How to Ensure Your Brand Survives the Tsunami of Recession
We’ve been here before. But never quite like this.
The global pandemic has exacted an immense personal toll and continues to cut an almost unfathomable swath of lives lost, jobs eliminated, families faced with fear and insecurity as to what is to come. The economic impact is being felt across all sectors and strata of society with those in the middle and working class, those small business owners, bearing the brunt of crippling unemployment and economic lockdown. All the while, the bills keep piling up. Running in parallel to this upheaval are the important questions regarding what will happen next? For brands and businesses, there are also many unknowns. Among them are the short and long-term actions to take in the face of a tsunami of economic crisis and impending recession. We have been shaken. The aftershocks and tremors are only just beginning. The waters are pulling back from the shore, and it is only a matter of time before the full force of the waves reach us.
What can be done to protect, preserve, and recession-proof brands for what is likely to come? The lessons of history can serve us in these moments to help inform the path ahead. So, we decided to take a look back.
Warning Signs. The Writing Was Already on the Wall (Street).
It has been just over a decade since the 2008 financial crisis hit and we endured our last recession. In late 2018 and early 2019 Wall Street and corporate executives were already bracing for another possible recession. In May 2019, a Harvard Business Review article pointed to, “the warning signs of ballooning corporate debt,” lower than average “government yields …. negative returns on the S&P 500 and lower GDP growth in China”[1] as a foreboding of rough times ahead. In a 2019 Duke University/CFO Global Business Outlook survey of more than 1,500 global CFOs, two-thirds said they expected the US economy to enter a recession by the third quarter of 2020.[2]
Although some companies may have been prescient enough to begin bracing for a recession, it is safe to assume that most were not fully prepared for what is happening now. Much analysis was done after the 2008 recession. Businesses wanted to better understand the impact and identify the hallmarks of those who survived and, in some instances, came out even stronger. A look at US public companies with >$50 million in annual sales during the last three economic downturns found that ¾ experienced revenue growth declines but about 14% were able to accelerate growth and increase profitability.[3] In our review of the available data, studies, reports and articles, we found themes which crossed over sectors and industries. The most successful and resilient businesses share applicable and common practices.
It feels intuitive and, perhaps, terribly obvious that some measure of cost cutting occurred. Many resilient companies got out in front of the crisis early with reductions in operating costs. However, it didn’t end there. Much more was done to combat the crisis.
The most resilient companies and brands did these 3 things:
1 - Foster Loyalty in a Time of Uncertainty
Head to a Designated Meet Up Point: Get a Headcount. Make Sure Your People are With You.
Let’s face it. You are going to lose spend from your most loyal customers.
However, the resilient companies focused on expanding their base of loyal customers. They looked for the headroom – the market share you don’t have minus the market share you can’t get. To that end, they shifted their targeting efforts and went more aggressively after Switchers – those who are neither loyal to you nor to your competitors. Now is the time to re-consider your marketing plan and acquisition strategy as well as your insights efforts. Move away from a pre-occupation with “who is shopping in our stores or buying our products and how satisfied are they” to “why” are they shopping in our store or buying our brand and what/when and for what reasons or needs are they shopping and buying from our competitors.[4]
A not-so-subtle nuance at play for us during our current pandemic crisis is access and distribution. Supply chains are shaky and outages due to shifting consumption away-from-home to at-home have been punctuated by stock-up behavior and empty shelves. The tried and true go-to brands may not be available to us, limiting selection to what is immediately accessible. Further, we are seeing more price and deal shopping as job and income insecurity increases. Deals, discounts, value-brands and store brands are winning. These scenarios have created a disruption in normal, pre-Covid consumer behavior forcing trial of new products and services and, thus, a huge moment of forced reappraisal.
Will your loyal customers come back after purchasing and using your competition for weeks and months? Will those who switched to your brand stay with you for the long haul? What will the new normal look like? While we do not have a crystal ball to fully predict these outcomes, we can say that consumers do hold an affinity for brands and services that are there for them when they need it most. And, brands that demonstrate this in little and big ways can hold an upper hand. This can look like the brand that IS in-stock and available during a weekly stock-up trip to my favorite store. It can also look like:
eliminating or reducing payments and interest
avoiding and voiding penalties and late fees
offering free and/or expediated shipping
giving bonus loyalty points, miles and rewards
extending time-limited offers, payment due dates and expiration limits to use aforementioned perks and points
buy-one and give-one promotion where customers can gift with others more easily
give-backs and donations to the community, non-profits, healthcare workers, or other more deserving and vulnerable groups
gift with purchase that recognizes what is most needed right now (e.g. free protective masks or hand sanitizer)
communication priority shifts away from hard sell to useful information and help offered and/or demonstrating your attention to protect your work force, job security, health & safety, etc.
signaling transparency and authenticity in messaging vs. stiff and technical corporate speak
Of course, price and availability are key and none of the above measures can fully offset the challenge of distribution or pricing yourself out of the market. That said, building these tactics into your overall marketing plan and response can go a long way to endearing current customers and triers to your brand.
2 - Deepen Partner Relationships
Grab Only Your Essentials.
Take a lesson from consumers. Buy in bulk and save. Resilient brands take a hard look at their current set of vendors, agency partners, consultants, and external suppliers.
By consolidating essential services and support to fewer partners there is the opportunity for savings. But, beyond these practical economies of scale and increased efficiencies there is also the less tangible benefit of an already established relationship.
Those who know your brand and business well and those whom you know well can ramp up more quickly, dive in more deeply and do more, faster and better. They have the knowledge and intuition to be more proactive in their service of your business. There is less time and effort to get them up-to-speed and, instead, that time and effort can be put to better use on helping your brand get smarter, take action and make the necessary adjustments to keep afloat and growing. To this end, consider focusing on deepening your collaborations versus expanding your one-off engagements. Do you want the valuable time of your team spent on fielding new business and sales calls or onboarding new suppliers? Or would you rather they focus on other areas? The exception to this, of course, is if a critical activity or response cannot be effectively managed through your current partners.
Ultimately, taking a critical look at your current partners and vendors also requires you to take a critical look at yourself. What’s missing in your arsenal and where are your own capability gaps? Downturns can reveal vulnerabilities not noticed in good times. If you do spot an outage here, it may be incumbent upon you to bring in an external expert to bolster your team in times of upheaval. Seize the opportunity to make those necessary changes for future success.
3 - Don’t Neglect the Growth Possibilities
Head to Higher Ground by Balancing Cost Cutting with Innovation Investment.
While resilient companies pursued efficiencies in operations, the most important driver in their success was revenue growth. It accounted for nearly 50% of shareholder return.[5] Coming out of the 2008 recession, winners were not the ones who made the fastest or deepest cuts or the ones who boldly invested more than their rivals.[6] No. Instead, the winners found a balance in cutting costs to survive and investing to grow. Innovation and creativity matter. A meta-analysis of marketing spend during a recession confirms that marketing can be significantly more important to a brand during a recession than at any other time.[7]
But, before we get into the role of innovation any further, just a note about cost cutting. Many experts agree that a hack and slash approach to cutting costs should be avoided. Resilient companies went after “bad costs” or the things that customers don’t value. The companies also exhibited restraint in going after “good costs” or the items and services that customers do value. How do you know which is which? Ask your customers. Knowing what is important to them and what they value is a critical component of knowing where to trim and where to hold steady. And, speaking of balance. What about the practical matter of balancing your portfolio focus and distribution across channels? For consumer goods manufacturers, consider how a shift of more volume to club channel and/or dollar and discount stores could help offset rougher seas in traditional grocery. These channels were bigger winners in the last recession.[8]
Now, back to innovation. Brands must remain engaged in this effort. Now is not the time let your innovation boat get wrecked by ceasing to work on trend spotting, consumer needs and white space identification, product development and experimentation. In fact, just the opposite is true. Avoid pulling back as you await some declaration that things are back to normal and all is well. Our world, the marketplace, your customers are in a state of flux and dynamic, unprecedented change. Needs are evolving and new needs and consumer jobs to be done are emerging quickly.
As insights professionals and marketers, we must dive in in order to learn and understand these shifting dynamics. Knowledge, insight and empathy are our weapons in the battle of recession-proofing. So, grab your gear and get to that higher ground. Short of sheltering in your proverbial place, what other choice do you have?
What’s coming next
To help our clients navigate their business to a new ‘normal,’ we are following everyday Americans, listening and sharing their stories as they progress through this profound transformation. Navigating to the New Normal is an ongoing, multi-generational, cross-geographical, nationally-representative quantitative and qualitative research study. Chapters 1 and 2 focused on Maslow’s Hierarchy of Needs and the emotional impact of the pandemic.
