Marketing in a Recession

May 14, 2021 | Chris Kervinen

Marketing in a Recession

“The dreaded R-word is on everybody’s lips.

It’ll change the game for good, taking down old monoliths and picking up new contenders. And no, it’s not re-targeting. It’s recession.”­­­

It’s here.

Coronavirus COVID-19 is spreading like wildfire, causing hoarding, quarantines and major economic downturn all across the world. And there’s more black clouds in the horizon.

Markets seem to be shutting down (except for toilet paper business, of course).

You can literally feel the CEO’s finger on the trigger, ready to start cutting costs. And marketing budget is infamously the first in line in when it comes to “shared sacrifices”.

But as research shows , throwing marketing department under the bus is one of the worst things you can do when trying to recover from the hit. It’s like getting rid of the one thing that could get you out of this hole.

Why is it then that marketing faces the cutter first?

One reason is that it’s fast and easy. It’s like that big red button on your dashboard that screams “press me” when the panic mode hits you.

Compared to e.g. production costs, marketing budget can be trimmed more swiftly, and without having to fire people (a lot, at least). Cutting the marketing budget seems like a silver bullet in fighting the downturn.

Except that it’s not. You’re actually selling your silver bullet in this situation. The short-term savings will become extremely costly in the long run.

That’s where we get to reason #2: Not knowing the commercial value of your marketing activities.

In more prosperous times it is easy to forget that successful marketing campaigns and attractive promotions are not the only factor driving up the sales graphs over time (as the economy grows, there’s usually more money and more buyers at the markets). Moreover, it might be difficult to grasp that marketing contributes to maintaining a market share – the consistent brand building, customer activation, loyalty programs and weekly deals all play a part in keeping your customer base happy.

If you won’t put in the work and try to stay relevant for your customers, someone else will. So, by cutting your marketing investments you’ll start to lose your market share in addition to your future sales growth.

We’re here to make sure that doesn’t happen.

Here’s our 4 Cs that help marketers to avoid the infamous budget guillotine and turn this turmoil into a business opportunity:

- Continuous analytics to back up your decisions. Because your decisions will be challenged. Use their arguments against them.

- Clear brand assets. Know which are your strongest brands and bet on them. Use them to crush weaker brands and take over bigger market share.

- Confident pricing & promotion plan. It’s easy to bend the knee and go low. It’s also extremely expensive to do so. But if price wars have piqued your interest, consider fighter brands first.

- Consumer research. Pay close attention to your customers’ contextual wants and needs. Because if you don’t, you’ll get that “It’s not you, it’s me” in no time. Spoiler alert: It’s you.

Okay, now that we’ve catered the skimmers and the “list-people”, let’s deep dive into the topics more thoroughly…

1) Start measuring your marketing effectiveness on continuous basis

Marketing analytics isn’t probably the sexiest topic for most marketers, and it might have been on the bottom of your to-do list for a while now, but it is absolutely necessary for you identify new emerging best practices and activities, as well as for proving how crucial the investments are for different departments and top management within your company.

What’s more, people will want get updates very frequently. One-time analysis won’t cut it, as the uncertainty starts to creep in as the economy continues to struggle.

What calms executives more than anything? Numbers, results and hard data.

Being able to show clear evidence, day in day out, how your marketing activities are driving the company forward will help your CEO take her/his mind off the business challenges that aren’t exactly hers/his to begin with and stay off the budget.

Reminder: Why are we guarding the budget like Smaug was guarding his treasures?

Because maintaining a healthy marketing budget is one of the crucial steps towards surviving a recession (see e.g. this , this and this ).

But you’re not going to merely survive the downturn. You’re ready to graduate from Hard Knocks University and stand up when others are sitting down.

You’re going to supercharge your brands.

2) Review your strongest marketing assets

Securing sufficient resources provides you a lever to lift your company up. But this lever is a bit tricky, as it works both ways. Place it poorly, and it will start to push you down, very fast and very powerfully.

There’s little room for errors, so you’ll need to know your core customers’ wants, needs and consumption behavior (prior and during the recession) thoroughly in order to make the most out of your marketing.

Supporting your core brands with the strongest chances to survive (often brands with the best price premium) will play a key role in maintaining profitability over tough times.

Not only will they give you more room for maneuver in terms of pricing (price cuts should be the absolute last resort in your playbook), these are the products and services you’re known for. During uncertain time trusted brands are especially strong in terms of top-of-mind, consumer preference and new product launches, whereas new brands and categories lose their footing.

After defining your core brands, find out what kind of marketing plan will support their growth in the long run:

· Which features to highlight in marketing communications

· What is the optimal media-mix for each brand

· Which distributors to prioritize (and possibly support with e.g. early-buy allowances and extended financing)

· What kind of promotional campaigns could and should be implemented (this is extremely important as customers will be shopping around for deals, but you don’t necessarily have to or want to cut the list prices)

All in all, how to make certain that the value of your brand is preserved and communicated to your customers on continuous basis – because 68% of people, who stop doing business with a company, do so because they feel that the company doesn't care . Never stop figuring out who your customers are, how they see your brand and why they prefer it from others.

As in the previous chapter, it’s good to have the numbers and hard data to back up your decisions. Especially when the resources are scarce, knowing what kind of segments different products and brands attract (in terms of numbers) is the key to recognizing which items perform the best for the most profitable customers (numbers again).

It is advised to perform a historical analysis for at least past 2-3 years to recognize how different campaigns have performed brand-wise, but also in terms of overall bottom-line growth.

It probably goes without saying that 2-3 years means a lot of data. Hopefully you have your data guy ready and prepared…

Additionally, we can lend a helping hand as well.

But wait a minute… What about the “weaker” and/or not-so-crucial brands, then?

It’s sink or swim for them now.

That’s economic Darwinism 101.

Next up in our evolutionary journey: Price tags.

3) Get your promotion & pricing strategy straight

Surviving (and thriving) in a recession requires nerves of steel.

Another thing that ends up to chopping block way too easily is pricing. Jumpstart your sales – give 50% off all items! It’s tempting to slash the prices to hold on to the price-sensitive shoppers, but that might not be what you’d ultimately like to do in a situation like this. You might have won them this time, but there’s always other desperate players willing to risk an all-out price war, in which only the price-driven customers win.

Like with pulling marketing investments, short-term wins might become very costly in the near future. Once a price premium is lost, it tends to stay lost. Frequent (or worse, regular) deals train the customers to expect the discount, blurring the perceptions of normal price levels.

We’re not saying that you shouldn’t do promotions. On the contrary, promotions are an excellent way to drive traffic to different sales channels – people are hunting bargains when the money is tight. You just have to pay extra attention to your promotion effectiveness . You don’t want to sell only that one product from the ad, you want to sell a full basket of items.

With the promotion effectiveness analysis you’ll be able to recognise how specific products, product groups and brands have performed in promotions and answer questions like:

· What are the products that you can sell with bigger discounts due to their shopping basket halo effect?

· Which categories perform well as multi-buy discounts?

· How other products and brands within the same category are affected by the promotion?

· What kind of customer segments do you attract with each campaign?

Take a similar approach to pricing as well. Try to define the strategic roles for each item, brand and product category:

· Destination --> Customers choose your company because of this category --> Every Day Low Price -approach

· Traffic Driver --> Customers select you because of good deals --> Great campaign items

· Shopping basket --> Customers make additional purchases within this category --> Store placement important

· Service --> Customers know they find everything they need from you --> Ensure excellent product variety

If you’re successful, you’ll get great insights on how to review your product-level pricing tactics (yes, price increases are also applicable for specific items).

Your job as a marketer is to defend the brands as well as possible. Brand campaigns & product development strengthen the brand, whereas discounts and price reductions tend to erode it.

Investing in branding by aligning marketing and pricing strategies with the core values has paid out for numerous companies in previous downturns and recessions, and it will provide a ladder for some marketers in this chaos as well (yes that’s another GoT-reference right there).

But if the price-driven market still seems attractive and lucrative, consider launching a fighter brand .

However you decide to sort out your business models, you’ll need some fresh insights to make the best out of the new status quo. We suggest…

4) Re-examine & reforecast

Let’s face it – your quarterly sales targets, growth roadmaps, expansion strategies and marketing plans all just flew out of the window. There’s no way things will play out as nicely as the latest report said it would. It’s time to pull the brakes before you too fly off the cliff.

It’s time to regroup, re-examine and reforecast the things around you. The fundamentals of marketing are still there, 4P is still a thing, customer orientation still pays off. The biggest thing that’s changed is the amount of resources companies and customers have at disposal. Thriving in a recession requires investing those resources wisely.

You can’t trust blindly that what you knew before will apply for the current situation. When resources become scarcer, most consumers have to re-evaluate their consumption behavior and available product assortment. Familiar, trusted brands and products will be a safe choice for customers that share similar values (which makes focusing on existing brands that have already strong status so much better choice than introducing new ones).

So, the love is still there, but requirements might have adapted with the new hierarchy of needs. That’s why researching the customer is crucial for re-defining which core values and features need to be highlighted in the marketing communications. Previous must-have features have become today’s can-live-without, and the consumers are more prone to trade down and postpone their purchases. Spending time with the customers helps marketers to understand and recognize these changes in the consumption habits and react to them appropriately.

Lastly, it’s important to understand how the situation within your organisation has changed. Although it’s good to set the bar high in whatever you do, there’s nothing more frustrating than unrealistically set objectives. Your team won’t commit to a goal that’s not doable by any means necessary.

Instead, you need to reforecast how the economy starts to recover, and how your actions and possibilities convert into results. As the situation is a bit vivid, to put it mildly, you’ll need to reforecast again and again to keep your Northern Star visible for the entire team. As with point #1, continuous forecasting tools and processes will reap the ripest fruits in the long run, so investing in acquiring these capabilities pays back quickly.

So there you have it, our guide for maneuvering your way through economically challenging times. To summarize (and regroup with our skimmers), here’s our guidelines for companies that wish to survive and flourish during the upcoming recession:

· Increase the transparency and measurability of your marketing activities

· Take a scalpel rather than a cleaver to the marketing budget

· Allocate around 60% of the budget to branding activities and 40% for tactical

· Understand your promotion effectiveness and its factors


· Put customer needs under the microscope

· Nimbly adjust strategies, tactics, and product offerings in response to shifting demand

· Keep in mind that marketing budget is one of the few “good costs” during a recession

Curious to learn more? Book a demo.


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