By Matt Rhodes, Contributor to ClickZ
We hurtle towards 2023 as another once-in-a-decade recession looms. Central Banks in the US and Europe are raising interest rates and warning markets of the potential for a recession deeper and longer than the 2008 financial crisis. Inflation and the cost of living are rising across the globe. And there is the issue of war in Europe taking lives and threatening food and energy supplies.
As the International Monetary fund said in an October 2022 report, “The worst is yet to come, and for many people, 2023 will feel like a recession.”
All of this means another swathe of articles telling you why turning off the marketing taps is a bad idea. And to be fair, the data suggests they are right. I am not here to disagree – rather, offer some nuance and actions brands should consider taking.
What can we learn from previous periods of recession?
At times of recession, all evidence suggests that brands should maintain, or even increase, both their marketing and advertising budgets. Industry juggernauts such as Les Binet, Peter Fields, and Byron Sharp agree that brands should not only maintain but increase marketing budgets during a recession where possible. Across their work, they recommend similar actions your brand should take and why.
Recession Lesson #1
The overwhelming recommendation from previous recessions is that brands need to make themselves heard by taking advantage of cheaper media to increase their share of voice (SOV) where attainable. An analysis of the UK’s Institute of Practitioners in Advertising data bank shows that during the 2008 financial crisis, brands whose excess share of voice (ESOV) exceeded 8% enjoyed “very large profit growth” at a rate 3.8x higher than those whose ESOV was 0-8%.
Recession Lesson #2
In most cases, you should focus on brand-building activity to drive saliency at the point of purchase. During a recession, consumers’ spending is under more scrutiny than usual. They are more likely to trade down, substitute, or cut back on buying your product. This makes building and refreshing your brand’s memory structures with emotional, brand-led advertising more important than ever. If you are not salient at the point of purchase, consumers will not buy your product.
Recession Lesson #3
We know from Nielsen research that creativity really is king. It will have the biggest positive impact on any campaign you run (accounting for over twice the impact of reach on sales). It is critical that any creative used during a recession strikes the right tone and remains mindful of the context in which your audience is living. As we face a cost-of-living crisis that is hitting consumer staples more severely in some countries, this is particularly important.
Recession Lesson #4
And finally, it is always tempting to drive short-term sales through price promotions. But the evidence suggests that is unlikely to be a winning solution in the long term. Savvy shoppers are likely to switch to your price-reducing competitor once your promotion ends. McKinsey analysis has shown that a 1% price increase boosts profits by 11% if demand remains steady. The smartest brands command a price premium through strong branding, communicating quality, offering reassurance, or even entering adjacent categories where their full-price products seem comparatively cheaper.
The rise of digital opens new strategic opportunities
While the evidence for continued spending is clear, there are significant limitations for marketers who take learnings for 2023 from brand behaviors in the last great recession. In 2008, digital marketing had just entered double-digits of overall marketing spend. It now accounts for more than half of marketing spend. Alongside this, digital now accounts for a significantly greater proportion of sales or indeed of products and services themselves.
Does this change the fundamentals of how a brand needs to behave in a recession in 2023? Probably not. But it does provide brands with more data and information, more flexibility in the tools they must deploy, and a wider set of touchpoints they can focus on optimizing to maximize their performance.
A recession action plan for 2023
In this context, we can build on the evidence we have from how brands have navigated previous recessions, in the context of an increasingly digital environment for both marketing and product touchpoints.
As brands are planning how they navigate 2023, there are six actions they can take to best weather the storm and create a recession-ready plan.
1) Reconsider and refresh your audience segmentation.
Consumers’ reactions to a recession will differ depending on their circumstances. Your brand could find itself serving new customers who are trading down or even coming in from a different category.
At a macro level, the HBR’s 2009 segmentation serves as a good starting point for segmenting customers’ recessionary changing behavior into: “slam-on-the-brakes”, “pained-but-patient”, “comfortably well-off”, “live-for-today”. Each segment will have a different approach to product and service categories.
2) Re-evaluate your campaign shape and channel mix.
It is easy for us to say you should be maintaining or increasing your big, expensive ATL brand spend. I appreciate it is less easy in practice. Especially at a time when TV spot time inflation is on the up. Should budgets come under scrutiny, it will be important to re-evaluate your campaign shape. You must ensure you are maximizing reach and attention at the upper funnel level and targeting appropriately further down. The smartest brands use all touchpoints available, from packaging to map listings, to communicate what they need to.
3) Make sure your creative and messaging are striking the right tone
This seems like an obvious point, but unfortunately, marketers do not always take it into consider it. Up-to-date customer research (including but not limited to national polling), your first-party data, and social listening can help you get a sense of the nation’s zeitgeist – as well as any issues related specifically to your category. You must consider nuances and sympathy for your audience’s mood and needs if you are to be listened to. It may not be necessary to reposition your whole brand based on this, but your messaging may need to flex.
4) Flex, augment, or improve your proposition where possible
Changing a product or service is costly and time-consuming. However, you may be able to change how your consumers discover or pay for your product or service. Offer bundles that speak to savvy consumers or consider post-sale support and guarantees which give your customers and prospects peace of mind.
5) Monitor your competition and adjacent categories closer than ever.
Marketing departments will be more chaotic than ever, which means your competitors’ behavior is likely to be more unpredictable than ever too. While every brand should be wary of being too competitor oriented, if your category is in flux reacting to the recession it will create opportunities for you to exploit. You must also monitor adjacent categories that may be coming after your customers’ share of wallet.
6) Deliver on customer experience where brands can shine against the competition
Marketers often ignore CX in the recession literature. This is because it was not a top marketing priority when we had the last great recession. However, in times when a recession stretches consumers’ money and time, offering an easy, convenient, and frictionless experience can deliver real, meaningful value to them.
Great CX not only increases loyalty and WOM but can be weaponized as a competitive advantage for many brands. It is an essential part of the customer journey and a way in which they experience your brand. It can build trust in your product or service.
Right now, it is more important than ever to consider the totality of your brand, and how it is delivering value to your customers.
But if you only do one thing?
Plan for change.
For your customers. They will be trading down in a category, entering new categories, and being more mindful of all the spending decisions they make.
For your trading conditions. The external influences on the economy in which all brands are operating (from the impact of China’s zero Covid policies to the war in Europe) could change rapidly through 2023 and brands need to be flexible for this change.
And for yourselves. More data is available through more channels (digital and otherwise). The brands most likely to thrive will be those who understand how to react and change to the data they see. A critical marketing skill set for 2023.
Article originally appeared on ClickZ.
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