Meet John. John owns a breakfast cereal company. It’s a popular brand, and by all accounts, things are going well. One morning, however, John receives bad news: the market has plunged into a recession. People are panicked. John’s financial advisers suggest massive cutbacks. But John keeps a cool head: while his competitors slash their marketing budgets, he doubles his. By the depth of the recession, John’s profits have risen nearly 30 percent and the company has taken the lead in market share for decades to come.
Now meet Amayra. Amayra owns a pool maintenance business. It’s small and regional, it pays the bills. Not a bad living, all told. One day, Amayra wakes up to discover the market in turmoil. She makes the decision to pull back on marketing—hard. Why should I spend money if I can’t get the return? No marketing will make a difference. We should preserve our capital, she thinks. In the meantime, Amayra’s strongest competitor continues to advertise. By the end of the first year, the competitor has pivoted its products strategy and increased its market share to become a nationally recognized pool builder. Amayra’s company, meanwhile, has laid off its staff and filed for bankruptcy.
A Cautionary Tale
These aren’t simple fables. The names have changed, but the examples are real: the first is Kellogg’s during the Great Depression. The second (specifically, the competitor) is River Pools, based in Virginia, U.S., in 2008.
In the business world, the story is always the same: times get tough. The rusty axe of budget cuts looms overhead. And marketing’s one of the first expenditures on the chopping block. Over and over, however, it’s been shown that brands that maintain or increase their marketing investments during times of recession come out ahead. As competitors go dark, marketing budgets (not to mention, product R&D) suddenly deliver a larger share of voice.
“But not every company is a massive conglomerate like Kellogg’s with marketing dollars to spare,” you say. True, but consider that in 1920, breakfast cereals were still an oddity—upstarts, if you will. Consider also that the internet is rife with examples of companies of all sizes that cut back on marketing in a recession, only to learn the hard truth:
They should have done the opposite.
Consumer Behavior in a Recession
By now it should be clear: during a recession, marketing spends should at least be maintained. The only effective marketing is the consistent and persistent kind. Brands that maintain or grow their marketing spends increase sales and market share during the recession and afterwards. Those that don’t gamble with their future.
It’s counter-intuitive, right? If fewer people are buying and demand is low, then why spend more? The answer, as with most things, is grey. The fact is, consumers (both B2C and B2B) don’t collectively halt all spending when times get tough. But neither do they continue to spend the same as before. The Harvard Business Review generalizes buyers in a recession into four groups:
- The “Slam-on-the-Brakes” Segment: These folks feel the hardest hit financially. They reduce almost all spending and “go lean.” “Although lower-income consumers typically fall into this segment,” says the HBR, “anxious higher-income consumers can as well, particularly if [their] health or income circumstances change for the worse.”
- The “Pained-but-Patient” Segment: More resilient and optimistic about the long term but less confident about the near term. They economize, though less aggressively. This constitutes the largest segment and represents a wide range of spending levels.
- The “Comfortably Well-Off” Segment: These consumers feel secure about their ability to ride out current and future economic bumps. They spend nearly as much as they did pre-recession but are slightly more selective.
- The “Live-for-Today” Segment: As the name implies, these folks carry on as usual. Their main response to the recession is to extend their timetables for major purchases.
What this indicates is that consumers in a recession don’t stop all spending, and they don’t ignore marketing efforts. They do become more selective with how they spend their money, and in some cases will wait to make large purchases until the economy is in recovery.
You want to be the company that’s top-of-mind when consumers need you now, and to be there when they return in force.
Why Marketing in a Recession Works
Companies that continue to market themselves during a recession stay at the forefront of consumers’ minds. When consumers need something now, they know where to turn. When they get more money, they instinctively remain with these brands and spend more. In addition, when brands continue their marketing efforts despite an economic downturn, they send a message of strength and leadership, which resonates with consumers that seek stability in uncertain times.
On the other hand, brands that reduce their marketing budgets cut into their online and offline presences. This leads the door wide open for competitors to fill the gaps (as happened with Coca-Cola in 2020).
How to Market in a Recession
History has demonstrated a few key patterns in the ways successful companies market during an economic downturn.
1. Don’t Overreact
Recessions come and go. No one said they’re fun. However, the worst thing a company can do is overreact. Slashing budgets across the board may seem like a good plan when you need to conserve resources fast. It’s seldom the best-case solution. Rather, successful companies maintain (or even increase) their marketing spends, but leverage data to back their investments. They understand their target market and segments. They’re aware of their metrics tracking and reporting. They continue to provide and create products that fit the market and communicate them. From there, brands can make messaging personal and reap returns on their marketing investments.
2. Realign Your Brand
In a recession, B2B and B2C consumers are more price sensitive. “Value” becomes more important in messaging (“value” means how much you receive in return for what you give). There’s no need to ignore the recession if everyone’s feeling it. Instead, double down on your brand’s value: how your product or service delivers more of something for less money. This is how brands maintain consumer loyalty, brand equity, and revenue. (Luxury brands and high-cost B2B services—especially those affecting their clients’ travel budgets, such as conferences—are a little different: in their case, the appeal should be more emotional. Stress the need for comfort and emotional release and give the customers permission to take it. Also, stress long-term investment value, especially for products and services that require significant expenditure.)
3. Improve Affordability
In tough times, discounts that require little effort from consumers are more effective than delayed-value promotions (e.g., rebates and other mail-in offers). Brands should increase the frequency and depth of temporary price promotions. They should also monitor consumers’ perceptions of “normal” price levels and adjust their offerings accordingly. This is not to say that brands should move their products and services down-market. Rather, they can introduce lower-priced “leader” versions of their premium offerings. Who remembers these examples?
- The iPhone 5c (ca. 2013), a colorful, more affordable version of the iPhone 5s
- Natural Pilsner (ca. 1991), Anheuser-Busch’s low-cost alternative to Budweiser
- Banner (ca. 1980), P&G’s low-cost answer to its Charmin line
When the recession ends, the leader product can be withdrawn or continue as a value entry in the overall product line. Companies can also improve affordability by lowering thresholds for quantity discounts, extending credit, or establishing layaway plans.
For service businesses, reducing up-front adoption costs and lowering penalty charges can attract price-sensitive consumers. They can also unbundle offerings, fold more services into the bundle—or both.
4. Reinforce Trust
In a recession, consumers across all segments exhibit worry (yes, even the “Live-for-Todayers”). Messages that reinforce an emotional connection with the brand and demonstrate empathy (“We’re in this together”) are vital. Such messages must be backed up with action: the last thing anyone should do is reduce quality while raising prices. Companies can educate consumers on how to spend efficiently and live their lives better. For example, some food retailers in previous recessions have provided flyers that detailed nutritious, low-cost meals using their products. This tactic is also exemplified by climate technology companies, for example, that offer free energy savings calculators and other marketing tools.
Don’t neglect to reinforce trust. Remind customers that your brand is the right purchasing decision, right now. In a recent economic downturn, Aleve added a new message to its marketing kit: “That’s value. That’s Aleve.” Today, Aleve remains one of the market leaders in the NSAID market.
Conclusion
Don’t stop marketing during a recession. Embrace the opportunity.
Marketing in an economic downturn is challenging because it often goes against your instincts (and probably your CFO’s fervent pleas). The fact remains that businesses that continue to market in a recession see gains, while those that curtail it face dwindling market share, revenue, or worse—obliteration. By optimizing your budget, understanding your market, and prioritizing your goals, you can survive the economic downturn and come out ahead of the competition. This is an opportunity to provide the market what it needs most, and to bolster the loyalty consumers feel to your brand. Embrace it.
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