Renee Prejean-Motanky

Marketing When the Economy Sucks

In Business Strategies, marketing on August 2, 2009 at 2:15 am
american_economy
Image by digital_monkeyvia Flickr

According to John A. Quelch and Katherine E. Jocz, no two recessions are exactly alike!  And for this reason, marketers find themsellves in poorly charted waters every time a recession rolls around.

Fear not!  They also say; “Guidance is available.”  The two have studied marketingsuccesses by Smucker, Proctor & Gamble, Anheuser-Busch… to name a few and they’ve studied failures throughout past recessions.  In fact, they’ve identified patterns in consumer and company behavior that strongly affect performance. 

Understanding consumers’ changing psychology and habits, they argue, will enable firms to hone their strategies so they can both survive the  downturn and prosper afterwards.

Consumers in a recession can be divided into four groups:

  1. The slam-on-the brakes segment, which feels the hardest hit, reduces all types of spending.
  2. Pained-but-patient consumers, who constitute the largest segment, also economize in every area, though less aggressively.
  3. Comfortablywell-off individuals consume at near pre-recession levels, but they become a little more selective and less conspicuous with their purchases.
  4. The final group, Live-for-today consumers, pretty much, carry on as usual, responding to the recession mainly by extending their timetables for making major purchases.

People may switch segments if their economic situations change for the worse.  All groups prioritize consumption by sorting products and services into the following categories:

  • Essentials (central to survival or well-being)
  • Treats (justifiable)
  • Postponables (can be put off)
  • Expendables (unnecessary or unjustifiable.)

As firms manage their marketing investments, they must simultaneously assess their brands’ opportunities, allocate resources for the long-term and balance their budgets.  Many make the mistake of cutting costs indiscriminately, which can jeopardize long-term performance.  Instead firms should streamline their production portfolios, improve the affordability of their offerings and bolster customer trust.

 

Source:  Harvard Business Review, April 1, 2009

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  1. Marketers always suggest advertising when the market is tense like a recession. I think companies have to be extremely careful and meticulous when in a recession. Every move has to be strategic.

    • Thank you for your comment! I agree that it’s important to be strategic.

      Successful companies don’t abandon their marketing strategies in a recession, the adapt them! This is not the time to cut advertising. It is well documented that brands that increase advertising during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times. Uncertain consumers need the reassurance of known brands. Brands with deep pockets may be able to negotiate favorable advertising rates and lock them in for several years. If you must cut marketing spending, try to maintain frequency of advertisements by shifting from 30-second to 15-second spots or by substituting radio for tv advertising, or try using direct marketing, which gives more immediate sales impact.

      There’s also the Internet and Web 2.0 technology. Today’s marketing landscape offers many more ways to communicate with consumers.

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