Are we headed for another recession? Despite a historically low unemployment rate, many economists and business pundits say there's plenty of evidence that in 2019 or 2020 the economy is likely to tank. The reasons for a potential downturn include a trade war with China, rumblings from the Federal Reserve to raise interest rates, and forecasts for slower GDP growth. What's more, the U.S. is in one of the longest economic expansions on record and therefore, some argue, ripe for a fall.
For marketers, it all points to one conclusion: Time to plan ahead, tune up the business before the next downturn, and think about how to react when a recession hits. "You have to make sure you're in fighting shape," says Allen Adamson, co-founder of Metaforce and adjunct professor of marketing at the NYU Stern School of Business. "But you also have to plan how to weather the storm."
Pinpoint Your Brand Value
In any economy, but especially during a downturn, it's all about how customers perceive a brand's value. "During an upturn, consumers are more open to new products," says Andrew Swinand, CEO of Leo Burnett. "In a downturn, people focus more on value." The upshot: Brands that truly understand the value their consumers bestow upon them are better positioned to ride out a slowdown.
That's where social listening — which provides an almost supernatural way to get inside the heads of customers and understand their real needs — comes in. With such understanding, brand managers are able to figure out how to address those needs most efficiently and enhance their value among consumers. "You must make yourself indispensable," says Ryan Kutscher, co-founder and chief creative officer at marketing firm Circus Maximus. "Your customers won't be willing to cut you out of their budget."
Kutscher points to client Justworks, which helps small business owners run their companies, to illustrate the benefits of social listening. Last year, Circus Maximus saw that the most frequently downloaded white paper on the Justworks' site was about how to foster camaraderie among work teams. Using social analytics platform Crimson Hexagon, the marketing firm took a closer look at social media conversations regarding how companies create an esprit de corps among their employees. The recurring thread in the conversation? A strong desire to build a robust corporate culture.
With that information in hand, the firm created Cards for Camaraderie, a riff on the popular Cards Against Humanity party game. It featured 42 cards, each with a different suggested and fairly self-explanatory activity for forging a communal feeling among employees, such as "Go camping" and "Create an office library." According to Kutscher, Cards for Camaraderie was one of the company's most successful CRM efforts ever.
The other side of the coin is ethnographic research. When Jill Baskin joined The Hershey Company in 2017 as CMO, she incorporated ethnographic research into its marketing strategy for the first time.
"We're in people's homes, so we can hear what they want and need," Baskin says. "That helps us pinpoint the value we bring." It also helps the brand home in on important changes that need to be made. Recently, for example, Hershey decided to create new packaging for its Twizzlers candy when ethnographic research revealed that consumers had a hard time storing the licorice sticks.
The War Room
Before a recession arrives, brands need to think about strategies for how to handle a slowdown. But that can be done in creative ways. Bryan Mattimore, co-founder of Growth Engine Innovation Agency, takes clients through what he calls "war-gaming strategy sessions" to help them prepare for downturns and other potential disruptions. Teams role play not just direct competitors, but also companies that could become new rivals.
The goal is to anticipate worst-case scenarios and create strategies to deal with them, anything from joint ventures to targeted social media campaigns.
During one such session, Mattimore says, a razor company realized that it was likely to experience continued pricing pressure from discount razor clubs. The most effective response? Bite the bullet, accept lower margins, and form its own club.
Dig for Relevant Data
Company data serves a vital purpose, both before and during a downturn. That means continually scouring sales reports for consumer trends, especially unexpected insights.
"You're looking for anomalies," Mattimore says. "By drilling down further you can make discoveries that help you to be more efficient with your marketing spend."
For example, Mattimore worked with Danaher Corp. after sales data revealed that consumers were purchasing multiple sets of its ratchets, wrenches, and sockets during a downturn in overall business. "Those products had a lifetime guarantee, so we wanted to learn why the heck they were buying more of them," he says.
What they learned from qualitative research was that consumers wanted multiple sets for a variety of uses and locations: one to keep in their car or truck, say, and another for their boat. Plus, thanks to the popularity of home improvement shows, women wanted their own sets. Finally, customers liked to give these products as gifts, especially to those moving into a new home.
Thanks to those insights, the company created several new lines of products, which were a big success.
A brand's website is another source of useful data. During the last downturn, Jeffrey Adelson-Yan, president and co-founder of marketing firm Levelwing, analyzed website visits for a client that offers automotive parts and services.
Adelson-Yan learned that repeat visits, as well as products and services being compared and purchased, were higher than before. Plus, he saw an increase in paid and organic searches by both new and repeat visitors. His conclusion: Consumers were being more diligent and deliberate in their shopping process compared to just a few years ago. "They required more touch points before making a purchase," he says.
As a result, the client rejiggered its media budget to focus on the shallow end of the sales funnel to capture increased demand. For example, the company targeted site visitors with more digital ads. "We loosened our frequency cap — say, instead of serving an average of four ads in a 24-hour period, we'd increase that to eight," he says. "We wanted to make sure we were top of mind."
Fuel Innovation Through Efficiency
During a downturn, brands find themselves in a predictable bind: They want to keep expenses down, but continue to innovate. For that reason, they need more cost- and time-efficient ways to bring new ideas to market.
One approach for manufacturers, Mattimore says, is to meet with top retail customers to toss around ideas for new products, promotions, and in-store merchandising campaigns.
Marketers come to these meetings armed with a highlight reel featuring insights from about 10 hours of focus-group sessions with shoppers. They use that information as the jumping-off point for two- to three-hour discussions about how to turn those observations into marketing actions.
Because retailers help form the ideas, they're more likely to support them. "The retailers become part of the process," he says. In fact, there's a very high rate of adoption, he adds.
For major brands with enough pull (and budget), another tactic to reduce marketing spend is to run "big-idea" sessions across agencies.
Mattimore stresses that such meetings bring together all of a brand's agencies, including PR and digital shops, to discuss the overarching themes and concepts for the year.
It's the proverbial win-win for everyone. "Agencies are happy to just focus on the execution, which is often where they make their real money," Mattimore says. "And brands can be more judicious about how they use their marketing dollars."
Feel Your Customers' Pain
"Be sensitive to your customers' struggles," says David Reibstein, a professor of marketing at the Wharton School of the University of Pennsylvania. "If you identify with them, they'll be more likely to identify with you."
Case in point: In 2009, during the depths of the Great Recession, Hyundai Motor America introduced a new "Assurance" program allowing buyers and leasers of new cars a novel guarantee. The company would buy back its vehicle up to a year after purchase, paying a maximum of $7,500 of the cost of depreciation, if a customer lost their job in that timeframe. Or customers could ask the company to take care of their car payments for 90 days while they were job hunting; Hyundai would do so without demanding the money be paid back.
The announcement included TV commercials and online ads bearing such headlines as, "We've got your back for one full year" and "Assurance: certainty in uncertain times."
The result? Hyundai outperformed other automakers in February 2009. "It set them apart as a company that put customers first, above their bottom line," Circus Maximus's Kutscher says. As the economy started to bounce back in 2011, the program was phased out.
Brands can also combine empathy with an understanding of customer behavior. When money is tight, consumers tend to make certain predictable changes in their buying habits, such as eating out less frequently and staying in more often. For food companies, that calls for promotions and campaigns that not only tap into those behavior patterns, but do so in a supportive way.
Baskin points to Kraft's increased marketing push of its recipes as a good solution. During the Great Recession, when she was a marketer at the food company, it posted more recipes using Kraft products on its website and through social media.
"In a recession, people have less money to spend — and they're a little scared," Baskin says. "You want your brand to help alleviate that anxiety." Smaller brands can team up with other companies able to provide complementary ingredients, she notes, adding, "It's one way to stretch the money."