With the UK now officially in recession this is a scary time for business owners in all sectors. And, while no recession is exactly the same, the 2007 – 2009 downturn can provide us with some valuable insights into marketing strategies that will help your business weather the recession. In this blog, we’ll look at the impact of recession on consumer behaviour and how you can use psychology to update your marketing tactics.
Understand your customers and recession psychology
Customer confidence is at the heart of any form of purchase, when times are good people are more likely to spend money on things that they may not need while during a recession people are likely to cut down on non-essential spending. In addition to this your customers will also generally fall into four different groups as modeled by Harvard Business Review:
Slam-on-the-brakes consumers – This segment feels most vulnerable and hardest hit financially. This group reduces all types of spending by eliminating, postponing, decreasing, or substituting purchases. Although lower-income consumers typically fall into this segment, anxious higher-income consumers can as well.
Pained-but-patient consumers – Tend to be resilient and optimistic about the long term but less confident about the prospects for recovery in the near term. Like slam-on-the-brakes consumers, they economise in all areas, though less aggressively. They constitute the largest segment and include the great majority of households unscathed by unemployment, representing a wide range of income levels.
Comfortably well-off consumers – Feel secure about their ability to ride out current and future bumps in the economy. They consume at near-prerecession levels, though now they tend to be a little more selective (and less conspicuous) about their purchases. The segment consists primarily of people in the top 5% income bracket. It also includes those who are less wealthy but feel confident about the stability of their finances.
Live-for-today consumers – Carries on as usual and for the most part remains unconcerned about savings. The consumers in this group respond to the recession mainly by extending their timetables for making major purchases. Typically, urban and younger, they are more likely to spend on experiences rather than stuff (with the exception of consumer electronics). They’re unlikely to change their consumption behavior unless they become unemployed.
Regardless of what group your customers fall into they will prioritise how they spend their money by sorting products and services into four main categories which are:
- Essentials are necessary for survival or perceived as central to well-being.
- Treats are indulgences whose immediate purchase is considered justifiable.
- Postponables are needed or desired items whose purchase can be reasonably put off.
- Expendables are perceived as unnecessary or unjustifiable.
Once you understand your target audience you can start to get an idea of how likely they are to change their purchase behavior and whether or not your products or services are going to be considered an essential item, treat, postponable or expendable purchase.
Update your marketing tactics
Now that you know the likely behaviour of your customers you can start to look at ways that you can update your marketing to reflect these changing behaviours. This will vary depending on your audience and how they shop but some of the ways that you can do this include:
Slam-on-the-brakes – Offer smaller pack sizes at a lower price point, promote low-cost alternatives, use emotions such as you deserve it for treat items, provide interest free finance options for big purchases.
Pained-but-patient – Promote bonus packs, offer loyalty rewards, advertise luxury alternative treat items, promote simpler and lower cost services.
Comfortably-well-off – Advertise the quality of your products and services, use limited time offers and create sense of urgency, emphasis desire to impress.
Live-for-today – Offer convenience services such as subscriptions, advertise based on seizing the moment, promote an aspirational lifestyle, focus on new must-have products and services.
Pick the right marketing channel
One of the first things that a lot of businesses cut in a recession is their marketing budget, but this can cause a lot more harm and lead to a drop off in customers. The businesses that are able to optimise their marketing efforts and focus on the channels that deliver the highest returns on investment are the ones that tend to succeed.
Marketing during a recession is incredibly hard and requires focusing on the needs of your customers. With such big changes to consumer behaviour it is important to identify where your audience fits in the four groups and what categories your product or service falls under. Once you have done this you can start looking at which marketing channels will best suit the needs of your customers.
The perfect option for businesses that have thousands of loyal customers, email marketing lets you connect directly with your audience and fully tailor the message that you are sending out. Start by segmenting your audience into the groups identified above and then create individual messages, offers and promotions for each of these groups.
So while the comfortably-well-off might be inclined to treat themselves to a brand new car, those in the slam-on-the-brakes group will be looking to cut back so an offer to reduce their current car financing package in return for a longer payment term might be a message that is welcomed and helps to ensure they continue being a loyal customer for your business.
Further personalisation and split testing will help you take full advantage of your email marketing.
Does your business appear prominently in the search engine results for relevant key phrases? Search engine optimisation, SEO, is the process of improving your website’s visibility in the search engines to help generate more exposure and traffic. People will continue to need products and services, even during a recession, and this is when they will turn to search engines like Google. If your business doesn’t show up in the search results, then you will be losing business to your competitors.
Businesses that cut their SEO marketing during a recession often find it more difficult to acquire new customers compared with those who continue their SEO activities. SEO is a long-term strategy and businesses that invest in SEO during a recession often find they are in a stronger position with better visibility compared with businesses that cut back on their marketing spend.
Not all marketing has to cost your business money. Making it easy for customers to review your products, services and business will help improve your business’s local visibility as well as making your business stand out from your competitors. Positive reviews help to show that your business is not only trading but that it is recommended by others. In a recession customers are much more likely to shop around to find the best product or service and a big part of this will be positive reviews.
While platforms such as Facebook were once filled with nothing but cat memes, today they are a valuable marketing tool for businesses in all sectors. Starting a conversation with prospective customers is often one of the hardest tasks that marketers face, but social media makes this easy to do. From commenting on a user’s post to advanced audience and demographic targeting, social media platforms are quickly becoming an invaluable place to build customer rapport and generate sales.
During a recession the temptation is to pull all your marketing spend in a bid to cut costs, but there is plenty of evidence to show that businesses who continue to advertise are in a better position to weather a recession than those that cut back. It’s all about keep your business visible and ensuring that when customers are looking, they are able to find your products and services instead of your competitors.
Need help marketing your business? We’d love to help find out more about your business and how we could help. Get in touch with our friendly team today on 0161 909 3400 for a free initial consultation.