How to protect (and promote) your brand during a recession: 4 kinds of customers

In previous recessions and other times of strife like wars, the advice has been to spend more on advertising. Time was kind to those who did; their brands tended to bounce back when the bad times were over. But that was back when press ads, TV, posters and radio were the main media channels. Now, protecting your e-commerce brand means being omnipresent on marketplaces like Amazon, eBay and Wayfair, as well as social media.

Keep your share of the market

Research shows that there is some truth in the old adage ‘when times are good, you should advertise. When times are bad, you must advertise.’ The reason? Businesses that cut back on advertising to reduce costs lose their greatest assets: audiences.

A study by Millward Brown following the 2008 recession showed that 60% of brands that went ‘dark’ saw brand use and brand image decrease by 24% and 28% respectively.

Tempting as it is, reducing marketing budget now could cost more in the long run. It can cost five times more to acquire a new customer than to keep an old one. Meanwhile, research shows that increasing customer retention rates by 5% increases profit by 25-95%.

Less advertising competition = greater customer impact

McGraw-Hill Research’s Laboratory of Advertising Performance’s study of 600 companies’ advertising strategies and sales during the 1980s economic crisis showed that businesses that maintained or increased their marketing expenditure during the recession enjoyed considerably higher sales after the economy recovered. Businesses that advertised aggressively during the recession had sales 256% higher than those that ceased advertising.

The best businesses push their brands during economic downturns while others cut their advertising budgets. Many businesses reduce their ad spend, making it easier for those still pushing their brand to dominate the market.

The volume of brands scaling back advertising spend can bring down the floor price of pay per click (PPC) ads, particularly on Amazon and Google. Fewer competitors will mean you get more bang for your buck. Similarly, an increase in ad spend can have a greater impact within your market if there's budget available. 

Understanding your customers during financial crises 

Analyzing customer behavior during previous recessions is a good way to see how you can ensure your brand continues to appeal even when customer budgets are tight. Harvard Business School professors John Quelch and Katherine Jocz identified four types of consumers that consistently arise in times of financial difficulty.

1. Slam-on-the-brakes consumers

Low-paid and unemployed consumers with little or no disposable income will meet their financial obligations by cutting spending in all areas where possible. 

These customers are drawn to brands that focus on value. You can appeal to this segment by focusing brand messaging on the long-term savings your products create and reassuring customers that they're receiving excellent value for money for products that are essential to daily living.  

2. Pained but patient consumers

People who are optimistic about the future of their personal finances but concerned about maintaining their standards of living in the short term will reduce spending in all areas (albeit less aggressively compared with slam-on-the-brakes consumers). 

These customers are looking for the best deals available and are willing to do extra research to get them. You can attract this segment by showing your brand offers excellent quality at reasonable prices.

They also occasionally buy small luxury items. In previous recessions, data showed that customers preferred to buy multiple small treats over making a larger purchase. Try positioning your products as modest luxury items: something customers can indulge in without feeling excessive or extravagant. 

3. Comfortably ‘well-off’ consumers

Financially stable consumers who feel confident about their ability to ride out any economic difficulties will likely not change their spending, although they may be less conspicuous in making expensive purchases. 

To appeal to this segment, focus on promoting the superior quality of your products. Customers in this segment are easier to retain, but your brand still needs to maintain a strong market presence to minimize their tendency to try something new.

4. Live-for-today consumers

People who continue spending as usual regardless of income and changes in the economy will be reluctant to view their favorite products as expendable purchases, but they may delay larger purchases.

This segment is unlikely to deviate from their preferred brands unless offered special deals. You can attract these customers by offering subscription services or limited-time deals. They also respond positively to messaging focused on aspirational living and unique experiences.

Now is not the time to retreat

History shows that bucking the trend and investing more now can help create healthier long-term profits. It may seem easy to cut back on marketing spend ahead of a looming recession, but research shows that while everyone else zigs, it’s time to zag.

Make sure that your customers have the same emotional experience with your products when they shop on marketplaces or social media as they do when shopping online or in store. Invest in the creative and advertising that these platforms offer, and you’ll be in the best position to guarantee your brand’s continued success during the upcoming recession and beyond.