Don’t know if you noticed, but things are a bit tight right now. We’re in ‘that part’ of the economic cycle. And that means most of us are looking for ways to trim the sails. Question is, which of the sails make the boat go faster?

At times like this, marketing is often the first thing we cut back. It’s an easy win on the cost front, but not necessarily the best idea. In fact, history shows that brands who maintain or even increase marketing activity in a downturn will recover faster when the sun comes out.

But not everyone can keep spending at the same level. And not all your marketing will work in the same way. So the real question is, what will make the biggest difference for your business?

While it’s tricky trying to predict the future, there are some clear lessons in the past. Here’s our take on where to point the boat when the seas look stormy.

Smart marketing drives stronger results

This is always the case. But it plays out even stronger in a recession. Partly, it’s simple economics. If everyone else is cutting back, you’ll get more bang for your marketing buck if you keep going. Ritson explores this idea in his Recession Playbook in Marketing Week. And Nitin Nohria has a broader and more academic take in a 2010 article called Roaring out of Recession.

But, like everything, it’s not just what you spend – it’s where and how you spend it. So how do you decide what to keep and what to cut? In part, it depends on what you’re selling - and what your customers are looking to buy.

Summary: Organisations that invest to grow markets during a recession generally bounce back faster with great profitability.

Are you essential or expendable?

In another piece from 2010 (the last time the world ran out of cash) Quelch and Jocz took a long hard look at the big US companies post the GFC. The ones who did best were those who best understood where their customers were at and what they were choosing to buy. They split the latter into four categories:

  • Essentials – stuff we need to survive – or is central to wellbeing.

  • Treats – extras that feel justified and make us feel better.

  • Postponables – stuff you need or want that can wait.

  • Expendables – things that are unnecessary or unjustifiable.

Summary: People put stuff in different buckets. They’ll always buy the essentials, but they may substitute for cheaper versions.

What are your customers thinking?

You probably have a good idea where your product fits. But that’s only half the story. The research also found that psychographic segmentations are more effective than demographics when money is tight. Customers fell into four clear categories:

  • Slam on the brakes – the most vulnerable and hardest hit. They tend to reduce all spending by postponing, decreasing or substituting stuff.

  • Pained but patient – the biggest group. They’re more resilient, but they cut back where they can and cut even more if economic news is gloomy.

  • Comfortably well off – feel secure about riding things out. But they may be more selective, especially when it comes to conspicuous spending.

  • Live for today – this group is more likely to be urban and younger. They’re likely to carry on as usual, but may extend timetables for big purchases.

There’s more in the article about all these groups. And it’s not as simple as ‘people with cash’ and ‘people without’. How people respond in economic downturns is more about personality than the cash in their wallets.

 
 
Summary: How customers think and what they’ll buy changes in a downturn. It’s useful to segment your customers based on where they’re most likely to part with their cash.

Do people still know you exist?

Once you’ve clocked your category and mapped your customers, you’ll still need to know which levers to pull. Again it depends on who you are and what you sell. But the best advice is to weight your activity in ways that build your Share of Voice.

Brands with a larger Share of Voice enjoy a larger share of the market. Those with less, don’t grow. If you’re new to SOV here’s a fairly dry 101. It’s worth being aware of because of all of the stats and opinions and peddled in marketing, this is the most empirically proven fact.

It also makes sense, right? Nobody’s going to buy your stuff if they don’t first know and like you. Share of Voice is a key driver building ‘mental availability’ – the space you rent in your customers brains.

Mental availability is the holy grail of marketing. It’s a measure of how easy it is to earn people’s attention. High mental availability makes all your ads work harder. And we build it through reach, relevance and great creative. Right person, right message, right memories.

Summary: Share of Voice drives share of market. We can build it with smart marketing and cut-through creative. The goal is to build salience or ‘mental availability’.

Balancing the long and short of it

Traditionally, brand advertising is good at building mental availability. While performance tactics (like short term retail sales and programmatic click-hunters) are great at closing the deal. We need both.

Binet and Fields are the godfathers of this thinking. Their research from 2013 shows that ‘famous’ brands enjoy a 5% premium on price. Meanwhile short-term hits have a short-term impact. While dollars in the tin can help boost business confidence, cutting your margins to keep your customers is a spiral that’s hard to get out of.

Summary: If you have the opportunity to increase Share of Voice, now’s the time to do it. Even maintaining your current spend could win you an advantage when the market picks up.

It’s not just promotion, y’all

Whatever your marketing mix, you have four ingredients to play with: product, price, place and promotion.

  • Product: Make something I want or need.

  • Price: Sell it at a price I’m willing to pay.

  • Place: Make it easy for me to buy it.

  • Promotion: Make sure I know about it.

All four can make a difference in closing the deal. Could you tweak your product to support cash-strapped customers while maintaining margin? Can you offer different ways to pay that make big tickets feel smaller? Are there moments or events that feel special to loyal customers without the need for discounts or added extras? And can you use the opportunity to cut back the stuff that isn’t working and double-down on stuff that does?

Summary: Everyone knows it’s tough right now. How can you spin that conversation to make things better for your customers? And therefore better for your business.

Set sail for awesome. Beware of Pirates.

Marketing in a recession is a different game. Less Monopoly, more Buccaneer. Trimming your sails and tacking into the stormy weather is an easy thing to do, but it’s rarely the best for your business.

There’s truth in the adage, ‘change is an opportunity’. Even in a storm. The best-case scenario says this weather will linger for a bit. So easy sales and steady growth are not on the cards for everyone. But we’ve been here before and someone made a map.

So think about your segments, maintain your SOV, dig into those core principles to look for buried treasure… and always watch your flank for Pirates.

That’s what I reckon, what do you think?

Source: Michael Goldthorpe, Managing Partner, Hunch. 5 April 2024.