What brands need to know in a recession

by Ana Lopez

CEO and co-founder of heal mediaa leading and award-winning influencer marketing company for fashion brands.

Disease, war and other factors have forced the consumer economy into freefall, leaving brands and individuals alike to reflect on a potentially bleak new year.

Now that economic growth is slowing to 1.7% in Europe and 2% in America and inflation with an ominous foreboding 8.8% worldwide (and expected to be 6.5% next year), many retailers are looking to strengthen their resources. This often means cutting back on their spending while hoping to convince consumers not to follow suit. History tells us that this has rarely been a successful strategy McDonald’s coping with the 1990s recession, proving that even staunch industrialists aren’t necessarily safe.

In the worst cases, this may be unavoidable. However, for most brands there are much smarter ways to face these challenging and uncertain times that can help them emerge stronger than before.

The mindset of the consumer

Fact: This is not the first downturn the world has faced, and it certainly won’t be the last.

This may not be the most optimistic note to begin with, but it may be the most helpful thing to keep in mind as you think about the year ahead. The salient point here is that having dealt with tough economic times in the past, we’re actually relatively well versed in how they affect consumer habits. While times certainly change, underlying consumer behavior can be surprisingly consistent, giving brands a roadmap for how to respond.

Consumers often have feelings of anxiety and loss of control during difficult financial circumstances; although these feelings affect us all to a greater or lesser extent, for the majority they are not as finite as they may sound. Interestingly, consumers are still willing to try new products, especially if their previous favorites are no longer available or are too expensive.

In 2009, John Quelch, then a professor of business administration at Harvard Business School, categorized the majority of consumers as “pained but patient” during recessions. Willing as this group to make some short-term compromises, they will continue to look for their favorite brands for supplies and will even buy more if they find a good deal. In addition, they will still occasionally buy a treat if they feel they can justify it.

This oft-documented reaction is especially evident in what is known as the lipstick index. This index, devised by Leonard Lauder, founder of the cosmetics company Estée Lauder, is the simple yet revealing discovery that sales of affordable luxury goods actually increase during times of economic hardship.

The brand response

What does this mean for brands?

1. Consumers still want to shop. As a group, consumers have generally become accustomed to a certain lifestyle, and we don’t like to give it up. If we think we can weather the storm with small compromises rather than large-scale sacrifices, then we will still look for buying opportunities.

However, what we spend our money on is becoming much more flexible. This creates a valuable (and necessary) opportunity for brands to strengthen relationships with current customers or even win new customers. As a professor of economics, Erik Modig said in a recent podcast: “Talk to your customers, or you’ll open an opportunity for your competitors to take them away from you.”

2. Marketers still have work to do. Branding has never been more critical. Retailers must walk a tightrope to generate revenue to survive without appearing mercenary or unsympathetic to their customers’ plight. Now is not the time to implement aggressive performance tactics or rely on blank billboards in empty streets. Instead, look to high-trust channels like peer-to-peer marketing and focus communication around the value proposition of your most marketable products or services. If cuts are necessary, make yours selectively, following Modig’s advice to focus on your most profitable channels rather than making blanket cuts.

3. Look at the long term. While survival will be at the top of the list for most retailers right now, I think it’s the brands that are at least keeping one eye to the future that will come out on top after the recession. Research and experience show that brands that continue to invest in their long-term goals and tactics during economic downturns are more likely to see significant returns once the recession is over – a return that brands that cut budgets and cut communication are unlikely to see. to enjoy.

In fact, this is a trend that has become all the more pronounced in the social media age, and according to the Harvard Business Review“Exactly what consumers buy may change, but their ease in navigating the options will prove sustainable, as will their willingness to switch allegiances.” The stark reality is that for brands that chose not to participate in this competition, and according to a study by McGraw-Hill during the recession in the early 1980s, companies that advertised heavily during the recession, an increase of 256% in sales compared to those who did not.

The fact is that the boom/bust cycle is as fundamental to contemporary capitalism as the free market itself. This means that once we emerge from this current “crisis period”, consumer spending is unlikely to simply return to 2019 levels; it will surpass them. And now you have to decide to what extent your brand will benefit from it.

While now may not be the time to hard sell or divert all resources to strict performance channels, it is also not the time to remain silent. Instead, brands that invest in tactics to build relationships and likes will be remembered for the right reasons once the current recession is over. Even if their competitors are forgotten.


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