Founder of 5&Vine—The marketing agency helping Challenger Brands win.
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That is what financial experts and forecasters speculate another recession is on the horizon. Whether this recession will overshadow the Great Recession of 2008-2009 has yet to be determined, but there’s no denying that the impact will be felt far and wide in the business world.
As one of the first to suffer from reduced budgets during recessions, the role of marketing will invariably shift in the coming months and years.
However, to succeed, companies should not blindly cut budgets or cut marketing spend altogether, but reevaluate and reallocate spending to more strategic areas of the business.
That’s why, as a founder of a marketing agency, I think marketers should approach everything they do with empathy in difficult times. It can appear tone-deaf if marketers continue to position their product or service in the same way as they did before the pandemic, for example.
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Discretionary vs. Essential: how marketing preparation will differ
So, how should marketers prepare for the onset of another economic downturn? First, assume that the recession is already here. It’s a tried and tested mindset: be proactive rather than reactive.
Run simulations, research how your customer will be affected by the upcoming recession, and analyze where your product or service is in their hierarchy of needs. For example, will they contact you more during difficult times, or does your product represent a discretionary expense that they are likely to cut back on?
For example, I predict that low-cost basement stores — or brands synonymous with discount items — are likely to see a boom as people look for cheaper deals on essentials like food and clothing.
Such companies expecting a boom still face challenges. They need to analyze how they spread their marketing spend, but the trick is to increase spend in the right areas, such as strategic ad placements to put messages in front of the consumer’s mind.
At the other end of the scale, companies in the luxury goods market — I’m talking about everything from jewelry and dining out to streaming services and vacations — could take a bigger hit if people tighten their wallets.
Marketing teams at these companies will face different challenges. They need to squeeze value out of every last marketing dollar. This could be alternative pricing, acquisition models, or reinvestment from paid acquisition to organic or referral.
I expect consumer subscription brands and B2B SaaS companies to amplify value with retention plays. For example, companies offer customers different plans that offer more flexibility when it comes to pausing their subscription or different packages with limited features but at a lower cost.
Netflix, for example recently announced a cheaper subscription level for viewers and will reduce the cash shortfall through ad revenue. The popular streaming service is likely to introduce a more affordable option to its audience in the hope that cheaper prices will encourage viewers to keep their Netflix subscriptions while cutting back on their rivals. With the sheer amount of streaming services on the market, I think online subscriptions will be one of the first luxuries that many consumers forego, but it’s doubtful that people will cut every streaming service out of their lives.
Another method is to analyze the churn rate to determine when a customer is likely to cancel their subscription. Near the expected exhaustion point, companies can then offer exclusive deals to continue their subscription during hard times (i.e. 12 months for the price of 8).
This approach will work especially well in B2B, where continuity and trust are key to a successful long-term relationship.
Empathy evangelists: The role of marketing as the voice of the customer
Ultimately, it’s up to marketing to determine how to communicate the above, which is just as important as deciding what proactive price changes to make in the first place. After all, marketing has a unique position within the business as the voice of the customer. As such, it is the responsibility of marketing to ensure that customer empathy is present throughout the organization.
There’s nothing worse than a customer receiving marketing content—be it emails or social media posts—that show empathy and understanding of their current situation, only to have a sales colleague respond with disconnected messages that don’t have the same empathy or compassion.
Moreover, this mindset can (and should) extend to every department. Consider using marketing to help HR train employees to engage customers with more empathy or help finance teams communicate the sensitivity of updated payment terms to repeat customers.
Practice What You Preach: The Importance of Internal Communication
What many of us also forget is how important marketing becomes in representing the brand and internal communications. Remember that your employees are people too: they share the same fears and concerns as your customers. If you’re preaching empathy and understanding to your customers, then it’s essential that you apply the same humanity in your own home.
As a CEO or leadership team, that same lens should be applied to your own people, whether through better access to company data or transparency about the company’s financial stability.
People aren’t stupid – they know that their job is intrinsically tied to the ups and downs of the company, so consider introducing more regular company-wide meetings about your catwalk, the milestones the organization needs to achieve, or if you can, implement salary adjustments that help mitigate the effects of impending inflation.
With power of attorney, it’s easier to treat customers with empathy if it’s a value that’s already embedded company-wide in how the people are treated. It’s easy to see why internal communications will only become more important in the coming months, and marketing will play a vital role here.
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