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How to Market in a Recession

Published
October 28, 2022
6 Minute Read


The cost of living crisis coupled with political and economic instability has drained consumer confidence as well as buying power. And when people start to change their consumption habits marketers need to adapt their strategies and tactics to maintain growth.

In this post we look at how consumers and marketers are affected during a recession, and importantly what action businesses need to take to maintain growth.

What are the challenges of marketing in a recession?

Pressure to maintain marketing ROI: In a thriving market, marketers often benefit from the rise in sales opportunities. With customers financially secure, it doesn’t require tremendous efforts from marketers to sell a product.

In a recession however, these opportunities dwindle along with their customer’s purchasing power. In a downturn, marketers find it more difficult to maintain marketing ROI.

Ineffective targeting: In a downturn, consumer spending habits shift and adapt to the changing economic situation. Some consumers will reduce, replace, or cut spending. This shift in consumer dynamic means that marketing campaigns for specific target markets can become obsolete fast. In such instances, even with increased ad spending marketers may not succeed.

Unless marketers keep up with these changing dynamics, it can significantly impact the effectiveness of their marketing.

Value-based shopping: An economic downturn crumbles customer confidence, making them reevaluate their purchases from a value perspective. In a downturn people reduce the amount of impulse purchases and increase the amount of planning that goes into every purchase leading to more mindful spending.

This shift also presents a unique challenge to marketers forcing them to focus less on feature-based marketing and more on customer-centric value-based marketing. Marketers need to adapt their communication strategy to demonstrate value and gain trust.

What are the opportunities with marketing during a recession?

When a recession lands, one big question for businesses is - should I stop, reduce, maintain or increase my marketing investment ?

It is well evidenced that brands who maintain marketing investment during a recession come out the other side in a far stronger position than brands who cut back. Recessions, though tough, are always cyclical and do not last forever, for brands who hold their nerve, and marketing budgets, there is opportunity, both long term and short term:

Defending your position: While your marketing generates sales, it also impacts brand awareness and consideration. Cutting back on marketing during a recession puts you at risk of losing consumer attention and subsequently market share, not just sales. If you reduce your marketing investment, your brand starts fading from your customer’s mind and they shift their attention to your competitors that either maintained or upped their marketing spend. Maintaining your marketing investment will secure your position in your customers’ eyes and keep their confidence in your brand during the recession.

Capitalise on competitor weakness: While defending your own position, be sure to win your competitor’s customers.  If your competitors are reducing marketing investment their customers will be more primed to brand switching. Their budget cut is your opportunity; invest in value-based marketing campaigns and win new customers along with retaining your current ones.

Grow Brand Awareness: Recession brings an opportunity for brands to position themselves in a way that will help them emerge as market leaders when the inevitable upturn comes. With continued investment in marketing, brands can grow mindshare and position themselves to be top-of-mind when consumers return to normal shopping habits.

How are consumers affected during a recession ?

Every economic downturn brings a unique set of challenges but what remains consistent is the need to be customer centric. Understanding who is being affected and how they are affected is key to marketing success in a recession. Different groups respond differently to a downturn.

At a very high level consumers broadly fall into two categories during a recession: affected and unaffected

However each segment has its own subcategories. The Affected group has ‘put-a-halt’ and ‘optimistic’ segment and the Unaffected group comprises ‘well-off’ and ‘YOLO’ segment.


Put-a-halt consumers: This segment consists of consumers that have been hit hardest, financially. They are currently the most vulnerable group. All types of spending has been either eliminated, postponed, decreased, or substituted with cheaper alternatives.

Typically, low-income consumers fall in this category, but higher-income with changed income circumstance is also grouped under this segment.

Optimistic consumers: This segment of consumers is resilient, but feels less confident in the idea of recovery any time soon. They lack faith in their ability to maintain the same standard of living and just like put-a-halt consumers, they cut back in all areas.

Unlike their fellow segment, they economise less aggressively and are mostly unscathed by unemployment. Even though they are the largest segment, most optimistic consumers migrate to put-a-halt consumers as the situation gets worse.

Well-off consumers: They are comfortable and secure about their ability to live through an economic downturn. Their shopping habits continue at near-pre recession levels, although they are now more mindful and selective about their purchases. This segment widely consists of people in the top 5% income bracket along with those who are less wealthy, but are confident about their finances.

YOLO segment: The YOLO or You-live-only-once segment lives for today. They are unconcerned about their savings and continue to spend as usual. Their reaction to the recession is to extend the decision-making period for major purchases.

This segment is primarily young and urban renters. They prioritise spending on experiences and are less conspicuous compared to the well-off segment. Unless they become unemployed, it's unlikely they will change their consumption behaviour.

Regardless of the category they belong to, consumers prioritise and categorise their purchases into four categories:

  • Essentials are necessary for survival and perceived as basic living expenses.
  • Indulgences are usually treats that offer immediate gratification and spending on them is considered justifiable.
  • Optionals can be a needed or desired item, but their purchases can be postponed.
  • Luxuries are purchases that are perceived as unnecessary and mostly unjustifiable.

How to adapt your marketing strategy for an economic downturn?

Focus on existing customers: It’s time to focus your marketing efforts towards retaining your existing customers. Reevaluate their needs during the time of recession and match those needs. Your existing customers bring in the majority of your sales and customer retention is the key to surviving  and thriving the downturn. Adapt your communication strategy to strengthen your connection with customers. Show genuine care during an economic crisis to establish trust and boost confidence.



Reassess your ideal customer profile: In a volatile market with shifting consumer dynamics, you might want to check if you are still targeting the right audience. The recession might have affected your customer’s purchasing ability. In such cases, just increasing your ad spend or communicating value will not get you the desired ROI. Based on the redefined ideal customer profile, invest in highly targeted marketing channels.

Increase the value you provide (and communicate it): Reconsider your offerings based on your target market. When a recession hits, consumers are more careful about what they purchase and weigh perceived value for money. Don’t just talk about your product features, focus on communicating affordability and value for money.

Check if your offerings match market needs: At the time of a financial crisis, most consumers hold back on all purchases that are deemed unnecessary or as luxuries. Identify if what you are offering is a priority to your customer. If not, it’s time to rethink your product line and distribution channels.

Invest in your brand not just performance: The recession has presented you with an opportunity to emerge as a market leader when it’s all over. Don’t be short sighted and invest in just current performance. Focus on building a brand image that shows customers that you care about them. Humanise your messaging and build long term relationships with your customers. Prepare not just for today, but for recovery as well.

Expand to unaffected markets: Based on your current financial situation, decide if expanding your target market - either to include financially unaffected consumers or to a new geographic location is a feasible option.

An actionable list of marketing Do’s and Don'ts during recession:

Do’s

  • Do maintain your marketing investment, but use it for highly targeted efforts.
  • Do consider new approaches, audiences and messaging that reflect a changing market.
  • Do pay attention to your competitors’ recession marketing and respond with defence or offence accordingly.
  • Do adopt a rapid experiment-based approach, reviewing data more not less frequently.

Don’ts

  • Don't go silent. If anything, communicate more, not less, especially to existing customers.
  • Don’t be tone deaf. Acknowledge the changing market and support your customers through challenging times.
  • Don't flip flop from one strategy to another without giving enough time to gather insights on performance.
  • Don’t ignore long term brand building because recessions are never permanent.

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