Like with the COVID pandemic, the current global and economic challenges are affecting almost everyone and everything. It presents yet another need for brands and marketers to adapt and tackle the challenge head-on.
A perfect storm has lead to an unusual combination of inflation and rising interest rates (“stagflation”), which has created a very difficult environment for consumers. Put bluntly, many people are struggling financially (and emotionally). Consumer confidence is at the lowest levels recorded (even lower than what was seen during the pandemic), and so people are pulling back on spending as there’s less disposable income.
Fewer people spending will certainly lead to drops in sales and performance across most industries.
Much to many accountant’s dismay, pulling back marketing or advertising investment during a downturn is absolutely the wrong strategy, and numerous studies have demonstrated there are long-term negative effects for brands that do this, particularly smaller and challenger brands. During the last recession, brands that continued to invest throughout eventually saw a 54% improvement in ROI.
Furthermore, stopping advertising for any period of time has a direct negative impact on sales (it seems obvious, but for those that need it, the data supports the logic). For example, brands that stopped advertising spend saw a 16% decrease in sales after 1 year, and 58% after 5 years. Note, the delayed-impact of advertising may soften the blow initially, but will eventually compound the negative impact if not remedied.
Keeping front-of-mind is key, so maintaining a presence amongst in-market and target audiences is of utmost importance, and any loss incurred from budgetary reductions will almost certainly lead to a bigger and more expensive task of trying to recoup that ground when times are good. Not only that, but trying to recover awareness and trust in a more competitive environment during any economic recovery will present other challenges.
There are levers that marketers can pull on to be more effective, and without having to lose momentum.
An obvious area that can be adapted is pricing. Marketers can review their product pricing strategies to make products either more accessible in an environment where their audience’s expenditure has changed, or to better highlight the value exchange with customers.
Communication is key. Being sensitive to the issues that many are facing, whilst conveying the value that a brand’s product provides is just as important during a recession, even if audiences are less likely to convert.
Maximising share of voice, combined with effective messaging, and owning the narrative amongst the competitor set/industry will not only support during downturns, it will help brands to reap the rewards during the inevitable recovery. The brands that don’t take the foot off the pedal will be front-of-mind when market conditions improve and audiences decide they’re ready to buy.
