There’s a saying in business, “When times are good, you should advertise; when times are bad, you must advertise.”

I know that may sound biased coming from a marketing company, but hear me out. 

The Harvard Business Review asserts that, “companies that have bounced back most strongly from previous recessions usually did not cut their marketing spend, and in many cases actually increased it.” Further, in the specific case of the recessions in 1981-82 and 1974-75, companies that continued investing in advertising, research, and development saw more growth than their competitors that eliminated their budgets. During Reagan’s recession in the 80’s, the companies that continued advertising saw 256% more growth than their competitors.  

One of the most classic examples of this is Post and Kellogg’s during the Great Depression. Ready-to-eat cereal was new to the American market and no one was sure what the Great Depression’s impact would be on the consumer market. Post did what is natural to most businesses and aggressively cut back on their advertising budget. Kellogg’s did the opposite. They invested heavily into radio and launched a brand new product, Rice Krispies. 

Can you guess what happened?

By 1933, in the midst of the worst economic downturn in history, Kellogg’s profits had risen 30% and to this day they retain more market share than Post Holdings. 

Post slashed their advertising budget, stopped innovating, and waited for the storm to pass. Instead, opportunity passed them by and they’re locked in second place behind Kellogg’s insurmountable lead.

How about Chrysler? Before the Great Depression, Chrysler had been the third player in the US auto industry, out competed by the other big two. In 1928, Chrysler launched000 Plymouth to compete in the “low-priced” market segment dominated by Chevrolet and Ford. Introducing a fighter brand in the Depression was risky, but Plymouth became a high-volume seller for Chrysler until the late 1990’s. 

Recessions have always been viewed as challenging times, testing the resilience of both businesses and consumers. Entrepreneurs and great intrapreneurs are comfortable with risk, but risk is educated by data. You have a sense of the possible outcomes. Often, recessions make us feel uncertain. The decision to cut back expenses is driven by this uncertainty. 

History has shown a pattern in buying behaviours and how marketing strategies can help a business survive turbulent economic downturns. In this blog post, we’ll explore the different consumer segments that emerge in a recession and three ways you can reallocate marketing budget to stay afloat. 

The Who’s Who of a Recession
First, to understand how to determine your marketing strategy during an economic downturn, you need to understand the four main consumer buying behaviours that tend to emerge during a recession. 

Slam-on-the-Brakes - Categorized as the most vulnerable and hardest hit financially by the recession, these consumers reduce all of their spending by eliminating, postponing, decreasing, or substituting purchases. They’re most likely to switch to a fighter brand, put off major purchases indefinitely, and stop buying treats altogether. They are almost always lower income, but can also include higher income consumers if the recession is prolonged. 

Pained-but-Patient - These consumers are more resilient and optimistic in the face of a recession. However, they are less confident about the prospect of recovery in the immediate future. They cut spending in a similar fashion as those in the previous segment, but are less picky on where they spend on needs. This segment represents the vast majority of consumers, but their behaviours can shift if economic circumstances get worse. 

Comfortably Well-off - Most often those who are comfortably retired with fixed expenses and an income unaffected by the ebbs and flows of the marketplace, these consumers feel secure about their ability to ride out current and future bumps in the economy. They may postpone large purchases or cut some expendables, but they don’t curtail their spending to a significant degree. Bad news for businesses, this segment represents less than 5% of consumers in any given market. 

Live-for-Today - Or as I like to call them, the YOLO/FOMO crowd. These consumers carry on as usual and for the most part remain unconcerned about savings. They respond to the recession by extending their timetable on large purchases or the amount of time it will take to pay off an expense (Klarna, anyone?). This group is often found in more urban city centres, represented by young renters. They are primarily focused on experiences and consumer electronics. Their spending won’t change unless their own economic situation changes, regardless of the length of the recession. 

In prosperous times, it’s easy for business owners to forget that rising sales aren’t solely the result of clever advertising (yes, that’s honesty coming from a marketing agency) or a superior product. Consumers must have disposable income in order to feel confident enough in their financial future to embrace a lifestyle that encourages consumption. 

And as business owners, we are asking our customers to consume. 

How to Shift Your Marketing Budget in a Recession
With what you know now about the consumer segments, how can you reorganize your marketing budget to accurately reflect the changing buying behaviours of a recession? 

Cheaper to Keep Them Around - Focus on retaining your existing customer base by strengthening your brand and investing back into the customer service experience. Make it easier for your customers to continue their relationship with your brand. Invest in loyalty programs that encourage repeat business, testimonials, or reviews. 

In uncertain times, consumers seek comfort in familiar, trusted brands. They already know that your business provides them good value for the money they’ve spent. Reassuring messages that convey empathy and a sense of unity can strengthen emotional connections with your brand. 

On average, acquiring a new customer can cost 500% more than retaining an existing customer. In fact, increasing customer retention by 5% can grow profits from 25-95%. 

Don’t Change Who You Are
Avoid changing your messaging during a recession. It can be tempting to completely overhaul your existing brand campaign in the face of uncertainty, but this is a surefire way to alienate your existing customer base.

Unless your brand messaging is unsympathetic to the mood of customers, there is more value in continuity than change. Reinforce your key brand proposition and adapt strategies based on stability and your customer’s budget. Most consumers will be open to trying new products once the economy improves. If you’ve maintained strong brand messaging, you may be poised to seize opportunities ahead of your competitors (let’s call this pulling a Kellogg’s). 

For some, developing a “fighter brand” can be a way to capture market share amongst pickier consumers, without tarnishing a premium image (this is pulling a Chrysler). 

If You Can, Continue to Spend
Direct marketing campaigns and online ads tend to grow in importance during recessions. Part of what drives the cost of online marketing up to an untenable degree is competition. If your competition is no longer bidding on the same audience or the same keywords, you may find yourself with an opportunity to increase spend and drop your cost per click.

Point-of-purchase marketing - promoting price cuts or generating in-store excitement - also tends to pick up during recessions. 

In 2008, lovingly dubbed the Great Recession, marketers spent 14% more on online ads over the first three quarters of the year than they did over the same timeframe in the previous year. Continue investing in organic growth of social media and strategic spend, it will pay off. 

What does this all mean? 
Marketing during a recession is both an art and a science. It requires a deep understanding of consumer behaviour, an unwavering approach to customer experience and service, plus a commitment to maintaining brand consistency. 

While recessions are challenging, they also present opportunities for companies that adapt and continue to invest in their brand, business, and marketing efforts. As history has shown, those who hold their nerve and maintain their share of voice often emerge as leaders when the economic storm subsides. 

If planning for an economic downturn is overwhelming and you’re not sure where to start, Blueprint Agencies offers complementary marketing strategy assessments. We’re happy to schedule 30 minutes with you to determine challenges, opportunities, and where you may see potential growth in your current approach.