How Marketers Can Prepare for a Recession
Around the world, inflation rates are rising faster than they have in decades, yet consumer spending in the United States continues to climb. The labor market is also red-hot, with two positions open for every one person who’s unemployed, though the stock market remains volatile, having fallen almost 17% this year.
It’s a confusing economic picture, but what’s coming into sharper focus is a decided market downturn. Marketers would be well-advised to prepare in advance — ideally, six months out. That’s especially true in the B2B sector, where buying cycles are typically longer, and incorporating new tools and processes can take time.
I should know — I’ve been through a few economic upheavals. They can be rough and, without a plan, even rougher. But I’ve survived them and want to pass on what I’ve learned to my fellow marketers. Together, we can meet the moment and help our customers do the same. Here are the top lessons I learned.
Review the metrics for all your marketing programs
A recession can be scary, and it can lead to knee-jerk reactions, particularly when it comes to budgets. Before you cut anything, conduct a yield analysis. Have you started seeing diminishing returns on certain programs? Divest from those. Which have shown steady growth? Stick with the ones that continue to show ROI.
It can be tempting to slash ad spend and brand awareness campaigns, especially because their results can be hard to measure, but don’t do it — or at least don’t cut so deeply. Like retirement planning, brand management is about the future, and if you pull back on your brand investment in the short term, you’ll pay for it in the long run. Recessions don’t last forever, and you want your brand to stay intact and visible during a downturn.
In fact, strong brands like Johnson & Johnson and Colgate-Palmolive have fared better during recessions than similar consumer goods companies with lesser-known names, according to the Harvard Business Review. Scholars have also found that companies that maintained their ad spend during downturns grew their market share.
So take care when reviewing your budget. Be sure you have the data you need to make informed decisions and resist the temptation to act quickly.
Focus on customer retention
With budgets still top of mind, focusing on customer retention just makes economic sense. Acquiring new customers can cost five to 25 times more than retaining those you already have, and the higher your retention rate, the greater your profitability.
But keeping existing customers can be challenging during a recession when buyers — be they B2B or B2C — are more price-sensitive. Like you, they’re weighing what’s essential and what’s not, and they’re more willing to try new brands that may be more cost-effective. You have to show the value that your products or services add to their lives, which means landing on the essentials list.
King Arthur Baking Company did a beautiful job of this at the start of the COVID-19 pandemic when multiple factors — stay-at-home orders, layoffs, the rise of work-from-home office policies — converged to force millions indoors. Suddenly, it seemed like everyone was at home surfing the Internet, binge-watching The Great British Bake-Off, and dreaming of making the perfect sourdough loaf.
King Arthur Baking Company answered the call. A revamped, brand-driven digital experience allowed the company to deliver personalized content, online resources, and educational content. The results were nothing short of phenomenal, with site traffic increasing 260% and year-over-year e-commerce sales jumping 200%. By investing in its digital ecosystem, the company could more easily show its value through content marketing.
Again, the main takeaway here is adding value. You don’t necessarily have to carry all the weight either. Create community through a social media group or establish a customer or product advisory board. By learning from one another and developing networks, your audience can find value through their peers; you’re proving your worth just by facilitating connections and insights.
Invest in word-of-mouth advertising
Speaking of community, how about word-of-mouth (WOM) advertising? It's about getting your fans talking about you. If you’re a B2C brand, you can encourage this by making sure your product pages feature customer reviews, which you can solicit through follow-up emails after a shopper’s purchase. If you’re a B2B brand, the counterpart is something like G2 Crowd or TrustRadius.
This tactic is in line with the buying habits of millennials, who prefer to conduct their own research versus talking to a rep. Make it easy for them to find what they need on your site. (Remember the investment that King Arthur Baking Company made in its website and the dividends that yielded.) Companies have picked up on this trend and are increasingly reducing their rep headcount in favor of more self-service customer experiences.
Staff your teams strategically
Recessions almost always thin out teams. Poor performers or non-essential positions are cut, but given the current job market, those teammates will hopefully find new roles quickly. And the gig economy is flourishing, affording workers more opportunities than ever before. Indeed, by 2027, half of America’s workforce will be freelancers, according to Upwork.
The rise in freelance workers gives you a chance to collaborate with contractors and consultants who have niche skills, allowing you to stretch your people budget and to try things you haven’t been able to because you didn’t have anyone on staff with that expertise. These limited-time arrangements also mean you develop a nice collection of relationships that help each party see what the other is all about. If it’s a good fit, the relationship can become more permanent when the economy improves, and you can offer them a role.
Of course, you also have to ensure your current employees continue to feel motivated. A recession can lower morale, and you want them to remain enthusiastic about your company, brand, and their contributions to both. See if any want to stretch their wings and explore new project areas to expand their skill set. You may end up there anyway if you can’t plug the holes former teammates left behind so get a feel for who might want to take on new tasks. It’s a lot easier when the people shouldering them are excited about the opportunity given to deepen or complement their skills.
Don’t stop innovating
It’s natural to panic during a downturn, and you may be tempted to tighten your budget by letting subscriptions for some tools and platforms lapse. Or you might want to halt progress on a new addition to your martech stack.
Both mindsets are short-sighted because they don’t see the inevitable: the end of the recession. Planning for a market dip means thinking ahead to its upswing. You want to be ready to go when the market begins to correct itself. Not only will your preparedness put you ahead of the competition but, with fewer launches in a down economy, whatever you debut — a product, service, campaign, or rebrand — will be splashier. So, you want to have your tools and teams at the ready because B2B purchasing processes and implementation can take time but be oh so rewarding.
Take the example of customer data platforms (CDPs). They’re increasingly a differentiator for retailers, and I think what they offer will be even more important during a recession when up-to-date intel on your customers is critical. Their fortunes may have reversed, and they might be looking to cut costs. Can you offer a discount at the right time?
Or have your customers been largely unaffected by the recession? You won’t need to offer them lower prices then. In fact, if you do, it might be seen as an insult, especially if you’re a luxury retailer.
The point is: Can you accurately interpret and predict the data you’re compiling? Consumer habits can change not just during a recession but after too. You need the right tools in place to monitor those shifts now, not while you’re in the thick of it or afterwards. Without critical investments, there may not be an after.
Reevaluate expanding into new markets or geographies
Breaking into new territories or cultivating new audiences is expensive, time-consuming, and hard work. Remember what I said about retaining existing customers? An expansion is the opposite of that. Carefully consider your balance sheet — metrics, metrics, metrics! — staffing, and goals. If everything lines up, go forth and conquer.
Home furnishings brand Serena & Lily used Acquia CDP, for example, to learn where its high-value customers are located and used that data to inform decisions about where the company should open new stores. I’m a broken record here, but it’s worth repeating: The more information you have, the better your decision-making.
Ensure organizational alignment
Market slides can threaten any organization, and how do companies prepare for threats? They have disaster recovery and business continuity plans in place. While a recession doesn’t rise to that level, it does require the same cross-team alignment. R&D needs to understand why you’re continuing to invest in your martech, and you need to be on board with the kinds of content (and the frequency of their production) that the sales team is requesting. There are all sorts of negotiations and discussions that take place during a time like this, but what’s important is a unified organization that understands that everyone is working toward the same goals.
That’s why reviewing your numbers is so important. You can rally support with data or undercut assumptions that don’t move the needle. Make sure you have what you need to get that data because, above all, informed decision-making is what will elevate your organization.
My team and I are here to help. We organized a series of webinars that directly address how to prepare for a recession — and not just prepare, but flourish during a downturn. Find the free recordings here.