Marketing in a Recession: Find Success In Challenging Times

What is a recession, and how does it impact businesses?

The simplest definition of a recession is a prolonged economic downturn, which results in customers spending less money on products and services of all kinds. During a recession, consumers change their purchasing habits, focusing more on needs and less on wants because their money doesn't go as far.

As sales drop because customer priorities shift and they have stricter spending habits, businesses must reduce costs and prices while postponing new marketing investments like hiring new employees or developing a new product line.

In addition, since businesses must remain profitable during a recession, they might consider cutting costs in various departments, such as marketing.

It's common for businesses to reduce their marketing budgets during a recession, but that doesn't mean you should stop all marketing efforts. Your marketing efforts are responsible for bringing existing customers back and attracting new ones. Therefore, spending too little on marketing can actually lead to lost opportunities.

Instead, it's crucial to have a recession marketing plan that enables you to effectively target customers of all types without spending more than you need to.

While customers are being more cost-conscious and strategic with their purchases, you must be more strategic with your marketing budget and strategy.

Understanding the market

How does a recession affect marketing?

During a recession, economic growth comes to a halt. As a result, consumers face various challenges, from job loss to inflation, affecting their purchasing power.

As we've mentioned, consumers prioritize their expenses during a recession for various reasons. Therefore, your business might find it more challenging to attract new customers.

Both large and small businesses often have to reduce the quality of products and services as a cost-cutting measure. For instance, if your business sells shoes, you may source cheaper materials from different vendors to try to increase your profit margins.

But, unfortunately, this decision can also impact sales and your overall reputation.

Analyze consumer behavior changes during a recession

Unfortunately, businesses can't stop a recession, but they can monitor their customer's behavior during a recession to help them make more informed business decisions.

For instance, if your products are selling slower, keeping the same amount of inventory on hand doesn't make sense. Review all the data you have on your existing customers and their purchasing behavior.

You might find that even your most loyal customers are shopping less or that it's more challenging to retain clients during a recession.

Measure the impact of a recession on the market

After determining any changes in your customers' behavior during a recession, it's important to ask yourself why. There are many reasons why customers choose to spend less on items they deem as "wants" during a recession.

Additionally, the economic downturn alters the entire business landscape. Your business may not be selling as many products, which means your vendors are experiencing the same issues, and their cost-cutting measures can affect your business.

Let's take a look at the various impacts of a recession on the market:

Becoming unemployed

One of the most common cost-cutting measures businesses employ during a recession is laying off their workers. Unfortunately, these individuals have less money to spend and may only focus on their highest-priority purchases.

A decline in income

Not everyone gets laid off during a recession, but there are declines in income between family members. Additionally, employment situations can change. For instance, a full-time worker may become a part-time worker because the business doesn't have as much for them to do during the regular workday. All this results in less money to spend on your products and services.

Decline in production from partners

Besides your customers, changes are happening throughout the entire business landscape, affecting your partners, vendors, and suppliers. For example, when your sales decline, you and similar businesses reduce spending on raw materials and other goods you purchase from your partners. Your partners may also reduce their production to mitigate risk during a recession, leaving you with fewer parts and materials to develop your own products. Therefore, you can expect more out-of-stock products during a recession because businesses are trying to cut costs anywhere they can, which includes on their warehouse shelves.

Decline in retail sales

If you work directly with retailers or are a retailer yourself, you can expect a decline in retail sales during a recession. This means having less cash flow to spend on the business, including raw goods, materials, and labor.

Utilize market research to gain insights during a recession

Mitigating your risk during a recession requires understanding the market at any given point. Market research can help you understand your customers' spending habits and behaviors, what they're looking for, why they purchase the products they do during a recession, and how to market to them effectively.

Market research can provide the information you need to make data-driven decisions that help your business stay competitive even during a recession. While customers reduce their spending during this time, they don't completely stop making purchases.

Instead, they buy less, switch to cheaper brands, or find new products. Market research can help you uncover reasons why you're losing customers.

For instance, if you sell toothpaste, you might find that your customers have switched to a more affordable brand, which tells you the cost of your product is an issue.

Build a resilient marketing plan

You should never completely stop marketing during a recession. Instead, your recession marketing strategy will help you make changes to your overall plan to help you improve sales and stay ahead of the competition.

During a recession, there's much less competition because your competitors think as you do — they want to reduce costs anywhere they can, which often leads to smaller marketing budgets.

Luckily, recessions don't last forever, so there's no reason to stop marketing. In fact, if you completely stop marketing operations, it could have a long-lasting negative impact on your sales and growth, even after the economy recovers.

A resilient marketing plan will help you uncover new opportunities that reduce costs while attracting and retaining customers.

Once you understand each of these components, you can begin crafting your recession marketing strategy by following these tips:

Target audience identification with clear marketing objectives

Your customers change their purchasing habits during a recession to align with their current circumstances.

So before investing money into marketing, you should determine how they've changed. This is where market research and customer surveys can come in handy, telling you exactly what you need to know about what they want from you and your products.

During a recession, you may have to revisit your customer segments and edit personas based on current demographics. Think about different ways you can segment customers now. For instance, you can use psychographic data to market to customers based on interest instead of income data, which may have drastically shifted.

Once you learn about your "new" target audience, you can start creating marketing objectives. Being realistic is crucial when developing marketing objectives during a recession.

Remember, it's unlikely your sales will match what they were before, and you can expect to lose some customers. Instead of focusing on metrics like brand awareness because your market may not be interested in finding new products, consider pivoting to customer retention strategies, which are more cost-effective than attracting new customers.

Budget allocation

After identifying your goals, you must determine how much of your business budget you'll use for marketing. A flexible budget is crucial during a recession because it will fluctuate based on sales and how much you actually have to spend rather than giving yourself a static number.

Take a look at the marketing tactics you currently use and their costs. Some of these marketing strategies will become too expensive for you during a recession, requiring you to choose a different approach to attract customers.

One of the best ways to cut costs without sacrificing results is by adjusting your strategy to focus on low-cost tactics. For instance, social media advertising is more cost-effective than billboard marketing, and digital marketing is more affordable than any type of traditional marketing.

Additionally, you should revisit your customer segments and double down on targeting customers based on similarities, such as demographics, psychographic data, and perceived value of your products.

During a recession, many consumers go out of their way to find savings opportunities, which gives you a chance to market your more affordable offerings.

When deciding which tactics to use during a recession, you should track how customers reallocate their own budgets. For example, are they switching brands and sacrificing quality for affordability? Knowing what customers are looking for can help you tweak your marketing strategy to support lower-cost initiatives.

Effective messaging

Your brand identity and messaging help you stay relevant regardless of what's going on in the world around you. Your messaging tells customers who you are and what you stand for, giving them a reason to trust you.

While your customers may not be purchasing as much as they did before the recession, now is the perfect time to teach new and returning customers about your brand's values and mission to help you begin forming bonds that will last well into the future.

Flexibility to adapt to changes

During a recession, businesses need to be agile and respond to market changes quickly. However, if you're set in your ways, your business may not succeed.

For instance, if you invest x amount of dollars into a marketing strategy that doesn't yield results, it's time to go back to the drawing board instead of investing more money into it just because it's worked in the past.

During a recession, your customers' priorities are different, so you'll need to be flexible in everything you do to meet their demands.

Leverage the benefits of digital marketing

Digital marketing has many benefits over traditional marketing, which is why so many brands have shifted to a purely digital approach over the last few years. Your customers are on social media, websites, email, and texting all day long, so you can reach them easier and for less. A few benefits of digital marketing include the following:

Cost-effectiveness

It's no surprise that digital marketing is more affordable than traditional marketing. A billboard advertisement on the side of a highway can cost tens of thousands of dollars, while a paid ad can reach the same amount of consumers for a few hundred dollars.

Of course, the total cost depends on your strategy and the effectiveness of each of your campaigns. Yet, most digital marketing tactics are less expensive than traditional methods.

Targeted advertising

With digital marketing, you can effectively target your audience with display, native, and search ads, allowing you to choose who you target and when. Targeted advertising allows you to allocate the proper amount of spend on customers most likely to purchase your products. For example, you wouldn't want to spend money advertising a women's apparel line to a man and vice versa.

Instead, you can target your ideal customers from any digital advertising platform to reach only those interested in your business.

Additionally, you can use retargeting to retain customers by bringing them back to your website after they've viewed a product page or made a purchase.

Measurable results

Unlike traditional advertising, digital marketing is measurable, providing you with data you can use to determine how effective a specific tactic or campaign is in real-time.

With measurable results, you can A/B test variations of your campaigns and ads to determine the most effective results and get more for your money.

Increased reach

Unfortunately, you can't measure how many people see your traditional marketing campaigns. For example, if you place an ad in a magazine, you'll know its readership, but you won't know how many people actually saw it.

With digital marketing, you can increase your reach with just a few dollars a day using social media advertising and search ads.

Improved customer engagement

Digital marketing improves customer engagement by allowing customers to interact with your brand in multiple ways. When you send a customer an email, they can click on a link and go directly to your website. Email, SMS, and social media marketing increase customer engagement while building beneficial relationships that last well into the future.

Create a strong brand

When sales are slow, you have more time to focus on your branding efforts. While customers may spend less in a recession, they don't necessarily shop less.

Instead, they change what they buy, looking for alternative brands and products that are less costly. Creating a strong brand can help you stand out during a recession by being more creative and showcasing your company's unique values and personality.

Brand building influences everything you do during a recession, especially your marketing and how you communicate with customers. Maintaining a strong brand will keep you on top of your customers' minds even when there are cheaper alternatives. A few ways you can strengthen your brand include:

• Focusing on visuals: Visuals are essential to your branding efforts because they showcase your unique personality. Additionally, colors directly impact how your customers perceive your brand, so focusing on the colors you use and your logo can help you stand out.
• Updating your mission and unique selling proposition (USP): Why should customers spend their money on your products and services during a recession? Your mission and USP should tell them. Customers are more conscious of the types of brands they purchase products from and want to invest in those with similar values. Letting your customers know who your brand is can help you build trust.
• Improving the customer experience: The customer experience will always play a role in the success of your business. Providing a good customer experience throughout various touchpoints and stages of the customer journey will ensure customers build positive associations with your brand.

Focus on customer retention

During a recession, you might find that it's more difficult to attract new customers because people are prioritizing their purchases.

However, it's always easier and more cost-effective to retain the customers you have because they've already purchased your products in the past and know all about you.

A strong customer retention strategy can help you succeed during trying times, allowing you to continue promoting your brand and its products to customers who have already experienced them.

There are several ways to focus on customer retention. However, one of the most affordable customer retention strategies is to use email marketing to stay in communication with your customers and give them details about promotions and new products. You can also create a customer loyalty program that rewards them for frequent purchases.

Besides developing new comprehensive plans, you can focus on methods that make your customers feel appreciated and use SMS and email campaigns to thank them for continuing to support your brand.

How to measure customer loyalty and satisfaction

To ensure your customer retention strategy is effective, you must be able to measure it. The easiest way to measure customer loyalty is to track repeat purchases.

However, you can gauge customer satisfaction in several ways, such as:

• Net Promoter Score (NPS): An NPS is a customer metric that measures the likelihood of customers recommending products to friends or family.
• Customer satisfaction surveys: Surveying existing customers provides you with qualitative data to learn about customer sentiment and satisfaction by asking them about recent experiences they've had with your brand.
• Customer retention rate: You can use sales analytics to measure your customer retention rate — the percentage of customers you retain over time.
• Social media engagement: Social media engagement metrics can help you understand how engaged your followers are with your brand. The higher their engagement, the more likely they will become your customers.
• Online reviews and ratings: If you want to know how customers feel about your business after interacting with it or purchasing its products or services, you should follow your online reviews and ratings. If you don't have a Google Business profile, you should claim yours as soon as possible and begin monitoring reviews.

Navigate a recession smoothly with a resilient marketing plan

A recession marketing strategy should be resilient against any changes or fluctuations in sales and buyer behaviors.

Unfortunately, not all marketing strategies are resilient, so marketers and small business owners must be flexible during an economic downturn. One of the best ways to ensure you're making the right decisions for your business is to perform market research to learn about changes that can impact sales.

Perform market research with Mailchimp by sending your customers surveys to learn more about their buying patterns and experiences with your brand. Then, use our email marketing tools to craft personalized, targeted campaigns to help your business stay strong during a recession.