After 63 consecutive quarters of economic growth, the current economic climate is very different from that to which consumers and businesses have been accustomed. It is academic as to whether we enter a recession in the technical sense of two consecutive quarters of negative growth. The key point is that the boom is over - and the impact of this downturn on consumer behaviour is already being felt.
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Economic slowdowns are inherently unpredictable, and, crucially, no two are the same. This makes it difficult, and indeed dangerous, to prescribe a strict set of rules that marketers should follow. There are, however, several broad principles that are crucial to navigating a safe passage through any slowdown.
Protect differentiation
While price will clearly be important to consumers in a slowdown, very few make decisions on price alone. Brands need to continue to give them multiple reasons to choose their products over the competition, by reminding them of the broader value they add to their everyday lives.
While consumers will not necessarily jettison the most expensive things first, they will always look to cut or trade down in the least engaging areas of their expenditure.
Continuing to invest in the brand will not only help drive engagement, differentiation and sales in the short term, it will also ensure the brand's long-term success. Now is the time to evaluate investment and cost-effectiveness, and to redirect spending where appropriate.
Such strategies should not be seen as purely defensive. Slowdowns represent a chance to introduce new consumers to your brand at a time when past loyalties and habits may be open to challenge. As Tesco grew its customer base during the 1991 recession, so Aldi and Lidl are now aggressively chasing new customers.
Look, listen and react
No two slowdowns are the same. The contributing factors tend to be different, and in any category, the market context will have moved on significantly since the last slowdown. As a result, consumers will not necessarily respond identically, so neither should brands.
Developments during a slowdown are hard to predict, so it is critical to continuously monitor what consumers are doing - not simply economic figures. By the time most such data is published, consumers have moved on. Having the agility to respond to their changing needs is key to unlocking opportunities.
Importance of empathy
It is critical in difficult times for brands to position themselves as being on the consumers' side. Anxiety is a powerful emotion, and helping consumers alleviate it offers the potential to build powerful, enduring brand connections.
Brands will need to support consumers' desires to spend wisely, rather than impeding them. It is also important to be open and upfront with them, as their antennae are particularly well-tuned during difficult times. Any attempts to mask price rises or short-change them are likely to backfire, as illustrated when Dairylea Slices, Rolo and Pringles cut pack sizes without reducing prices earlier this year.
Redefine the competitive set
During a slowdown, consumers tend to look to save in some areas, so that they can continue to spend in others.
The key implication is that brands need to understand the broader context in which they operate, encompassing not just direct competitors, but also direct and indirect substitutes from other categories. If a brand operates in a category in which consumers are prepared to buy less, look at what they are spending on instead, and how perceptions of the category and brand must be shifted in light of this.
Adopting this broader consideration ensures a more rigorous assessment
of the challenges a brand faces, and should lead to creative positioning and promotional opportunities that can help to stem falling sales. Brands such as Marks & Spencer, with its 'Dine in for £10' promotion, have capitalised on the slowdown successfully.
Plan for the recovery
Economies are cyclical and, just as a slowdown was inevitable, there will be a recovery. It is also worth bearing in mind that recessions are usually short; the average post-war recession in the US has lasted 11 months.
As such, businesses should not lose sight of their long-term objectives, and should be planning for the recovery before it has begun. If strategic and innovation planning grind to a halt, a brand will inevitably be playing catch-up when the recovery begins.
All these principles necessitate a proactive strategy. Recessions have been described as 'gales of Darwinian change'. Businesses that tackle them head on with differentiated value, innovative thinking, agility and creativity are the ones that are most likely to survive.
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