Follow these strategies to get in touch with your customers’ needs during tough economic times.
With most economists forecasting a recession next year, consumers are already tightening their belts, and plan to rein in their spending even more in 2023, which is affecting the strategies of advertisers and marketers, who have belt-tightening issues of their own.
According to a Big Village Insights/Caravan Survey, three-quarters of consumers agree inflation has had a significant impact on their households, with nearly as many expressing concerns about a recession happening in the next six months.
Additionally, nearly half the population (45%) has taken to purchasing more lower-cost store brand/generic grocery items rather than their preferred brands.
And most holiday shoppers said inflation is making it more likely they will shop more at mass-merchants or value-oriented stores rather than specialty or boutique retailers (76%) or will have to settle for more value brands this year (73%).
With consumers expected to be more careful with their discretionary income, here are four strategies that marketers expect to use in 2023:
Prepare for a Consumer Recession by Focusing on Value
Having a message that resonates with consumers will obviously be a winning strategy, but as they have less income, most will qualify their advertising messages in one of two ways: Promoting the value of what you’re selling or highlighting cost/price advantages over the competition, said Joe Karasin, CircleIt CMO.
“Explaining and communicating value to the consumer is usually the better method — consumers will still spend money during a recession if they see the value in what you are providing,” Karasin said. “Value-based advertising is also optimal because it is successful in all different economic situations. If you’re able to cut through the noise and resonate on an emotional or personal level with your ideal customer in your advertising, you will see increased ROAS. You can, of course, address the pain points of the recession, but it is better to stay on message with what your product or service brings to the lives of the customers you hope to acquire”
Big Village Insights/Caravan Survey Vice President Rich Tomasco agreed, “Messaging around value, quality and maximizing your hard-earned dollars should be front and center. Price-sensitive consumers will likely be more on the lookout for special promotions and ways to stretch their budgets while not sacrificing fun experiences for their families. This will require a lot of skill and creativity when designing campaigns, until the economy eventually stabilizes.”
Related Article: What Does Customer Success Look Like in an Economic Downturn?
Be Agile While Heading Into a Consumer Recession
The best marketers are heading into this period with a decision-making framework that is agile and rapid, according to Adam Rodgers, Leavened president.
Those marketers use forward-looking scenario planning — putting measured response to work by planning a media mix under different budget levels, competitive conditions and consumer needs, according to Rodgers. “Marketers need transparent understanding of what is behind consumer response — knowing what drives more than conversion but engagement and consideration.”
Embrace Lifecycle Marketing to Help Customers Adapt
The economic slowdown has accelerated a trend that was already taking hold: putting more emphasis on customer life cycle marketing, according to Ally Bancroft, director of global client practice at The Marketing Practice.
“The Marketing Practice has also been advising clients to focus their messages on productivity to tackle the pinch of wage pressure and low growth and invest in getting new products quickly to market that can help customers adapt to the new economic reality,” Bancroft said. “For example, 46% of marketing leaders have put more emphasis on growing existing customers, 33% of marketing leaders are accelerating time to get new products/services to market where they can help our customers respond to the changing economic landscape.”
Related Article: Chief Marketing Officers Share Priorities Amid Economic Stress
Concentrate on Loyal Customers
During tough economic times, consumers will look for ways to save, making them more open to switching brands, according to Mark Brown, Rain the Growth Agency chief investment officer.
“A potential recession represents both a challenge and an opportunity to marketers in the coming year,” Brown said. “The challenge: maintaining your loyal customer base. Use data to model the signals of customer churn. When those signals appear, quickly mitigate churn, especially for high-value customers. Design retention offers and empower customer service teams to activate them.”
The opportunity is the potential of taking customers from your competition, according to Brown. “Many marketers reduce advertising investments during a recession, but the winning strategy is to hold or increase advertising during a downturn. If your competition reduces ad spend, a flat budget will garner a higher share of voice. And if the ad market experiences a slump — which all signs currently indicate — those dollars can buy even more media as costs decline.”
Brown added: We recommend that marketers take both a defensive and an offensive strategy to address customer loyalty during a recession. Defend your best customers against churn with quality customer service and a data-driven retention strategy, while actively conquesting the competition to build a larger loyal customer base for the future.
Final Thoughts on Expected Consumer Recession
Many economists had expected a recession to hit by the end of this year, but as of the early December, it had yet to hit as the economy had yet to slow. However, with the Federal Reserve determined to tamp down inflation, it will keep raising interest rates — a 50-basis point increase is expected in December — until inflation is in check and the economy slows.
It remains to be seen if any downturn is short and marginal, or deep and long. With all of the business media attention on a potential recession and the rising cost of loans impacting large purchases (i.e., cars, major appliances), consumers expect to spend less. The most successful marketers will expect this and adjust their strategies accordingly.