Marketing in a Recession: Creating a Responsive Strategy

An overview of the current situation

The current cost of living crisis is inescapable. This can be quite difficult to handle personally and the news only exacerbates people’s reaction to this which in turn is having a knock-on effect on people’s spending behaviour in not just B2C settings, but also B2B. 

The inflation rate in the UK surpassed 10% in July, which was worse than analysts' expectations. Barclaycard, who  represents almost half of all UK credit and debit card transactions released data to show spending on clothing in August 2022 was down 1.9% compared with the same month last year and down 10.7% month on month.  Spending on home improvements, electronics, as well as in department and health and beauty stores, when comparing the previous month was also down. This comes as average spending on utility bills in August was up 45.2% compared with August last year, which really demonstrates the challenge households are facing. 

Government figures from August also showed that just under 2,000 registered businesses went bust in England and Wales. This is an increase of 43% on the same period last year, and a 72% increase since 2021 of total business going bust in 2022, a total figure of 20,000.

The numbers feel bleak, but history tells us that now is not the time to stop spending money on advertising. Research by McGraw-Hill from the 1980s showed that businesses that maintained or increased their marketing spend had sales that were 256% higher than those that didn’t when coming out of recession. And there are plenty of similar studies that demonstrate this trend. 

What now?

As marketers, now is a time to take stock, re-assess our strategies and update our plans accordingly. It’s the time to manage expectations, demonstrate thinking and garner buy-in in a bid to protect budgets with rationale behind your new spend plans. 

But how? How do you reassess without a crystal ball to the future? 

To me, it is important to start by being able to clearly articulate the purpose of your role, your department and your strategy. A recent webinar aligned with our own view that the role of marketers is to:

• Execute a multitude of campaigns targeted at our desired audience(s)
• Drive ROI
• Drive brand awareness
• Be creative
• Drive customer retention

And, most importantly: show customer empathy. 

Being empathetic with your audience is the key to building a relationship and relationships are key to delivering on all of the above.

As modern marketers, it’s easy to get wrapped up in data and analytics and to forget that behind each and every number we look at is a human being, someone with needs, beliefs, and motivations that it is our job to understand. 

And for me, this is the BEST bit - this is where we really get to flex our skills as marketers. 

Channel who?

It is a fact, and you might hate me for saying this, that your customer does not care which channel they find you on. As a customer, we are all just looking to find the right solution at the right time, in the right place - with the right place being…wherever we are looking! Which calls on brands and marketers to be mind readers.

Now mind reading might sound like something that should live in fantasy movies, but it is something we can achieve in some shape or form by taking time to understand our audience. I am going to take you through how you can do this, starting with a model created by John Quelch - ‘How to market in a downturn’ and then layering in a model we use to understand motivations.  

Profiling your market 

1. Slam on the breaks - these are people who will eliminate, postpone or decrease spending in every way possible. They tend to be the most vulnerable group of people, often the lower household income groups, but not exclusively. 
2. Pained by patience - this group know that things will get better, but will need to cut back on spending in many ways to help ride out the recession. This group will make up the majority of households. People in this group are at risk as the recession goes on to move down into the ‘slam on the breaks’ group if their circumstances worsen or if their anxiety rises. 
3. Comfortably well off - this group is predominantly made up of the top 5% of earners, they’re unlikely to change their spending habits. The only likely changes are to behaviours that would normally take place with people from the first two groups. 
4. Live for today - this is typically a young, more urban group of people. In this group, they tend to lack financial commitment, so do not have the worry of mortgages etc. Their spending is mainly on experiences and they will continue to spend like before unless their employment status changes dramatically. 

Profiling your products/services 

• Essentials - necessary for survival or perceived to be essential to wellbeing. This could be food, energy, transport to get to work etc. 
• Treats - indulgences whose immediate purchase is considered to be justifiable. This could be a treat night on a Friday after a long challenging week at work.
• Postponables - items that are needed/desired, but whose purchase can reasonable be put off. This could be needing a new car but knowing that you could keep the current vehicle on the road a little longer. 
• Expendables - perceived to be unnecessary and unjustifiable. This could be an amazing holiday or enhancement to your home. 

With this knowledge, the key now is to profile your audience and profile the products/services that your business sells. Below you can see some examples of how John has looked at the impact. 

Your strategic opportunities will be defined by which groups your audience and products/services fall into. 

For more value-based brands - there is a real growth opportunity present, and a longer-term strategy to consider how you can create a habit with this audience and build a relationship that supersedes these difficult times. 

For more luxury brands - the game here is to ride out the storm without compromising your proposition. Now is not the time to completely change your message. There is an opportunity to consider how you package your offering and to potentially find ways either through customer financing or through changing how your goods are packaged e.g. if normally always sold in a large quantity, you might be able to make a smaller size which is more cost-effective in the short term. 

It is critical to note, that during a downturn your loyal customers are extremely important and therefore in all your marketing efforts you need to be sure not to alienate this audience. You may find that some of your loyal audience will be forced to spend with more value-led brands during this time, but that is not a reason to stop communicating with them, you need to be sure that they still resonate with your brand for when their situation allows them to come back. 

Tactics for targeting based on these models

How to tackle your NEW strategy

So now we have a broad understanding of John Quelch’s model, what do we do next? Below is my recipe for how to tackle your strategy.

Step 1 - Audience

Firstly, map your audience and products to John Quelch’s model, you may have customers straddling different groups, or products that sit in different categories - it is important to understand this as they will require different strategies. 

Now we need to go back to audience basics, who are your audience and what motivates them? This is not about simple segmentation on gender, age, location etc. This is about why do they do what they do. Understanding the behavioural science of how they act. 

We have a persona model that was created with the LAB Group, playfully known as, Monkey, Lion, Dog. This is based on our contextual, rational and emotional needs and is based on 5 different behavioural science models. 

• The ‘monkey’ is the contextual part of our brain where we care about status, recognition and purpose.
• The ‘lion’ is the rational part of our brain where we like to think we are super-rational, and that all of our decisions are weighed up based on facts and data.
• The ‘dog’ is the emotional part of our brain where we need to feel connected to our friends, family, colleagues and brands that we buy from. 

This is a simple-to-understand model that allows you to push deeper into understanding the why in your audience, and why they do what they do. We uncover this through research and running workshops either with customer-facing team members or where possible the customers themselves. The aim is to be able to articulate which drivers are most present when considering your product/service. For example, for one of our clients, an online divorce service, we found that their audience sits more in the rational and emotional drivers - needing to understand the legalities of the service - ‘will I actually be divorced?’ and from an emotional perspective trust - ‘can I trust this service?’. By understanding these drivers and using these in ad copy we were able to improve their paid media campaigns generating an 80% increase in click-throughs, a 151% increase in leads and a 154% increase in lead-to-customer rate. 

With this understanding, you can now look back at your downturn-specific modelling and layer the two together, below I have included an example of how this might look - it really needs your business context to ensure this is correct and to layer in the detail. 

With this research complete, you can then move on to look at customer journey mapping. 

Step 2 - customer journey mapping

Plotting the various customer journeys is critical to happen next, as this will help to form your channel mix to test with your new messaging. 

There will be a number of different ways your audience interacts with your brand, find your products/services and how they buy and continue to buy from you. You will never be able to understand every way, but you can uncover the most common journeys for your key audience personas. Depending on your business there will be varying ways to do this, which is most affected by your data points, your type of product/service, the regularity of purchase and also the decision incubation period. 

Your aim is to uncover the varying touchpoints a customer has, the actions they typically need to take, the obstacles in their way and the critical moments that contribute to their decision-making. This needs to be done for each different audience persona and needs to be mapped across the whole funnel from awareness, to consideration, decision and through to advocacy and retention. As this process is confirmed and complete you will start to spot opportunities - for example, there may be key moments when maybe your competitor is present, that your brand is not.

From this mapping, you will spot the more consistent channels where your customer is spending time, which will help prioritise the channels for your marketing mix. 

The key outcome from this exercise is not just the channel understanding but then the ability to look at how the channels can play nicely together. It is easy to consider channels in siloes and to look at what they can add individually to a strategy, but the best results come from a more holistic view when considering the wider customer journey. I always use the analogy of the customer being a ‘baton’ in a relay race. The aim for a brand is to consider how you can ensure you take hold of the baton as early in the journey as possible but then how you can keep the baton in your race lane, in your owned or earned channels, digesting your content - building a relationship with your brand. 

So for example, you may be in a position where organic search is performing really well with ‘awareness’ terms, but without considering the ‘what next?’ for the customer, this could be a wasted strategy. Instead, as a wider holistic view - you must be considering how will you move a user from that organic search-led visit to the next stage of the journey and so on. This is critical to driving the best performance from an overall strategy. 

Step 3 - Messaging and creative

With your audience's understanding and channel plan - you can now look at the messages and creatives that will grab attention, evoke emotions and strike action with your audience. The key to getting this right is layering in the motivation understanding and ensuring you do this in the context of the recession modelling for your audience and your products/services. 

We all know at times like this, some brands nail it and some brands fail - those that fail have often misunderstood the needs of their audience or have been insensitive to the approach needed. Thinking of our three different motivation groups - our contextual monkeys are going to be fearful of having their status harmed, our rational lions are going to want to be seen to be weighing up the right decision and our contextual dogs are going to be feeling very protective of their family, friends and community. Anything that threatens any of these key motivations has a high risk of going wrong. 

When thinking about messaging and creativity it is really important to consider the best format of communication - we have so many ways to produce content now, and it will be pivotal to your strategy to get this right for your audience. 

Putting our behavioural science skills into full practice at this point we would start considering what other techniques we can use. Looking to nudge theory is one of my favourite places to start as there are so many different nudges we can consider that have proven to make a difference. Nudge was founded by Kahneman and Tversky and later developed by Thaler and Sunstein. 

Below I have included two examples of nudges that could be powerful considering the economic situation. 

Loss Aversion
People value something more when they possess it than if they do not. Therefore if you can offer free trials, or the ability to try and premium offering for free or low cost, the person is likely to continue. When you get someone to try something they are less likely to want to give it up. 

A perfect example is how many people have gym memberships but do not use them. We choose not to cancel because it is our membership, we don’t want to miss out. 

It is also possible to look at this from an ad copy perspective as framing the loss e.g. Your contract could be costing you money. 

When it comes to an explicit offer - offering more is perceived as more valuable than the equivalent discount e.g. 50% extra free is the same as 33% off, but humans will tend to go for the 50% extra. 

Anchoring
Nothing has a value until you give it one. When it comes to anchoring, we want to be in charge of what that value is, otherwise the user will decide whether something feels expensive based on gut feel. People anchor value on the first piece of information, so to ensure our price seems fair, it is important to give a higher anchor. 

It is also possible to do this on your landing pages by including a decoy option, one that is too expensive and not likely to be chosen, by doing this you will increase the number of people that go for the middle option - think Starbucks coffee pricing. 

As I said, there are tonnes of options available from a nudge perspective, these are just two examples that relate highly to pricing which is obviously on everyone's mind currently. If you don’t know much about nudges, I would highly recommend reading the book Nudge.

Step 4 - Test and learn

With all of the above culminating in a strategy and a roadmap of campaigns and actions to take it is imperative that you use and test and learn approach. As marketers, of course, we try our best to nail things the first time, but we also know - this is quite a rare occurrence. Building a robust testing plan is critical to marketing success as it is only when our campaigns are in the real world that we can properly assess their impact. 

To ensure a robust testing plan it is extremely important that you understand and articulate what good looks like. This will not only help in managing internal expectations, but this is your ability to measure the success of your campaigns and to be able to make decisions. 

There have been a number of experiments over the years that have proved the more tests you run the better the results and there is good reason for this. When we push ourselves to run more tests, we start to push ourselves into weirder and wackier tests - and often it is the weird and wacky tests that drive the best results - things that maybe you think, ‘no surely that won’t make a difference!’ But it does. So pushing yourself to think of the non-obvious tests is often where the magic can be found. 

Time to action

So that’s it, that is my rather long recipe - there is a lot of work to be done, I am sure you will have some of this in place already, but ensuring you re-look at it with the correct frame of the downturn is critical to its relevancy and ability to deliver results. 

If you do all of this right, document it and demonstrate to the business the deep thinking that has gone into the strategy this will help to strengthen your case for budget and for leading the strategy as you see fit. This will also ensure that the relevant stakeholders have their expectations managed and are aligned with your thinking. Without ensuring alignment you leave yourself open to unjust criticism as they will be judging you against their own anchor of what success looks like. 

If you need some help pulling together a strategy that covers these principles, I'm more than happy to help, please feel free to reach out or get in touch.