When a recession looms, business owners panic.
Will people stop spending freely? Will services go unwanted?
One in five tech companies worry they lack reasonable preparation for future recessions, and one in four think they won’t even survive a year-long recession. But what does ‘reasonable preparation’ really look like?
Should you scale back B2C and B2B marketing in a recession until the economy heals?
Here’s a quick answer to that last one: no.
As Henry Ford once said, ‘A man who stops advertising to save money is like a man who stops a clock to save time.’
Recessions are more common than many people think. What’s more, they’re always temporary.
Your business needs a recession-proof marketing action plan to ride out hard economic times and come out fighting.
- How tech businesses survived previous recessions
- What fintech, crypto, and other industries can learn from an economic downturn
- How to adapt recession marketing to your advantage
Let’s get started.
Are We Heading For A Recession in 2023?
Honestly, no one’s sure. However, careful preparation is still worthwhile since recessions occur when we least expect it.
Three major events in the past five years have shaken European economies:
- The COVID-19 pandemic
- The war in Ukraine
Therefore, it’s understandable that business owners worry about the fiscal future. But, look at the bigger picture.
First, the bad news. Plenty of factors suggest that a recession is imminent, albeit not immediately.
For example, The Economist warned of an ‘inevitable’ global recession for 2023 due to ongoing commodity shock from the Ukraine war.
Increasing energy costs could make these problems worse. We just don’t have a timeframe.
For as long as the conflict in Ukraine continues, the European market walks a tightrope of economic uncertainty, thanks to the continent’s dependency on Russian gas.
But hey, things might be looking up.
Further research suggests that while GDP growth worldwide will be lower this year compared to 2022, very few countries are heading into the minus territory:
Globally, inflation is shrinking, and labour markets are growing, particularly in the US. In fact, the US economy was booming ahead of 2020. That’s naturally great news for the markets, too, as the USD has never been stronger.
Even through the pandemic recession, the US held firm.
2020’s downturn was their shortest slump post-1945:
However, forecasting Europe is a little trickier. The European Commission predicts inflation will fall 2.8% across the EU over the next 12 months.
That’s all good news, but it gives us zero indication of how specific industries – such as big tech – feel the pinch. As it happens, tech is still healing from the pandemic.
Tech investors (according to NASDAQ downturns) lost over $74 trillion during 2022, with Microsoft, Meta, and crypto stocks all haemorrhaging value.
Crunchbase and Meta laid off staff en masse in response to tighter times. Google closed down its Stadia games console division and will cease production of Google Glass soon. That said, Google has a history of closing down projects if they’re no longer viable.
Does any of this action and forecasting add weight to pre-recession panic? Not really – if anything, it shows we’re planning ahead more carefully for the worst-case scenario.
With many recessions behind us (and with increasingly detailed forecasting data at our fingertips), we’re in a better position than ever to prepare for future downturns and learn from past mistakes.
What Happened In Past Recessions? What Can We Learn?
With plenty of recessions under our belts, there are lots of lessons to learn. Here are the three most important ones at glance, before we expand further below.
|Recessions are temporary||Every past recession came to an end, and global economies rebalanced to grow again|
|Never make baseless assumptions about your audience||Companies that grew during (and successfully exited) recessions listened carefully to audiences who adjusted spending habits|
|Keep your audience as your focus||Cutting marketing spend and making drastic changes affects your long-term appeal (it’s not sustainable)|
Lesson number one – recessions are temporary.
Global economies are continually growing, and while some stagnate, there is always a bounce-back effect.
When you remember that a recession isn’t necessarily a ‘game over’, planning for the rebound is easier. Sure, nobody really knows when recessions will end once they start, but historically, the status quo has always come back.
One thing all tech business owners must learn is that scaling back marketing spend in a recession leaves them scrambling to catch back up to competitors once economies heal.
Many business owners look at their marketing budgets during recessions and assume they are ripe for cutting. After all, consumer spending is likely to decrease, right?
Lesson number two – don’t make baseless assumptions about your customers.
People don’t stop spending during recessions. They adjust spending habits.
- Keep customers’ attention
- Increase confidence in your brand
- Prepare you for exiting the recession
During the 2008 recession, companies investing in marketing experienced a 17% compound growth rate by focusing more on ROI than on cutting advertising spend.
Consider the cases of fast food businesses in the US in the early 90s. Between 1990 and 1991, the US entered a recession, and McDonald’s responded by slashing its marketing. Pizza Hut, meanwhile, did the opposite.
Year on year, McDonald’s sales dropped by 28%, while Pizza Hut’s increased by 61%.
While some business owners cut spending or kept their budgets steady during previous recessions, others continued growing. That said, the knee-jerk response from most business owners during recessions is to cut, cut, cut.
Think about how much of an advantage you gain over your competitors if you buck that trend. If you’re the sole ‘investor’ in an industry full of ‘cutters,’ there’s a good chance to claim the inside edge once the recession comes to an end.
What’s more, those that grow during recessions invariably adapt their services and pricing to reflect their audience’s needs.
For example, look at Groupon, a company that started up mid-recession.
With economic strife on everyone’s minds in 2008, their user-friendly voucher service filled an immediate need.
Between 2009 and 2012, they boosted their annual revenue by 155 times:
Other companies took bolder risks by taking financial losses to emerge from the recession stronger.
Mailchimp, for one, offered a free service in 2001 with paid upgrades, building awareness, growing its brand, and eventually making a profit. Today, Mailchimp is a market leader in email marketing management.
Lesson number three – keep your audiences engaged.
Cutting marketing costs is a quick fix. Drastic action harms your brand and how customers see you in the long run.
Panicking business owners make poor choices. Instead, it’s a good opportunity to take stock, consider innovating, and focus on keeping balance with a view to growing.
9 Best Practices For Marketing In A Recession
When you don’t know when you’ll exit a recession, focus on how you’ll exit, instead.
Here are some proven marketing tips to try (instead of draining your budget through trial and error). We’ll also share some recession marketing examples to inspire you.
Summary Of Our Recession Marketing Tips
|Listen to your customers||Research consumer behaviour in a recession. Are your services viewed as essential or luxury? What changes can you make to fit their new needs?|
|Critically assess your products and services||Be willing to change pricing and functionality to fit temporary needs, remembering recessions aren’t forever.|
|Adjust (but don’t slash) your spending||Reallocate your marketing spend to avenues offering the highest ROI and spend to invest.|
|Pivot to cost-effective communication channels||Incrementally shift communication to channels such as email and social media to keep relevant and save money.|
|Keep branding consistent||Ensure your voice, visual ID, and ethos stay focused in times of crisis.|
|Plan for recovery||Focus on a long-term exit plan, not purely on short-term relief.|
|Reward customers and reduce churn||Retain loyal customers and prevent loss to rivals with VIP benefits, discounts, and added features.|
|Introduce smarter pricing||Go ‘freemium’ by offering entry-level features at zero cost, and additional services via tiers.|
|Invest in automated marketing||Schedule social media and email outreach to roll ahead for months at a time, automating lead generation and maintaining open funnels at a low cost.|
2. Critically Assess Your Products and Services
Don’t be afraid to change things up. Could you adjust your offerings if a recession was to hit tomorrow?
Once you’re clear on how your buyers behave during a given recessive period, taking stock is vital. If sales drop and you can’t cut prices, create new services – or change existing products to evolve with demand.
It’s also better to improve your current line than to make cuts. Doing so could result in further revenue decrease post-recession.
Some products and services become ‘non-essential’ during a recession in the tech industry. Unless your offerings make life more convenient when times are tight, you might have to pivot.
It’s example time.
Brick-and-mortar entertainment rental was waning by 2008, and when the markets crashed, Netflix took the emphasis away from their physical disc rental service and instead developed home streaming.
The brand took its existing product and made it more convenient and valuable to its audience (at what was likely a financial risk). As we all know, this paid off.
Conversely, consider Blockbuster, who had the chance to innovate by purchasing Netflix in the early 00s.
They turned it down.
As home broadband access grew, Netflix ate away at Blockbuster’s physical offerings, even though the brand had also pivoted to home delivery by the late 00s.
While Blockbuster obliterated late fees, they were long past relevant. The brand filed for bankruptcy in 2010 and even got delisted from the New York Stock Exchange.
- Refused an opportunity to cement their market leadership
- Watched competitors innovate for convenience
- Barely changed their model, ultimately losing their market share
3. Adjust (But Don’t Slash) Your Spending
Cutting spending when times get tight is the ultimate gut response. Instead of ‘going nuclear,’ adjust how you spend money and effort.
Slashing marketing expenditure seems reasonable initially, but there’s a big risk you’ll lose even more customers. You need a core marketing budget in place to weather the storm.
The key to surviving a recession of any size is to ‘spend to invest.’ Short-term losses can inspire panic, but the key is to exit a financial crisis more robustly and profitably than before.
For starters, try refocusing marketing efforts on content creation for long-term engagement. Online content is evergreen. It’s never going away, and the best content strategy approaches continue driving engagement for years.
Consider the long-term ROI of professional infographics and videos, too. They’re infinitely shareable and, again, evergreen.
Try and get out of that here-and-now money mindset. It’ll come back around.
When recession hits, carefully analyse where you spend most of your marketing budget and your returns over several months. Monitor in real-time, and adjust ad-hoc as the recession continues.
4. Pivot To Cost-Effective Communication Channels
Now’s the time to think about saving money. If you spend a huge chunk of your budget on flashy billboards and mass media advertising, consider looking into channels that provide a bigger ROI long-term.
Shifting to more cost-effective channels saves you initial money on marketing without cutting the budget.
Never underestimate Facebook, Instagram, and LinkedIn, even as we approach Web3. Compared to print and mass media advertising, inbound social media marketing campaigns are highly effective and affordable.
Plan ahead with a schedule and automate posts. You’ll frequently remind warmed-up customers who you are and what you do.
Alternatively, get creative with your social media strategy. Depop, the community fashion retail app, thrived in 2020 thanks to relying heavily on user-generated media for content marketing. Who better to sell to your audience than…your audience?
There’s also the ‘information overload’ approach, which, admittedly, only really works for very specific niches. PlayStation, for example, keeps its users excited by constantly sharing new game trailers and presenting highly relevant content:
Worried about taking too big a leap? Try an incremental approach. Gradually move across to digital channels and measure audience responses.
Your goal is to emerge with a scalable system ready to reduce and increase again in line with audience demands and without cutting the budget.
5. Keep Branding Consistent
Tempted to change your stripes during a recession? Forget about it.
Branding consistency helps to keep interest steady and boost sales by up to 20%. You need that boost if the economy tanks.
Effective branding breeds loyalty and confidence. Customers know who to turn to for specific services and trust you have their interests at heart, even during recessions. You want people to love your brand.
That said, you can change branding during a recession, but only in hyper-specific circumstances.
For example, it’s likely safer if your demographic changes drastically.
It’s still risky, however. Changing branding insinuates changing products, quality standards, and demographic targeting.
A consumer might wonder, ‘Is this service even for me anymore? Am I still the target audience?’
Consider AOL. While they’ve been synonymous with big tech since the 90s, their popularity waned by the mid-00s as ISP and search competition grew.
When a recession hit in 2008, Google had already taken much of its audience and ad revenue. AOL appeared outdated and old-school, as they simply weren’t evolving fast enough.
Amid a recession, however, they changed completely the wrong thing: their branding.
In 2009, the company shifted towards a ‘dot’ in its logo rather than its iconic ‘triangle,’ a move met with confusion rather than anger.
AOL focused on changing the wrong element first, leaving their audience baffled and bemused.
Learning from this, AOL instead focused on re-analysing its core audience and needs.
These later moves increased stock value, keeping the name in public consciousness up to their Yahoo merger.
Myriad tech companies flourished during recessions by changing absolutely nothing brand-wise. Tech giants such as Microsoft, Google, Apple, and Nintendo have done little to their branding in tighter times.
6. Plan For Recovery
Get out of that panicky, here-and-now mindset. People always spend money, even in times of recession.
With this in mind, it’s easy to plan for the worst and what to do when the worst ends. Think carefully about how you intend to exit a recession.
Do you exit with marketing budget cuts and on the back foot? Or, do you emerge with new sales funnels, pivoted products, and a more diverse recession marketing strategy?
Consider a six-stage approach:
- Respond ad-hoc to your audience. What do they need? Make changes and treat them as temporary pivots.
- Keep pivoting, but at the same time, develop a parallel plan to lean into what your customers need post-recession.
- Lean into your growth plan when the economy starts to heal.
- Accelerate when the economy appears to be in remission.
- Fall back on older strategies if need be, but blend with your pivots.
- Use this blended strategy to lean in either direction should a recession strike again.
Ultimately, never come to a complete halt. Listen actively, change behaviours, and remember that times will change.
Apple is one company with a healthy attitude toward planning for recovery. Now considered a tech giant, Steve Jobs’ maverick approach to innovation helped the company to disrupt an already evolving market – specifically, digital music.
Current Apple CEO Tim Cook, while perhaps not as mercurial as his predecessor, holds an attitude towards downturns that has served the company well across multiple recessions: ‘This too shall pass.’
7. Reward Customers And Reduce Churn
When times get tight, you must keep your most loyal customers as close to your brand as possible.
So, invest in keeping customers rather than relying purely on your sales funnels to create a revolving door of interest. Customer churn occurs when they regularly leave your business or stop using your services, never to return.
Reducing marketing spend seems like you’re falling back on customer loyalty, but there’s a chance you’ll lose them, too.
Use e-commerce tools to track customer behaviour and pivot towards discounts, loyalty schemes, and abandoned basket deals.
Properly designed and implemented, a loyalty scheme is a highly effective marketing tool to find and retain new customers. European businesses, for example, spend almost a fifth of their marketing budgets on loyalty program management.
Look at Amazon Prime as a great example of a loyalty scheme that reaps dividends.
While already in a great position to monopolise the customer base during a pandemic, Amazon introduced extra benefits to their memberships, including:
- Extended same-day shipping to four new US states
- Added Twitch and gaming facilities
- Provided at-home cinema releases for members only
These provided meaningful rewards to their customers and bolstered their brand loyalty even further.
8. Introduce Smarter Pricing
Value is king and queen in any recession. If your pricing is too high to justify a ‘luxury’ investment, can you adjust certain features and services for free or at a lower rate?
Evernote is a great example of a free service that rode out the 2008 recession based on clever marketing. While many of its users rely on the free version of its note-taking service, there are paid tiers available to entice loyal customers.
Instead of hard-selling its paid tiers, Evernote’s focus has always been to raise awareness. It passed 100 million users in 2014 and is still making money, despite having a relatively low conversion rate of 1% on paid tiers.
Even now, Evernote still leads with a free tier stacked with useful resources and features:
Tiers with low-rate or free options are fantastic for grabbing interest. Then, advertise paid options to users who want more from you, pricing at monthly or annual rates.
Tech and SaaS businesses thrive in recessions on this model because they keep building interest. Even if they don’t convert on every registration, their core audience is there to build upon post-recession. It’s a self-fulfilling pipeline.
9. Invest In Automated Marketing
Automated recession marketing channels take the heat off making knee-jerk responses in times of financial crisis.
The benefits just stack up:
For example, consider pre-scheduling posts to social media and portals to ensure you maintain brand awareness.
Automated email marketing, for example, is affordable and engaging. In a recession, it’s also a viable way to show you’re still in business, particularly as European email open rates reach as high as 38.33%.
Don’t forget to pivot towards loyalty bonuses. Use customer data to create targeted offers and discounts, thus providing extra value.
Marketing automation saves time, boosts revenue, and retains interest. There’s no need to reduce marketing investment in a recession – simply pivot more towards convenience. Save yourself time, not necessarily money.
However, even now, only 45% of CMOs want to invest in this marketing tech. Be part of that minority.
Recessions Don’t Always Demand Concessions
Recessions hit us all hard. For the business owner, it’s easy to worry about the ship sinking unless you make a few cuts.
Cutting your marketing strategy in a recession harms your long-term profitability. Instead, in times of crisis, look at your services and make a few (potentially temporary) changes.
If that means changing how you market your products or even offering some services for free – so be it.
Marketing in a recession effectively means you’ll stride out of that economic crisis confident and profitable instead of drifting into obsolescence, panicking all the while.
Given that no one really knows when the next recession’s coming, now’s a good time to boost your marketing moxie.
Is digital marketing recession-proof? Yes, but you’ll still need to take the first steps to ensure you leave a crisis as profitable as possible.
Remember, no matter the financial situation, you can reach out for advice anytime.