Explainer journalism publication Vox recently published an article asking, “Is the economy actually bad, or does everyone just feel like it is?” Spend enough time doomscrolling, and it certainly feels like we’re in an economic downturn.
The good news is most people, including your existing customers, have the same sentiment. The bad news is inflation is at an all-time, and regardless of how severe or mild the impending recession is, if consumers feel the economy is terrible, their spending habits will change.
Having said that, there are plenty of things businesses can do to recession-proof their existence. So, before you panic (this isn’t advised) and think you have to figure out how to generate multiple income revenue streams, you just need to re-strategize—and we’ll show you how!
The increased prices of commodities, slow economic growth, and rising inflation signal a future recession. World Bank President David Malpass stated, “recession will be hard to avoid” for many countries given the aftermath of Covid-19 and the ongoing war in Ukraine.
Are we in a recession? Technically, no, but according to CNBC the US, UK, Europe and Japan will be in the next 12 months as central banks move to tighten surging inflation. Understandably, when businesses and consumers experience an economic recession, they become reactionary.
Businesses focus on core competencies and cut spending wherever they can. As a result, critical services like advertising and marketing are the first to go. Yet, recessions can present profitable growth opportunities for big and small businesses.
To quote New York Times Bestselling author and real estate mogul, Grant Cardone:
“When people and businesses cut spending and focus on saving, they almost always save their energy, effort, and creativity as well. It is as if the mindset of dialing down spending naturally dials down other areas.”
Successful businesses adopt an offensive strategy. Rather than contract their expenditures, operations and output, they expand them. And they do so in strategic ways that include certain steps.
Their business leaders search for new opportunities, adjust their marketing strategies and offers, and come up with creative solutions that help them ride the wave until the economy improves, and they reach more stable shores.
What do the companies Mailchimp, Warby Parker and Groupon have in common? They not only survived the last recession but have continued to thrive.
So, if you want to know how to increase sales during a recession then read on!
The textbook theory is that during a recession consumers spend less and buy lower-priced brands. They typically categorize products and services into essentials, treats, postponables, and expandables, according to how necessary a product or service is to their immediate survival, or rather according to how they justify a necessity.
Marketers have long known advertising is about the aspirational. Thus, consumer spending is as much about financial means as it is about emotional fulfillment. During a recession, it is more useful to segment audiences according to psychology, which cuts across traditional LSMs (Living Standard Measures).
Therefore, you might segment your customer base into the following:
This segment is usually the most vulnerable and hardest hit financially. As a result, it ruthlessly reduces all types of spending by eliminating, postponing, decreasing or substituting purchases. Although lower-income consumers fall into this bracket, it can affect high-income consumers as well, particularly if health or employment circumstances take a turn for the worse.
Consumers in this segment tend to be resilient and optimistic about the long-term but more pessimistic about full economic recovery in the short term. They’re predominantly concerned with how to maintain their standard of living. Like essential-only buyers, they economize buying habits, but less aggressively because most are unscathed by unemployment. The majority of the population is part of this group.
Comfortable buyers fall into the top 5%, but also include those less wealthy, who remain confident in their financial stability like retirees or investors, for instance. These buyers are secure about their cash flow and ability to ride out an economic downturn. While they tend to be more selective about purchases, they consume at near pre-recession levels.
The buyers in this segment continue as usual and remain unconcerned about savings. Typically, urban and younger, they spend on experiences rather than stuff and are unlikely to change consumer spending unless they are retrenched. Carpe Diem buyers rent rather than own property and respond to recessions by postponing major purchases.
The clue to unlocking business opportunities during a recession is understanding how these segments reassess priorities, reallocate funds, switch brands, and redefine value. For instance, during an economic downturn, products, and services to do with dining out or entertainment will switch from essentials to treats, postponables, or even expendables, depending on which segment a consumer belongs to.
Implementing these strategies can reduce adverse financial effects when the recession hits. They can help you successfully navigate acquiring new customers, restructure your marketing budget and build customer loyalty.
It’s vital to remember that during a recession, loyal customers are your primary source of cash flow and organic growth. When the economy is stable, it costs five times more to convert a new customer than to retain an existing one.
In good times, the success rate of selling to existing customers is 60-70% while selling to new ones is 5-20%. Now, compound this data with the current economic environment, and you’ll soon realize marketing isn’t optional—it’s a “good and necessary” cost.
Most businesses that stay afloat during recessions know marketing and advertising deliver more business. Furthermore, they’re aware the majority of other businesses, including their competitors will reduce their marketing budgets.
Implementing aggressive marketing strategies during an economic slowdown yields a compound effect and tangible results. Companies that double-down on their marketing efforts during a recession keep their brands in the minds of consumers.
Market research suggests a business is more likely to bounce back from a recession if it increases its marketing budget. In addition to spending more, they also ensure their marketing strategies reflect new contexts and spend their budgets to accommodate shifting consumer behavior.
Consumers spend eight hours a day online. By now, we’re mostly preaching to the converted when we explain how important it is to have a strong online presence that attracts qualified leads.
It’s as simple as this: email marketing, social media marketing, content marketing and paid advertising give businesses unlimited access and opportunities to connect with current and new customers online.
Your client base spends a lot of time online, so you need to invest in a business strategy that makes your company visible on digital platforms and channels. There are a dozen reasons why, from proving legitimacy to reducing costs and improving visibility, but ultimately, it boils down to sales.
Over 50% of customers start their journey down the sales funnel on Google search. Therefore, being prominent on multiple channels creates opportunities for customer engagements to happen faster and ensures you capture your market share.
Now, you may be thinking this is all fine and well, but you’re a service-based business that has nothing to do with eCommerce. However, 93% of consumers use Google to find local service businesses. So, every business needs a good online presence!
Consumers have high expectations. Before you delve into paid advertising or social media marketing, you should have a robust, SEO-friendly website that clearly communicates your value and differentiates your business from competitors.
Having a great product or service is only part of what it takes to reach business success. You still have to do the hard work of building your brand which inspires consumer confidence and keeps existing customers coming back for more.
Due to ferocious competition and limited customer attention spans, the biggest struggle business leaders face today is obscurity, and not necessarily money or pricing.
When a brand achieves a high level of recognition, consumers instantly recognize the colors, logos, slogans, and tones associated with it.
Mcdonald’s is a good example.
In fact, for some consumers, the thought of fast food conjures a Big Mac in their mind’s eye.
In turbulent times humans naturally cling to stability. So, if you cultivate an image of stability and your products and services substantiate your marketing claims you’ll slowly build brand recognition.
It takes at least seven interactions for a lead to turn into a customer. To achieve brand recognition and increased customer acquisition, you need to have both a consistent tone and a marketing campaign that builds trust.
Developing a solid social media strategy that humanizes your brand is important. You want to use your social media accounts to build a community with your target audience. Once you have their trust it’s far easier to convince them to spend money.
If you aim to grow your business in a recession, you have to maintain consistency, beyond your marketing strategy. When a recession hits, it’s easy to withhold information due to fear, but you need to keep internal communication clear and consistent.
It’s no secret that everyone from business leaders to entry-level workers will feel vulnerable and uncertain. When fear starts to permeate an organization, it erodes trust and business performance.
During economic hardship, you must communicate with and upskill your team. It’s the easiest thing to do but is often disregarded as everyone tries to respond to new pressures. Update your team as to where you are, what your plans are and how you aim to recession-proof your business. Have an honest sales chat with them and ask for their feedback.
Emphasize the importance of brand consistency and how it maintains revenue, and ultimately, their jobs. If everyone is on board and has clear KPIs, they are more likely to play their role in keeping your business running.
While it seems counterintuitive, this is what major corporations do to ensure revenue growth. Every business has current customers who are slow to pay, extremely difficult or require a disproportionate amount of your staff’s attention in relation to the revenue they generate.
Cut these customers now.
You can rather spend your marketing efforts on attracting new customers and increasing the average purchase value of each customer. For example, can you offer two-for-one deals and encourage your target market to spend more?
By cutting the bottom 20% of your existing customer base, you free up resources and the capabilities of your existing labor force, so you do not need to add new employees to your payroll.
This is precisely the time to look at your operations from a quality control standpoint, brainstorm with your employees, and determine what you can do better for your existing customers.
You need to be head and shoulder above the rest. If you are offering mediocre service, most customers will go elsewhere. This should not even be an option at this critical time. By offering enhanced customer service, you will be building even greater customer satisfaction.
Sometimes bottlenecks don’t pertain to people; it may be that you’re not using the right technology to automate processes. In other cases, it could actually be the process itself. For example, your employees may be more productive if you introduced Flextime.
Find ways that you can improve and further streamline your operating processes so that your team can function more efficiently. This will ensure that you can succeed in the next critical step.
By enhancing and improving your operating processes, you will now have the resources needed to service the increased number of customers gained from following the preceding steps.
This is always a really tough call to make, especially with the onset of a recession in 2o22. And yet, we’ve all had employees who don’t perform as needed. Perhaps they work at 50% output, or are toxic to your small business environment.
Many times businesses don’t fire poor hires because they fulfill an essential function and keeping them on staff, even at a cost, is easier than training a new person. However, you should consider the expanded talent pool a recession provides.
There will likely be many enthusiastic and hard-working people ready to take their place.
Conversely, good employees are invaluable, which is why you should assure your core team that you will stand by them through the crisis. That the business can go into the red this year (and hopefully, every business has cash reserves or a line of credit to make this assurance) if need be to keep the team together.
If you let go of a good person, it will destroy the morale of your entire team because each employee will wonder “am I next?” Fear reduces productivity, and rightly so. To assure the good people on your team that you have their back. If you do so, they will have yours.
In summary, to remain profitable, you must:
Did we ever think the world would be hit by a global pandemic and subsequent war? No. But recessions and extreme economic downturns aren’t new. Some businesses have thrived in the face of adversity.
Marketing in a recession does not take unlimited financial resources. It just requires intimate knowledge of the digital landscape, a smart marketing budget, and business strategy, as well as an offensive posture and an expansionary mindset.
Remember that people everywhere — including your customer or client base—still rely on you to provide them with the goods and services they’ve always needed. Be there for them. Let them know you are still here and with better products, services, and customer care than ever. We are here for our clients and team members in this same way.
Your business will prevail. And we stand with you.
Comrade originates in Chicago, but we worked all around the United States. We can help your business grow and increase revenue whenever you are. We have offices across most major cities in the US. For example, we can offer digital marketing services in Madison or Atlanta. You can even find our internet marketing experts in Seattle! If you want to know more about our Baltimore digital marketing agency or find out how exactly we can help you, contact us via the phone or email.
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