Lucy Hinton, SVP Client Success EMEA at Flashtaking by Mediaocean
Globally, inflation has been on the rise. Recent, geopolitical events are causing the cost of living to skyrocket, with food and energy prices hitting record highs. Understandably, consumers (and subsequently businesses) are becoming more cautious with their spending and some experts are even predicting the start of another recession. With this potential new reality at our doorstep, the effective and wise marketer will be taking proactive steps now and considering new strategies to minimise exposure to risk. The truth is, no two recessions are the same, so let’s consider the best strategy to adopt today…
2022: a year like no other
Each downturn is unique in the events leading up to it. A recession in 2022 would be no different, namely with regard to the current state of the UK labour market.
In most recessions, economic output and employment decline simultaneously. Losses in revenue often force businesses to cut down on staff and higher levels of unemployment lead to reduced consumer spending. As an example, in the 2007-2009 downturn – colloquially known as ‘The Great Recession’ – the Conference Board’s U.S. Consumer Confidence Index sank in 2009 to the lowest level since tracking started in 1967. Unsurprisingly, this created challenges for marketers, both through the downturn and in the ‘recovery period’.
In 2022, in contrast with other years, the UK labour market (by many accounts) is thriving. Though employment is still below pre-pandemic levels, there are currently a record number of job vacancies on offer.
This is important to consider in the context of “recession psychology”. Ultimately, purchasing power depends on several factors – including consumers’ having disposable income, consumer confidence and the idea that people subscribe to a consumption lifestyle. This more buoyant job market gives consumers access, theoretically, to more income and subsequently puts marketers in a different position to 2007-2009.
Thankfully, it’s not all doom and gloom. Despite the unique iterations of each one, certain patterns in consumer behaviour have emerged from previous downturns. Marketers can learn from these trends and adapt strategies accordingly.
The audience may change and so might priorities
Both consumer and B2B customers fall into several categories. It’s therefore important for marketers to revaluate and understand where their audience sits in a downturn. During and post-recession, it’s key to appreciate that your demographic, and the customers which fall into each category, may shift as the change in state of play impacts organisations.
Whichever customer group they fall into, all purchasing decisions will fit into one of four categories – based on the type of product or service being provided:
- Essentials are necessary for survival or perceived as central to well-being.
- Treats are indulgences whose immediate purchase is considered justifiable.
- Postponables are needed or desired items whose purchase can be reasonably put off.
- Expendables are perceived as unnecessary or unjustifiable.
The essential products and services are the easiest to predict, as they will differ the least. However, what falls into the remaining three categories may vary hugely between customers. Throughout a downturn, it’s understandable that consumption priorities may shift. For example, what previously fell into essentials may be moved into postponables or expendables. Whereas other items may be eliminated completely.
What does this mean for marketers? Whatever the downturn looks like, it’s clear that the business landscape will change dramatically. As a result, marketers need to be innovative, proactive, and agile to stay ahead of any challenges- starting with two key factors…
C-Suite superheroes can save the day
Over the past two years, the C-Suite have gone above and beyond to keep things moving within their organisations. CMOs and CFOs in particular, have faced the most abrupt areas of change. For marketers, adapting to the needs of consumers who had their lives turned upside down has required real, rapid innovation. On the finance front, the shifting economic sands have needed faster analysis of better data than ever to manage.
It is this power pairing, of the CMO and CFO, that companies need to encourage and embrace. A strategically aligned C-suite can help drive digital transformation and expand growth opportunity. In fact, leaders of digitally advanced companies credit their greater gains to higher levels of synergy between finance and marketing teams.
A strong relationship between marketing and finance ensures company leadership is on the same page about important business objectives like demand forecasting, lead generation, and investment allocation—all of which accelerate digital transformation strategies.
Organisations which already have a deep collaboration between CMO and CFO are on the front foot. For companies which haven’t yet built those lines of collaboration, now is the perfect time.
Smart investments in technology
The second conversation that marketers need to be having is around tech investments. Growing data availability has made it possible to target consumers more precisely and reactively. Insights gained from looking at the data can help marketers to figure out what’s working well and what’s not in their media spend.
For example, forecasts from media agency Zenith, expect global advertising spend on social media to rise to $177bn in 2022 – putting it, for the first time, ahead of TV spend, which will sit at $174bn. Though social media’s influence can’t be denied, there’s a risk to seeing it as a singly, monolithic channel among media. In fact, no channel happens in a vacuum. It only takes looking at our own experiences as consumers to realise media is media, and we want the flexibility and choice to watch what we want when, where, and how.
This means that data and analysis is key to understanding the effectiveness of media spend, content and tools. In turn, this creates two clear benefits for marketers. The first, marketers can see what needs to change and where the focus should be rather than having to reduce budget. Secondly, and most critically, this sort of analysis provides the opportunity to create a flexible omnichannel strategy and approach where marketers can influence across a variety of channels and devices while still allocating more resources to channels proving most influential at the same time as not over allocating to what’s trending at the expense of proven media formats and creative.
We can’t control the state of the economy or stop the UK from heading towards a recession. But if marketers remain proactive and agile in their mindset and approach, they can move forward into this (potentially) uncertain period, knowing they’re armed with the necessary tools and practices to succeed and future-proof their plans.