With the cost of living reaching unsustainable levels and ongoing economic instability, it’s no surprise that consumer behaviour has changed. Increasing costs have negatively affected buying power and consumer confidence has dwindled.
So what should businesses do to ride the storm and how should marketers adapt to these changing dynamics?
We have learnt many things from the last recession – namely that the first impulse for most companies is to reduce their marketing spend to conserve funds. While some reductions may be prudent based on the performance of channels, cancelling all marketing activity is not a viable strategy.
Nonetheless, there are going to be significant impacts on your marketing activities, presenting challenges such as:
1: Increased marketing ROI and advert ROAS
The Pandemic had a huge impact on 2020/21 marketing, showcasing a veritable rollercoaster of performance during this time, but things had begun to stabilise in 2022. ROAs, (return on ad spend) were increasing and ad sets began settling into more consistent performance. With external influences and uncertainty mounting, we are now seeing a range of unusual trends appearing. For example, digital adverts previously favouring video due to its engagement are now seeing a shift towards static image popularity. Early 2022, marketers had started to benefit from the commensurate rise in sales opportunities again. However, with new financial uncertainty looming and impacts on consumer’s purchasing power, it’s starting to become much harder to market products and services, resulting in declining ROIs. Previously stable ROAs (return on ad spend) are becoming increasingly unpredictable, and brands are not getting the same bang for their buck, no matter how many ad varieties they try.
2: Targeting has become less effective
With the current shift in consumer behaviour towards a reduction in spending, we’re seeing a shift in the dynamic, making previous targeting and segmentation obsolete. It may be tempting for companies to retain their adverts and apply more budget, however, increasing ad spend won’t necessarily work. The cost of efficiencies has gone up and even the strongest of adverts won’t provide results in line with higher spends. Creating new adverts, ad sets and campaigns to test the waters has also resulted in much higher CPLs (cost per lead) and CPCs (cost per click) than before, making holding your nerve during testing phases that much harder. Instead, broadening audiences and reducing targeting is the best compromise for those with smaller budgets. (Albeit to the detriment of more quality leads and conversion). It truly seems to be a balancing act at the moment and unless marketers keep up with these changing dynamics, it can significantly impact the effectiveness of their marketing activities.
3: Consumer behaviour has shifted towards value
Consumers are beginning to reconsider their purchases from a value perspective, reducing the number of impulse buys and putting much more consideration into purchases. This mindful spending presents a unique challenge to marketers, forcing them to focus less on features and more on value-based marketing. Before consumers part with their pounds, they need to be educated on the product or service and understand exactly how it will benefit them, what impact it will have on their lives and how much value it serves to them. As such, marketers need to adapt their strategy to demonstrate value and credibility.
How should you adapt your marketing strategy in a recession?
Only recently in Q1 of 2022, UK ad spend saw a year-on-year rise of 28.3%, reaching a total of £8.6bn, (Advertising Association/WARC Expenditure Report 2022). However, the current climate represents a real-term contraction of nearly 1% in 2023 for UK advertising investment. Stephen Woodford, CEO of the Advertising Association says, “It is important to recognise the value that advertising brings to the economy in supporting competition, innovation and growth at this critical time. A consistent, evidence-led approach, with due consideration of industry views and expertise, will be integral to the ability for businesses to weather the challenges of the coming year.”
During a recession, the question businesses often ask is, “should I stop, reduce or maintain my marketing activities?”. It is well evidenced that brands who can maintain marketing investment during a recession come out the other side in a far stronger position than brands who cut back. It may be tempting to conserve funds during the next few months, but at Ace Marketing, we advise that it is better to maintain your position, but ensure that your budget is focused on the right channels and messaging. It’s not about increasing or decreasing your budget per se. Now is the time to review all marketing activities, with a particular emphasis on ROI. What’s working? What’s not working?
Regardless of previous trends or performance, October’s results should give you a pretty good indication of how the next few months will pan out so perform a deep dive of your current channels, messaging, spend and performance. Look at channels and adverts that are standing their ground and put your energy into those that are working hardest for you. Seasonally, we have some solid campaign opportunities with Black Friday, Eid, Christmas and New Year, so think hard about your messaging and piggyback on these events. Focus on getting the content right, utilising your strongest channels and you’ll be able to continue to compete in the marketplace without going overboard on your budget. Marketers should also adapt their strategies instead of just doing less of the same. It’s very unlikely that strategies that worked pre-recession will still work. Changing dynamics demand changing tactics. Brands can navigate the recession and still come out winning the other side by focusing on the following:
Defend your position and maintain/grow awareness
While the main aim of marketing is to generates sales, it also impacts brand awareness and consideration stages in the purchase funnel. Cutting back on marketing may be tempting, but it puts you at risk of losing awareness, and subsequently market share. If you reduce your marketing activities, your brand will slowly fade from prospect’s minds, and they may shift attention to competitors that either maintained or increased their marketing reach.
It’s also important to think about the long-term effects. Maintaining activities can secure your position in your customers’ eyes and keep their confidence in your brand during the recession. it’s also worth using this time to future-proof your brand. If you have enough budget to stand fast, you could use the next few months as an opportunity to position your brand in a way that will ensure you emerge as market leaders when the inevitable upturn comes. Once things start to improve, you’ll be glad you maintained your position and kept your brand at the forefront of mind.
Increase the value you provide and showcase your key USPs
While it may be tempting to exploit competitor weakness during this time to win their customers and steal market share, Ace Marketing & PR doesn’t advocate attacking competitors by highlighting their shortcomings or damaging their credibility. Not only could this lead to legal issues such as Defamation, but you could provoke them into reacting in kind. Suddenly your brand could be scrutinised in return or targeted in other ways ie constant false clicks on your Google Ads to waste your bids or even destroying marketing property such as roadside banners. (I have seen this and worse happen!).
Instead, spend time thinking about how to position your brand. Reconsider your key attributes based on your target market. Consumers will be more careful about what they purchase and perceived value for money will hold more weight. Focus on what differentiates you from your competitors, communicating affordability and value for money. Most consumers will begin to hold back on all purchases that are deemed unnecessary or luxuries, so identify how you can position your product or service as a priority to your customer.
Hold your ground respectfully and if your competitors reduce their marketing activities, their customers will be more susceptible to brand switching anyway. Seize the opportunity you have to invest in more value-based proposition messaging to win new customers while retaining your current customer base.
Collaborate to maximise reach and add value
The saying goes, ‘united we stand, divided we fall’. While this isn’t a prerequisite, there are some great opportunities to explore through partnerships during this time. Collaborating with a brand that provides a supplementary service and compliments your offering opens the doors to wider reach and taps into a new audience with a similar demographic and mindset. By providing a time specific, value-added offer or exclusive discount, you can effectively cross-promote your brand to your combined databases, extending your reach and piggybacking on each other’s credibility with their customers. Look at promoting partnerships via digital channels to keep costs low such as emailers, social media, website, blogs and apps.
You could also collaborate with complimentary businesses to add extra value to your offering. For example, a gym may highlight partner discounts to add perceived value to their customer’s membership. If customers consider switching to a cheaper gym, they are then reminded of the quality extras they’d also be losing, making it a harder decision to leave. By working with partners, you’re giving customers more value for their money and rewarding them for their loyalty.
Reassess or expand your target market
In a volatile market with shifting consumer dynamics, it’s worth reviewing your customer base and assessing if you’re still targeting the right audience. If the recession has severely impacted your target demographic, simply increasing your ad spend or communicating value will not get you the desired ROI. Now is the time to look at changes you can make to diversify your offering to appeal to your redefined profile. It may also be worth expanding your reach to include financially unaffected consumers or to target a new geographic location. In any downturn there are always customer segments, markets and locations that are less effected.
Focus on existing customers
Retention is always an important part of marketing, but now more than ever is the time to wrap your customers in cotton wool! There are many benefits to keeping your customers happy such as ensuring ongoing bread-and-butter purchases, promoting credibility and trust, and obtaining new customers through valuable referrals. Investigate your customer base and re-evaluate their needs during this time. Adapt your communication strategy to strengthen your connection with them, whilst showing empathy to establish trust and boost confidence.
Think about how you can reward them for their loyalty with value-added extras, gifts or exclusive offers. Can you encourage your customers to share positive reviews on Google to encourage others to trust in your brand and gain SEO points as a by-product? You could also promote a special reward for customers who increase their purchases or refer a friend to widen your reach. Ultimately, your current customers bring in the majority of your sales, so retention is the key to surviving and thriving this recession.
If you need support or guidance
I hope you found this article useful. Remember, recessions, though tough, are always cyclical and do not last forever. If you’re able to spend some time reviewing your current marketing strategy, you can use your current budget to best effect and perhaps even turn some negative aspects into opportunities.
Contact Ace Marketing and PR if you would like a deep dive of your current marketing activities, review of your strategy, proposition and branding, or support with changes to your current activities.