All over the world, economies are going through very turbulent times. Just at the time the world was gradually recuperating from the devastating effect of COVID-19, it was hit with Russia’s invasion of Ukraine.
In the case of Ghana our beloved country, these macro environmental factors have had a cataclysmic impact on the economy, with the country experiencing one of its worst economic situations in a long while. The country is on the brink of an economic recession, to the extent that a Debt Exchange Programme was recently announced and touted as one of the prerequisites for securing an IMF programme to help stabilise our economy and instill confidence in the eyes of the international investor community.
For marketers and business owners, a recession is a scary time as they navigate uncertain economic conditions. The long-term sustainability and resilience of firms passes through a litmus test in a period of recession. With diminishing disposable income levels, rising unemployment rates and economic instability, what role can marketers play to continually drive value for consumers and ensure their organisations stay afloat.
For marketers, it is essential to clearly understand the evolving consumption patterns of consumers during recession order to fine-tune strategies accordingly so as to maximise and optimise their expenditure. As pointed out by Quelch & Jocz (2009), a very thorough understanding and appreciation of consumers changing psychology and habits in a period of recession will definitely offer firms and marketers the opportunities to strategise in order to survive and stay afloat.
Consumer behaviour during recessions
Consumers, being rational beings, cannot continue living their normal lives and keep their spending patterns at precession levels during recessional period. Most consumers become more price sensitive, re-categories their priorities and reduce spending. There is less brand loyalty among consumers during a recession as most of them seek for suitable alternatives or substitutes at reduced prices. Quelch & Jocz (2009) provides a basis for categorisng consumers into four segments during a period of recession based on their spending habits.
These four segments are as follows:
- Feet on the brakes Felix: Consumers in this segment are mostly lower income earners although some anxious high-income earners can be found here. These consumers tend to be the hardest hit financially – often the vulnerable class. Their approach to living with recession is cutting down on all types of spending, mostly through excluding, postponing and reducing all types of spending as well as finding less priced alternate products to purchase.
- Pained-but-patient Philippa: This segment makes up the largest segment and consist of the grater chunk of consumers whose employment status have not been negatively affected by the recession.Just as feet on the brakes Felix-like consumers, they economise in all areas, although less aggressively. These group of consumers appear to be more resilient and expectant about the long term even though they are less assured about the possibility of economic recovery in the short term. As the recession lingers on for a longer period, pained-but-patient consumers gradually start falling into the feet on the brakes segment.
- Comfortably comfort: Consumers in this segment are mostly the top 5 percent of income earners as well as those less wealthy but very confident of their financial stability. These consumers keep their spending almost at pre-recession levels albeit now a little more discriminatory about their purchases.
- Living-for-todayLionel: Consumers in this segment continue living their lives as usual, appearing oblivious of the current economic conditions, and for the most part remain unconcerned about savings. Prolonging or delaying their timelines for making major purchases is their response to the recession. Living-for-today Lionel most often than not will not change their consumption pattern, until such time that they become unemployed.
Irrespective of which of the four groups consumers belong to, they prioritise consumption by sorting products and services into four categories, namely:
- Essentials: These are products or services necessary for survival or perceived as central to consumers daily well-being. Food, shelter, clothing medical care and transportation fall into these group.
- Treats: Products and services whose immediate purchase is considered justifiable, such as eating out in one’s favourite cozy restaurants
- Postponables: Products and services needed or desired, whose purchase can be reasonably put off. Example automobiles, new furniture sets, electrical appliances, etc.
- Expendables: Products and services perceived as unnecessary or unjustifiable, such as holidays, vacation, etc.
Marketers need to fully understand two very vital points; these are: which category does their product or services fall under (essentials, treat, postponables and expendables) and which segment does the larger chunk of their profitable consumers fall. A very thorough understanding of these essential factors will be the starting point for embarking on strategies to stay afloat during a recession.
Having clearly defined the nature of their product or service offering and the consumer segments, the underlisted are some strategies marketers can employ to help their organisations stay afloat in a period of recession.
Marketing strategies to adopt during recession
- Focus on customer retention: In a period of recession, one of the key marketing strategies to embark on is to market to your existing customers. These existing/loyal customers constitute a firm’s primary and enduring revenue stream; hence, it will be a cardinal sin for marketers to lose track of them. In a period of recession, existing customers are not only an asset to any organisation, but they are also its blood. Existing customers are more willing to buy from you because they know the quality of your products and services. During recession, consumers are very critical of switching brands for fear of losing money; therefore, constantly reach out to existing customers through various offline and online channels and update them about the current marketing promotions or exclusive offers. As observed by Morley (2022), existing customers will be your source of positive word of mouth referral, a critical factor that contributes to 74 percent of purchase decisions. A recession will cause consumer spending to shift, hence, use your existing relationships with your customers to boost profitability and reduce overall marketing spend. Bear in mind that retained customers could be the reason your business survives the recession and stays afloat.
- Leverage content marketing: As the disposable income of consumers contract in periods of recession, they tend to take a relative longer time to make purchase decision. This is because consumers would want to research on the products and services they intend buying to ensure value for money. This alteration in the lead time for purchases presents opportunity for firms to engage in content marketing to assist consumers determine how to find the best solutions for their needs. Content marketing refers to a type of marketing that involves creating and sharing relevant online materials – such as videos, blogs, vlogs, and social media posts – to attract, engage and retain audience. Content marketing results in greater visibility and enhance top of mind awareness(TOMA). It establishes your business as a thought leader, boosting trust among your audience, boosting loyalty, and generating more leads. 86 percent of consumers credit branded videos for convincing them to buy whereas 72 percent of B2B marketers say content marketing increases engagement and number of leads.
Examples of content marketing activities to embark on include:
- Use of comparison chart to help consumers understand the value your product/service offers, relative to competitors. Consumers are more likely to study these comparison charts to aid their purchase decisions.
- Educational blogs that help consumers find solutions to their pain points. This can forge stronger relationships with consumers.
- Testimonials: Content that depicts users of your products testify how helpful and useful a product has been to them in time past. Such contents serve as a powerful tool to help prospective customers near the purchasing decision understand why your firm offers the best value on the market.
- Maintain a consistent share of voice and wallet: When faced with recession, one of the commonest decisions firms take is cutting down on marketing expenditure. Whereas this strategy may appear rationale, Price (2021) – a council member of Forbes, argues that this is not a smart marketing decision. He argues that with most companies reducing their marketing budget, consumers will less likely be exposed to their marketing activities. Hence, maintaining consistent share of voice means your business visibility will soar even higher. More prospective customers will now be exposed to your business and its array of products and services, a situation that has the potential to result in increased revenue and share of wallet for your organisation.
- Keep an eye on competition: analysing your competitors is one of the smartest strategies a marketer can adopt during a recession. Take a closer look at the activities being embarked on by your competitors and gauge the response of the market to these activities. For example, have they suspended a promo they were running or reduced its frequency? Does this pose an advantage for you? Has your competitor suddenly started marketing to a new customer segment? Have they reduced quantities of their product while maintaining the same price? Answers to these questions could prove vital in how you approach the market to ensure your firm stays afloat in a recession.
- Adjust KPI’s and marketing goals: Metrics and KPI’s are very essential to ascertain whether a business is on track to achieving its objectives or otherwise. Therefore, in a period of recession, firms should – as a matter of necessity – re-adjust or recalibrate their KPI’s and metrics to reflect the reality on the ground. Tracking metrics are of importance during recession. For example, firms can pay more attention to retention rate as compared to customer acquisition rate. As stated earlier, during recession, retaining your existing customers is very paramount, hence, a metric/KPI related to retention, satisfaction (e.g., NPS, CSAT Score), etc. will prove very crucial than vanity metrics. This will help in setting up realistic goals and getting rid of ineffective campaigns. During lean times, there is no room for error; so, marketers have to invest in channels and marketing initiatives that yield the highest return. The use of relevant and appropriate KPI’ and metrics will help the marketer to know whether these goals have been achieved or not.
- Consider tiered services: offering tiered pricing in a recession is another way to bring in new clients and help existing customers save money.
Tiered offers provide consumers with options to choose from depending on their budgets. Hence, a firm can make provision for services with limited features, selected features, and full option features. This can even lead to upselling to customers. At times, the introduction of free version of a product/service with minimal features can lead to the acquisition of new customers.
- Prepare for the long term:
Regardless of how long a recession lingers on, it will definitely come to an end and the economy will bounce back to normal. It is thus imperative for marketers to appreciate this, and take strategic decisions that will still let their products and services remain attractive and competitive when the recession is all over. Marketers should ensure that in their quest to stay afloat, they do not unnecessarily alter a brand’s fundamental proposition or positioning. Do not be so fixated on trying to move into lower segments. For instance, marketers catering to middle- or upper-income consumers in the pained-but-patient segment may be tempted to move down-market. This could confuse and alienate loyal customers; it could also provoke stiff resistance from competitors whose operations are geared to a low-cost strategy and who have intimate knowledge of cost-conscious customers. Inasmuch as such a move may prove beneficial in the short term, your firm will likely find themselves in a weaker position when the recession ends. The best approach is to stabilise your key customer segment. Demonstrate empathy in your actions and communications to them, and let them know you are all in this together.
Recessions are temporary although their effects can be very ravaging on organisations. However, it is in such crucial times that the role of marketers is really needed to steer the organisations to stay afloat. By adopting very innovate and customer-centric strategies, marketers can play a very instrumental role in helping their organisations survive recessions and stay afloat.
About the author
Godfrey is a Chartered Marketer and National Business Manager of Mega Lifesciences Ghana Ltd. He also lectures at Ghana School of Marketing and Simon College of Marketing. Godfrey undertakes Corporate Trainings and can be contacted through [email protected],0205220830.