’ dining experience developed by a restaurant in Amsterdam to allow diners to eat while maintaining social distancing.

Marketing in rcecession-Restaurant in Amsterdam

Leisure & Hospitality

The UK hospitality industry has essentially ground to a halt with an estimated 75% of companies in the sector closing and 85% of the workforce furloughed during lockdown. This industry is the third largest provider of jobs in the country. It’s larger than the automotive, pharmaceutical and aerospace industries combined.

To make things a little brighter, it’s not all doom and gloom. When the nation starts to gradually open up, there will still be many restrictions on travelling abroad. Tourists, coming out of a long lockdown, will start looking for local destinations. ‘Staycations’ will be trending. That means that people will spend their money within the borders, so that may give the industry a little push. To overcome this phase, hotels, movie theatres, gyms and any indoor activity within that industry, need to gain the trust of their visitors by committing to stern hygiene and social distancing procedures.

Recession Vulnerable Industries

Retail, restaurants, and hotels aren’t the only businesses hurting during the coronavirus recession. Automotive, oil and gas, sports and entertainment, real estate, and many others see heavy declines during these times. As people are spending more time at home and limiting their movement, it’s expected that the oil & gas industry is facing new and serious challenges. Ride-hailing apps as well as car renting agencies are facing trouble and their consumer behaviour is shifting as general priorities shift towards safety and hygiene. According to McKinsey, this table shows the expected time for affected industries to return back to their situation before the pandemic, in case the recession lasts and the virus isn’t contained.

Marketing-in-recession-affected Sectors

Recession-Proof Industries

Food & Beverage

Food & Bevarage in Recession

No matter the state of the economy, people must eat. Whether they’re looking for a healthy option to sustain themselves throughout the day or a tasty treat to aid them through a stressful situation, there are business and franchise opportunities just waiting to be cashed in on.

In times of economic instability, people cut back on “splurges.” That means a lot less of going out for dinner and a lot more of cooking in. In the US, during the 2008 recession, the National Purchase Diary (NPD) estimated that, 77.4% of meals were prepared at home. Home-cooked meals rose steadily to 80% in 2013, at the end of the recession. With people staying at home for most of the time, the percentage is likely to be higher. That makes grocery stores a stable investment. Because not only do they provide food, but also provide consumers with their basic personal care needs. People still need to brush their teeth, do their laundry and wash their dishes in good times and bad times.

Amidst a pandemic, some consumers will surely be looking for healthier food options. Healthy food has already been trending in the last decade, so this situation will give it a great push forward. These consumers want affordable organic, plant-based, immunity boosting, and fresh alternatives. So, investing in this direction will surely be a relevant decision. Meanwhile, other consumers have thrown themselves into the arms of indulgent, comfort food which is quite the opposite of healthy. There’s an opportunity in offering healthier comfort food, beverages and snacks.

On another note, believe it or not, if you’re looking for a profitable opportunity in this industry during recession, follow your sweet tooth. In 2008, the profits of the popular confectionery brand Cadbury increased by 30%. This doesn’t come as a surprise; Snickers, Tootsie Pops and Mars Bars were all invented during the Great Depression. Coincidence? Apparently, people tend to use sugar as a mood raiser during times of crisis. The same thing applies to drinking habits, consumers tend to drink more during recession.

Information Technology

While the world is waiting for the vaccine to save the day, our real hero and true saviour is the Internet. Thanks to technology, around 40% of the workforce were able to work from home during the pandemic. Students are able to e-learn, meetings are done online, and fitness programs are done online. Even live concerts and entertainment shows had some ‘online shows’. In addition, consumers were able to buy their essentials through online shopping. The crisis would have been ten times worse, on all levels, if it hadn’t been for the Internet. This has shown how stable and profitable this industry is at the face of adversity. Coronavirus has given this field a huge leap forward so that nobody looks at technology as a luxury anymore because it’s literally saving lives now.

Marketers, business leaders, or anyone looking for an investment opportunity, this is the right time. The fifth generation technology will also empower future growth and allow for easier and faster remote interaction. Telehealth, in particular, is expected to grow globally to 17 billion dollars by 2025. This could help people to get diagnosed, treated and operated without the need of a physician to be physically present. As many patients in self-quarantine needed medical supervision and medical assistance every day, many apps were created in the past few months to help them achieve this.

E-commerce, on the other hand, is expected to grow bigger, yet with different challenges and a changing customer behaviour. From a shopper’s point of view, convenience beats price as the number one reason for online shopping. That tells you how much a seamless customer experience should be your top priority. During lockdown and with social distancing likely to continue, there’s an overwhelming demand for last-mile and contactless package delivery. Consumers are also buying their essentials online now, therefore, same day delivery is a huge perk that puts you ahead of your competition. Speaking of competition, ecommerce players seeing a surge in volume will do everything in their power to retain their newly acquired customers through loyalty programs, subscription models, promotions, and expansion of the product range. The competition intensifies with consumers using price engines and referral sites to find the best deals online.

Healthcare & Social Assistance

The home care industry has also long been underappreciated by the health care sector at large. The virus has exposed some of the weaknesses of nursing homes and senior living facilities in keeping residents safe. Widespread outbreaks at congregate care centres have inspired family members to pull their loved ones out of those settings and move them back home, where the risk of catching COVID-19 and other infectious conditions is much lower. Right now, many individuals may be working from home, giving them the ability to keep an eye on their aging loved ones. However, as the economy improves and people are asked to go back to work, they will need someone to take care of their loved ones. Family members will think twice before sending a loved one to a nursing home or assisted living facility.

Currently, home care services focus on helping seniors feel comfortable at home. Many senior living communities have faced staffing shortages during the COVID-19 pandemic. Thus, this industry is experiencing enormous growth and promises job-security, a very tempting offer for those striving to open their own businesses.

Examples of Companies Approaching Marketing in Recession

Lego’s Diversification Strategy

Lego-asia-marketing-in-recession

One wouldn’t expect that a brand revolving around toys, amusement parks or play centres would flourish during recession. To be honest, one would assume that this is a luxury that most people would exclude. That’s why this case study is a great example of turning around a negative situation into a good one. Lego played it smartly through expanding to the global market in 2008. The company concentrated its efforts on building revenue in Europe and Asia while the U.S. faced economic distress. Consequently, Lego has positively thrived during the recession, as parents reverted back to longer-lasting toys.

Airbnb’s Creativity & Luck Built Them One Successful Business

Despite the fact that Airbnb is severely injured by the Coronavirus recession, they were one of the companies that thrived in the 2008 recession. In 2007, Brian Chesky and Joe Gebbia had the idea of renting out an air mattress in their San Francisco living room. When the recession hit in December of the same year, people were looking for any extra income they can get. Meanwhile, a new generation of travellers on a low budget found Airbnb extremely convenient and cost way less than traditional hotels. Airbnb revamped the market of short-term living quarters for those who were priced out by hotels. In 2009, they received funding from top-tier VCs and experienced explosive growth. For Airbnb, necessity was indeed the mother of invention.

Staples VS Office Depot on Cost Reduction

A good example of cost management done right is the example of Staples. During the 2000 recession, Office Depot and Staples took different approaches to cost management. Office Depot cut 6% of its workforce, but it couldn’t reduce operating costs significantly. Although the company created an incentive plan to boost sales, its sales growth fell from 19% before the recession to 8% after—five percent below Staples’ post-recession sales growth rate.

By contrast, Staples focused on operational efficiency by closing down some underperforming facilities while increasing its workforce by 10% during the recession. They did that to support the high-end product categories and services they introduced. As a result of these strategies, the company contained its operating costs and came out of the recession stronger, bigger, and more profitable than it had been in 1999. Its sales doubled, from $7.1 billion in 1997 to $14.6 billion in 2003, while Office Depot’s rose by about 50%, from $8.7 billion to $13.4 billion. On average, Staples was about 30% more profitable than its arch-rival in the three years after that recession.

Sony on Extreme Defence Mode

Sony is an example of a company being too intimidated by a recession. When the recession hit in 2008, Sony announced a cost-reduction target of $2.6 billion in December 2008, which epitomises the prevention-focused approach. It planned to close several factories and eliminate 16,000 jobs. To add insult to injury, they delayed investments—such as building a much-needed LCD television factory in Slovakia—in its core electronics business.

This strategy resembles the approach Sony took during the 2000 downturn, when over a two-year period the Japanese giant cut its workforce by 11%, its R&D expenditures by 12%, and its capital expenditures by 23%. The cuts helped Sony increase its profit margin from 8% in 1999 to 12% in 2002, but growth in its sales tumbled from an average of 11% in the three years before the recession to 1% thereafter. In fact, Sony has struggled since then to regain momentum. It has invested in developing new products such as electronic book readers, gaming consoles, and organic light-emitting diode TV sets, but finds itself bested in those product categories by Amazon, Microsoft and Nintendo, and Samsung, respectively.

HP on Extreme Aggression Mode

At the height of the 2000 recession, for example, Hewlett-Packard drew up an ambitious change agenda even though sales and profits were falling. HP embarked on a massive restructuring program, made the largest acquisition in its history by buying Compaq for $25 billion, and increased R&D expenditures by 9%. It also spent $200 million on a corporate branding campaign and $1 billion on expanding the availability of information technology in developing countries.

These initiatives strained the organisation because most of these investments were long term investments. They ignored what’s happening on ground and didn’t focus on short term returns. When the recession ended, the company found it tough to match the profitability levels of IBM and Dell. By 2004 HP’s earnings, at 8.4%, had slipped below IBM’s 16.8% and Dell’s 9.3%.

Groupon Putting Their Bets on Affordability

Funny enough, Groupon was founded in November 2008; right in the middle of the Great Recession. Start-ups have a point of strength during recessions because they’re able to quickly fill a need and are often able to run on low budgets because they’re used to it. In addition to that, Groupon got somehow lucky because their business offered something that is always in extreme demand during recessions: discounts. Discounts actually offer consumers a way to survive a recession, which is why discount stores tend to do well during economic instability.

P&G Smart Advertising Strategy Saved Them from the Great Depression

The Great Depression was trying for most consumer product companies, but the soap giant came out of the whole ordeal smelling better than before. How did they do it? P&G came to a realisation: consumers are going to buy soap no matter what their financial situation is, so they might as well from buy it from us. They decided to do heavy, yet smart, advertising campaigns.

Instead of throttling down its advertising efforts to cut costs, the company actively pursued new marketing avenues, including commercial radio broadcasts. One of these tactics involved sponsoring daily radio serials aimed at homemakers, the company’s core market. In 1933, P&G debuted its first serial, Oxydol’s Own Ma Perkins, and women around the country quickly fell in love with the tales of the kind widow. The program was so successful that P&G started cranking out similar programs to support its other brands, and by 1939, the company was producing 21 radio shows—and pioneering the “soap opera.” In 1950, P&G made the first ongoing television soap opera, The First Hundred Years.

P&G Oxydol Own Ma Perkins

Today, this may sound like a ‘typical’ communication strategy by a big brand, but back then, this communication strategy was revolutionary. They’ve succeeded at targeting the brand’s exact target audience and managed to build a fan base of devoted buyers through powerful storytelling. Some brands struggle to do so even today.

Key Takeaways

You’ve finally made it to the end of this article. Here are your key takeaways for marketing in recession:

  • Keep an eye on the on-going new. There’s something new to learn every day. Knowing the in and out of your industry is crucial during such times.
  • Observe your consumer behaviour and do extensive research to find out your consumer’s needs. Always keep in touch with them.
  • Categorise the financial situation of your consumers. Which group do they fall into:  slam-on-the-brakes, pained-but-patient, comfortably-well-off Consumers, or live-for-today?
  • Prepare your business for three different recession scenarios depending on how long the global health emergency will last.
  • Don’t just follow trends that don’t add value to your brand.
  • Your existing customers are the heart of your business. Do not alienate them with a brand re-positioning. If re-positioning is truly the right decision, consider creating a fighter brand.
  • Stay agile. Recession is an embodiment of ‘survival of the fittest’. The fittest here is the business that adapts well with change.
  • Build a genuine relationship with your consumer through meaningful content and an offering that makes their lives easier.
  • If you manage to build loyalty during a downturn, you’ll be roaring out of recession.
  • Cutting costs should be done wisely. Do not cut costs that drive in revenue.
  • Improving your operational efficiency should be the main policy of cutting down costs, and not laying off employees.
  • Don’t be too defensive like Sony. Don’t be too aggressive like HP. Try to create a balance.
  • Don’t be afraid to be creative.
  • Diversify your revenue sources. You may look into investing in other stable industries or look into market expansions that would be profitable to your business.

Hopefully, this has been a useful guide on marketing in recession. Remember to always keep your spirit up. Being resilient and staying calm will empower you to make the right decisions. One thing for fact, recessions don’t last forever; the sun will shine again. Focus on surviving through the downturn and your business will get out of this stronger than ev

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