Surviving a recession and an economic downturn

A looming global recession and, on the local front, rising interest rates and growing inflation, are combining to leave marketers more than a tad concerned about what the future holds. Writing in Marketing Week recently, columnist Mark Ritson says that though economists can’t ever accurately predict when a recession will arrive, how big it will be or how long it will last, once it does arrive everything is affected in an entirely predictable way.

The silver lining for marketers, he says, is that we now have experience of how we should handle things once we are plunged into a recession, providing we accept that we aren’t living in a paradigmatically different era of marketing.

Ritson’s recession playbook outlines the following steps marketers need to take to help them navigate this challenging period. He lists them under the letters of the word “recession”.

• R stands for retaining advertising and brand building. Marketing, Ritson insists, should not be seen as a cost. History shows that those businesses that maintained advertising spend during a recession reaped the benefits in the long term.
• E stands for excess share of voice. The closest we have to a scientific law of advertising, says Ritson, is that an equilibrium exists between a brand’s share of voice and its share of market. “If a company increases its relative share of voice above its share of market, the equilibrium will eventually restore itself and market share will also grow,” he maintains.

Brands need to maintain their brand building budgets in a recession, he argues, not because of the recession itself, nor of the behaviours of consumers, but rather because competitors lose their nerve and are vulnerable because of it. “If you can keep your head and your brand budget while those around you are reducing theirs, you will earn the post-recessionary benefits.”

• C stands for “consider maintaining the shorter spend”. Conceding that this depends on the category and the effect the recession will have on it, Ritson advises the usual consumer spend if you market a consumer staple. However, if the recession is likely to affect the category it may make sense to cut back on shorter-term marketing spend if consumers are being affected. If anything is going to be cut, he says it’s the performance stuff that “should be reined in”.
• E stands for elusive balance. The secret to successfully navigating a recession is learning where to cut and where to maintain spend. Ritson argues that it is the companies that aggressively deploy a mix of defensive moves to reduce costs while investing in growth strategies that thrive post the recessionary period. Balance, he says, is key.
• The double S stands for strategic changes to targeting and to positioning. Ritson warns against simply shutting down categories considered too frivolous for the current economic times, pointing to prosecco wine brands that made a move on traditional champagne consumers during the global financial crisis. He says it’s a similar story for supermarket private labels who look to middle-class shoppers during a recession. If they can prove to have value and quality they will tend to remain a regular purchase even post the recession.

When it comes to positioning, Ritson points out that customers become more risk averse, are uncertain of the future and are keen to save. Brands that are nimble enough to respond accordingly will reap the benefits.

• I is for increasing prices. All indications are that inflation will make prices soar upwards, leading to stagflation. Ritson warns against allowing stagnant prices to make you ever more unprofitable. “Remember that when it comes to pricing, the way you present a price is significantly more important than the manner in which you set the price or the actual level of the price itself.”

His advice is to aim for fewer price increases but to explain why it is happening and when it is happening. Price promotions, he insists, make no strategic sense.

• O stands for orientation change. Ritson predicts that profitability will become a bigger issue, while at the same time purpose will see a reality check. The exception to this will be companies for whom purpose is “an ideal recession-busting strategy that will help them survive and then prosper”. His message is that while purpose has a role to play for some brands it’s not a panacea for every marketing ill.
• Finally, N stands for no more failure. During a recession there is no imperative to fail and learn. In fact, “Success will trump failure,” says Ritson.

He ends by pointing out that most recessions don’t typically exceed two years. In the meantime, “Keep your head down. Stay a student of history. And wait for the light at the end of the economic tunnel.”