When competition or pressures increase, we wander easily into the realm of discounts and deals. When competitors release products that seem better than ours, we rush to copy, create and mimic. When others are going left, we want to go left too. It's natural – and sometimes it works. Except when it’s reactive. Reactive only works in the short term.
Now is a time when reacting seems easy. Let’s face it, a pandemic crossed with a recession can feel like looking down a long dark tunnel, the light snuffed right out. It’s natural to want to do something to maintain or reignite the fire within the consumer's wallet: to discover a unicorn solution that might provide a trickle of income.
But reacting can set you up to fail.
The main reaction we’re seeing right now is deep discounting. It is quite realistic that, without considered messaging or super-targeted offers, this could be the beginning of a price spiral. Businesses either racing to the bottom to try and get one-more-sale, or worse, being posited as a discount retailer. Think Briscoes or Kathmandu – consumers hold out for sales and very rarely purchase items at full price. For a small business, that’s a difficult place to come back from.
So how do you not react?
We’ve scoured the internet over the last few weeks, searching for direction and insights from past recessions. When we looked deep (and we did go deep), we found the same advice time and time again.
Consistently, the first step and the most important piece of advice is: Re-examine your core.
Let’s face it, you have time; something you might not have had in a pre-C19 world. Why not use it to examine your core: really look at what the changes in market, economy and consumers mean to the future of your business.
HOW TO EXAMINE YOUR CORE
There are three simple questions you can ask to begin this process:
- What is the reason you do what do you – what is your brand story?
In a perfect world, why would someone choose your business over others in your category or industry? When sales start to decline, a lot of businesses will begin to alter their brand position to try and attract new customers in the near term.
Sadly this can mean you are in a weaker position to connect with your most valuable customers once the recession ends. They’ve witnessed the ship sinking, they’ve seen the captain changing course and they’re no longer confident that this is the brand they once believed in. Check out our Brand ideas paper to better understand the role of brand.
- Which marketing (promotion) worked best to date?
It’s important to keep turning up during a recession, to remain present. Turning off all communications says, we’re gone. Reigniting a brand if you’ve been silent for months is akin to launching a new business to market. It’s expensive and difficult. But we get it, spending money on promotion right now can feel futile.
We recommend you look at all of your marketing spend and work out which communications delivered you the best returns, whether that’s engagement, actual sales or just awareness. Then consider what you currently need to achieve. For many, sales just won’t be a possibility. So what levers can you pull? Where can you build value – relationship? Goodwill? Partnership?
Which channels have been most effective? Should you use email, social or digital advertising?
Optimising your marketing message, spend and returns is critical.
- How have your customers’ priorities changed? You had a customer base pre-C19. But what are they doing now? It’s vital to know and respect how their thinking has changed. There are four segments that typically emerge during a recession:
- Those that slam on the brakes: this is our vulnerable group and great caution is required if you typically market to a low-income segment. Right now, they will be hurting the most.
- The pained but patient group: these are resilient and optimistic but make changes to their spend during difficult times. The majority here will still have some income but they’ll be more cautious of who they invest with and why.
- Those who are comfortably well off: if you were lucky enough to market to the top 5% of income earners before C19, you can expect them to resume (even continue) spend at near-prerecession levels. They are financially secure and typically financially fit to ride out economic bumps. It’s good news if you have accessible products or services to sell.
- Those who live for today: typically younger and more urban, these folks will just keep on rolling, so long as they have employment. Larger purchases might not be delayed. They will continue to look for experiences to get involved in. Temporary discounts will work well for this group.
These customer segments will stay until recessionary pressures ease. People will shift around between pained and patient and slamming on the brakes. Where your customers sit will determine the kind of messages, innovation or pricing they will need from you to continue to support your business. We've put together a high level summary in this recession marketing matrix:
What should you do with this information?
These broad business insights can help you to begin to determine which strategies and tactics will help move you forward. It can help you work out whether to rationalise or innovate your product set. Whether to shift pricing. When and where to cut costs and when to focus on growth.
Taking stock of your core may mean that, once markets reopen, you might be able to trade at the same or similar prices, with the same or similar margins as before (obviously, there are industry and category exceptions here). It may also mean you have created new, better products and services. Or a more streamlined business machine.
Examining your core and responding thoughtfully can be very reassuring to your market. It demonstrates your position: ‘we’re going to get through this together‘ vs. ‘this is a sinking ship.’
There are several steps to building a strong marketing foundation, during and after recession. Examining your core is the first. But it’s important. It’s very important.
Establishing your why, your story and your baseline will set the direction for how you respond and rebuild your business after lockdown, during recession and into recovery.