Marketing During An Economic Downturn*
During the pandemic economy, individuals and businesses alike looked for ways to cut expenses and stretch funds as far as possible. The same strategies for efficiency apply in any downturned economy and it might be tempting to think that this is an appropriate time to reduce spending on advertising and marketing.
In fact, the opposite is true.
Not only is it not the time to reduce spending on your advertising, but it is also important to continue or even step up your marketing efforts.
Present Difficulties, Future Growth
It has been shown repeatedly that during times of economic downturn, those that continue to advertise are quicker to recover when the economy improves than those that cease advertising.
A 1999 study on advertising during and after a recession, the marketing and advertising data of 1,000 U.S. and European firms was analyzed. The firms were classified into three groups.
- The first group decreased their marketing and advertising during difficult times
- The second group chose to stay the course and maintain their marketing expenditures
- The third group not only maintained their marketing efforts but increased their spending
As the economy began to recover, the group that decreased its marketing efforts saw its market share drop by 0.8%. Those that maintained their marketing and advertising at pre-crisis levels had an increase of 0.6%, while the companies that increased their advertising saw an increase of 4.3%.
“Peace” Of Mind From “Piece” Of Mind
How did these businesses manage to create an increase during hardships that seemed to indicate fewer opportunities for growth? The answer is “piece” of mind.
Piece of mind refers to positioning one’s business in the mind of customers. When a customer seeks to make a purchase or engage a service, having your business spring to mind first indicates that you have a piece of their mind. This mental real estate is valuable at the best of times, but during an economic downturn, it becomes even more important.
By maintaining your position in a customer’s mind, you can give them a feeling of normalcy when other parts of their life might be in turmoil. They will come to think of you as being reliable, particularly if your competition scales back or even halts their own advertising.
If your competition also chooses to increase its advertising, then keeping pace with them becomes even more crucial.
Less Reliance On Demographics
When faced with economic difficulties the emotional state of consumers becomes just as important as the usual demographics (i.e., age, income and so forth). Research at Marwick Marketing LLC classifies consumers into several different psychological groups:
1 – Frightened and vulnerable customers are those who have taken the biggest hit financially. These customers are left feeling especially vulnerable and typically react by eliminating any spending they deem unnecessary and will decrease or postpone other purchases. For these customers, focus on being helpful and mindful in your marketing and advertising efforts.
2 – Cautiously optimistic customers are more hopeful about long-term prospects, giving them a more positive outlook. They probably remain concerned about the short-term, however. They will try to cut costs where possible, saving as much as they can, but not to the same extent as the frightened and vulnerable customer. This group comprises the largest psychological segment and represents a wide range of income levels. For this customer base, focus on gaining “share of mind” with your advertising and marketing. These consumers will still be “window” shopping online, researching and getting ready to purchase when they feel comfortable.
3 – Reasonably well-off customers will probably seem mostly unaffected by economic downturns. They are usually confident in their ability to endure difficult times. Compared to other groups, their level of consumption remains fairly steady, though they might become more particular about their purchases. This group usually consists of those in the top 5% income bracket, but also includes those who feel secure about their finances, even if less than wealthy. These customers will spend more time researching and searching for the best offers. They understand they hold a slight upper hand when it comes to purchasing during a downturn.
4 – No-worry customers appear unconcerned about economic downturns. Typically, they consider it business as usual. If they change their behavior at all, it usually involves delaying significant purchases. Generally speaking, they are younger urbanites who will spend their money on experiences rather than possessions. Unless impacted by unemployment, they typically won’t change their pattern of consumption.
The challenges presented by any economic downturn require a new way of thinking and an understanding of the needs and concerns of your customers. Many of them feel anxiety or concern about the changes occurring around them.
* By Christian Thomson, Forbes Councils Member
During the pandemic economy, individuals and businesses alike looked for ways to cut expenses and stretch funds as far as possible. The same strategies for efficiency apply in any downturned economy and it might be tempting to think that this is an appropriate time to reduce spending on advertising and marketing.
In fact, the opposite is true.
Not only is it not the time to reduce spending on your advertising, but it is also important to continue or even step up your marketing efforts.
Present Difficulties, Future Growth
It has been shown repeatedly that during times of economic downturn, those that continue to advertise are quicker to recover when the economy improves than those that cease advertising.
A 1999 study on advertising during and after a recession, the marketing and advertising data of 1,000 U.S. and European firms was analyzed. The firms were classified into three groups.
• The first group decreased their marketing and advertising during difficult times
• The second group chose to stay the course and maintain their marketing expenditures
• The third group not only maintained their marketing efforts but increased their spending
As the economy began to recover, the group that decreased its marketing efforts saw its market share drop by 0.8%. Those that maintained their marketing and advertising at pre-crisis levels had an increase of 0.6%, while the companies that increased their advertising saw an increase of 4.3%.
“Peace” Of Mind From “Piece” Of Mind
How did these businesses manage to create an increase during hardships that seemed to indicate fewer opportunities for growth? The answer is “piece” of mind.
Piece of mind refers to positioning one’s business in the mind of customers. When a customer seeks to make a purchase or engage a service, having your business spring to mind first indicates that you have a piece of their mind. This mental real estate is valuable at the best of times, but during an economic downturn, it becomes even more important.
By maintaining your position in a customer’s mind, you can give them a feeling of normalcy when other parts of their life might be in turmoil. They will come to think of you as being reliable, particularly if your competition scales back or even halts their own advertising.
If your competition also chooses to increase its advertising, then keeping pace with them becomes even more crucial.
Less Reliance On Demographics
When faced with economic difficulties the emotional state of consumers becomes just as important as the usual demographics (i.e., age, income and so forth). Research at Marwick Marketing LLC classifies consumers into several different psychological groups:
1 – Frightened and vulnerable customers are those who have taken the biggest hit financially. These customers are left feeling especially vulnerable and typically react by eliminating any spending they deem unnecessary and will decrease or postpone other purchases. For these customers, focus on being helpful and mindful in your marketing and advertising efforts.
2 – Cautiously optimistic customers are more hopeful about long-term prospects, giving them a more positive outlook. They probably remain concerned about the short-term, however. They will try to cut costs where possible, saving as much as they can, but not to the same extent as the frightened and vulnerable customer. This group comprises the largest psychological segment and represents a wide range of income levels. For this customer base, focus on gaining “share of mind” with your advertising and marketing. These consumers will still be “window” shopping online, researching and getting ready to purchase when they feel comfortable.
3 – Reasonably well-off customers will probably seem mostly unaffected by economic downturns. They are usually confident in their ability to endure difficult times. Compared to other groups, their level of consumption remains fairly steady, though they might become more particular about their purchases. This group usually consists of those in the top 5% income bracket, but also includes those who feel secure about their finances, even if less than wealthy. These customers will spend more time researching and searching for the best offers. They understand they hold a slight upper hand when it comes to purchasing during a downturn.
4 – No-worry customers appear unconcerned about economic downturns. Typically, they consider it business as usual. If they change their behavior at all, it usually involves delaying significant purchases. Generally speaking, they are younger urbanites who will spend their money on experiences rather than possessions. Unless impacted by unemployment, they typically won’t change their pattern of consumption.
The challenges presented by any economic downturn require a new way of thinking and an understanding of the needs and concerns of your customers. Many of them feel anxiety or concern about the changes occurring around them.
* By Christian Thomson, Forbes Councils Member