In the first part of this article, I noted there are questions about how brands should conduct marketing during times of crisis and recession. The questions are appropriate because the novel coronavirus crisis will inevitably change from a health crisis into a financial crisis. As Bradley Johnson (@bradage), Ad Age‘s director of data analytics, notes, “People — consumers, business people of all stripes — are in a fog, apprehensive for their jobs, for their lives, for the future. … A recession seems inevitable. The crisis we face is real and immediate.”[1] Although a recession IS inevitable, some economists fear a full-on depression may emerge once the pandemic recedes. I’m more optimistic than that. So what does that mean for marketers? Some experts insist marketing during a crisis and marketing during a recession represent two distinct cases. In part one of this article, I discussed marketing during a crisis. In this article, I will discuss what experts say about marketing during a recession.
Marketing during a recession
Some experts believe there are lessons to be learned from the 2008 recession. Back in 2008 Nigel Hollis (@nigelhollis), Chief Global Economist at Millward Brown, wrote, “Everyone is talking about recession. … From observations of recessions past, we know that consumers are quick to rein in spending when hard times are predicted. Many business leaders behave the same way. Anticipating reduced sales, they are inclined to cut back on variable costs, including marketing, in order to deliver on the expectations of the financial market. However, a great deal of evidence suggests that it’s not a good idea to reduce marketing spend during recession in order to hit financial targets. Doing so may leave your brand in a less competitive position when the economy recovers.”[2] One thing we should be clear about up front is that there is every reason to believe the economy will rebound and sooner than it did from the 2008 financial crisis.
One of Hollis’ main points is that speaking up (i.e., marketing) helps increase brand awareness when other voices might not be as prominent. He explains, “The connection between share of market (SOM) and share of voice (SOV) has been proven. The higher your share of voice compared to your actual market share, the more likely your brand is to grow its market share in the subsequent year. So, if you increase your marketing investment at a time when competitors are reducing theirs, you should substantially increase the saliency of your brand. This could help you establish an advantage that could be maintained for many years.” Anticipating the 2008 recession, John Quelch (@MIAMIBIZDEAN), the current Dean of the University of Miami’s business school and former Harvard Business School professor, published an article in which he offered eight factors brands need to keep in mind as recessions emerge.[3] Those factors are:
1. Research the customer. Quelch wrote, “Instead of cutting the market research budget, you need to know more than ever how consumers are redefining value and responding to the recession.” Business intelligence systems, like the Enterra Shopper Marketing and Consumer Insights Intelligence System™ can leverage all types of consumer data to provide high-dimensional consumer, retailer, and marketing insights to help brands understand the changing consumer landscape. The following matrix of consumer behavior from the Harvard Business Review highlights the importance of knowing your customer.
2. Focus on family values. This recession will follow on the heels of a crisis in which prevention of the loss of human life was the focus. Back in 2008, the focus was primarily on financial issues. The double-blow many people will feel — personal and financial loss — means families will struggle both emotionally and financially. Quelch wrote, “When economic hard times loom, we tend to retreat to our village. Look for cozy hearth-and-home family scenes in advertising to replace images of extreme sports, adventure and rugged individualism.” He believed “zany humor” has a role to play in marketing, but this recession needs to be sensitive about the way humor is used.
3. Maintain marketing spending. Like Hollis, Quelch insists cutting back on marketing is a mistake during a recession. He noted, “This is not the time to cut advertising. It is well documented that brands that increase advertising during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times.”
4. Adjust product portfolios. The late Harvard Business Professor Clayton Christensen believed brands need to find out what kind of jobs consumers need to address and create products to do those jobs. During a recession, jobs needing to be done change from normal times. Quelch noted, “Marketers must reforecast demand for each item in their product lines as consumers trade down to models that stress good value, such as cars with fewer options. Tough times favor multi-purpose goods over specialized products and weaker items in product lines should be pruned.”
5. Support distributors. The novel coronavirus crisis highlighted the importance of global supply chains. Keeping supply chains resilient should be a top priority. Quelch insisted, “In uncertain times, no one wants to tie up working capital in excess inventories. Early-buy allowances, extended financing and generous return policies motivate distributors to stock your full product line.”
6. Adjust pricing tactics. Pricing optimization is important even in the best of times. It becomes even more important during a recession. Quelch noted, “Customers will be shopping around for the best deals. … In tough times, price cuts attract more consumer support than promotions such as sweepstakes and mail-in offers.”
7. Stress market share. As Hollis pointed out, there is a proven connection between share of market and share of voice. Quelch noted, “In all but a few technology categories where growth prospects are strong, companies are in a battle for market share and, in some cases, survival. Knowing your cost structure can ensure that any cuts or consolidation initiatives will save the most money with minimum customer impact.”
8. Emphasize core values. Benish Shah (@benishshah), Chief Growth Officer at Loop and Tie, writes, “Instead of creating new things to attract customers that are outside the norm, identify what your customers already rely on you for.”[4] Quelch also advised companies not to forgot about their employees. He wrote, “Although most companies are making employees redundant, chief executives can cement the loyalty of those who remain by assuring employees that the company has survived difficult times before, maintaining quality rather than cutting corners and servicing existing customers rather than trying to be all things to all people. CEOs must spend more time with customers and employees.”
Concluding thoughts
Quelch concluded, “Successful companies do not abandon their marketing strategies in a recession; they adapt them.” Brad Adgate (@badgate), a Media Insights Consultant, adds, “There have been a number of studies going back nearly one century that point out the advantages of maintaining or even increasing ad budgets during a weaker economy. Those advertisers that maintained or grew their ad spending increased sales and market share during the recession and afterwards. As a popular adage says, ‘When times are good you should advertise. When times are bad you must advertise.'”[5] Staying engaged is important. Adgate concluded, “Perhaps the best quote about advertising in a recession came from Sam Walton, the founder of Wal-Mart. When asked, ‘What do you think about a recession?’ he responded, ‘I thought about it and decided not to participate.'”
Footnotes
[1] Bradley Johnson, “Opinion: What 9/11 Can Teach Us About Marketing in the Time of Crisis,” Ad Age, 17 March 2020.
[2] Nigel Hollis, “Marketing During Recession: To Spend or Not to Spend?” Millward Brown, April 2008.
[3] John Quelch, “How to Market in a Recession,” Harvard Business Review, 24 September 2008
[4] Benish Shah, “How to Market During a Crisis. Short answer: Don’t.” Noteworthy – The Journal Blog, 14 March 2020.
[5] Brad Adgate, “When A Recession Comes, Don’t Stop Advertising,” Forbes, 5 September 2019.
