Can brands opt out of a recession?

When asked about his thoughts on the 1991 recession
Wal-Mart’s founder, Sam Walton, responded, “I thought about it and I decided not to participate.”

Interesting approach, but is it actually realistic?

The short answer: no. It depends what you want your brand to achieve out of the incoming recession. If your goal is to attempt to protect short term profitability, then your marketing department and spend will take a hit. As will your business’ long-term profits.

As Peter Field noted, most brands are in one of two situations right now; so much demand that they’re struggling to meet it, or zero demand as consumers are unable to buy or access the product. In either situation, short-term activation will do very little to improve the situation.

The Long Answer: to furnish your business with a 3-to-5-year advantage over your competition, remember two key points: First, maintaining your investment in a recession gives you a brand and sales gap over brands lowering investment, long after the recession is over. Second, you can still grow market share in a shrinking market. As other brands cut budgets, there is an opportunity to disproportionately win share in a quiet competitive landscape. Here’s how:

Planning for the Long-Term: Don’t let Recession Hit Twice
The need-to-know: cutting your budgets and turning media off will not lead to medium- to long-term gain. (WARC, 2020)

Of course, this isn’t an easy task. Risk-averse human nature and marketing KPIs more weighted to the short-term often lead brands to reduce investment when consumers aren’t spending. But in the medium and long term, businesses that decrease their investment during a recession lose market share. In addition to their customers spending less, brands cutting budgets lose out to their competitors in share declines. In essence, the recession hit them twice.

Brands that maintain, or increase, their investment gain market share. Data2Decisions, a Dentsu company, found that when brands reduce their spend for 6–12 months, it takes them 3–5 years to return to pre-recession sales levels. The brands that maintain their spend gain market share plus a 3–5-year sales advantage over their competition post-recession. A 3–5-year advantage, would you turn that down in a good economy?

Know Your Existing Customers and Potential Consumers
The need-to-know: as recession hits, spend habits change. Pools of money will shift, and brands must identify emerging profit pools to guide the business. (Kantar Futures, 2016)

Right after the last recession, HBR found that consumer spending habits can be mapped on a matrix. People will handle their money on a range from “slamming on the brakes,” all the way to “living for today.” It’s important to first understand where your most valuable customers and consumers fall in that spectrum, cross referencing that with how they view your product: from essential to expendable. This will provide a consumer map to help brand investment work harder.

It’s important to analyze both consumer behavioral and attitudinal insights. Work with your agency to understand where and how people are spending, as well as their dynamic sentiment, confidence, and expectations.

Dramatic moments will change peoples’ behavior, so remember to experiment with different audiences. If nothing changes, nothing changes. Downturns are a good moment to find new avenues of growth.

Focus on Effectiveness: You’re in a Buyer’s Market
The need-to-know: when done right, advertising is an investment, not a cost or detractor from profitability. (The ARF, 2018)

The difference between investment and cost, is how brands measure effectiveness. ROI is going to decline regardless of how you handle your budget in a recession. But, in the 2018 report, Profit Ability, showed that more than half of advertising impact is enjoyed in the long term. Focusing on short-term KPIs won’t outweigh the resulting long-term stunted growth, especially during a time when people don’t want to spend.

Instead, focus ruthlessly on market share. Even if your category is shrinking, you can still steal a larger share of market, and it will pay dividends post-economic downturn. Do everything you can to get your share of voice above your share of market — even if that means earning conversation to get you over that threshold.

The noise level in many categories will decline as brands give in to the urge to cut spending, and media rates could deflate. Without any changes to your investment you’re going to get more for your money. Inventory and attention are on sale.

Find the Right Message: Express with Humanity
The need-to-know: reinvest in your brand values and prepare to be a force for good that provides value to people. (WARC, 2020)

Emotional intensity has always been key to memorability, but in this crisis humanity is likely to prove even more compelling. As you’re building your brand during a recession, plan out how you want the things you’re doing to be remembered post-recession.

Studies have found that campaigns which elicit an emotional reaction are more impactful than those that did not. Even negative emotional reactions were about twice as impactful as no emotional reactions at all.

A quick example from the moment we’re in right now, MarketingDive found that 56% of people want to hear about brands helping communities, and 43% found it reassuring to hear from brands they know in uncertain times. Only 15% did not want to hear from brands. You won’t get any stronger permission than that.

In this moment of enormous institutional uncertainty, people are still looking for things to believe in — and they are very willing for that to be the brands they know and love.

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