Sticking to the same marketing strategy during a recession is a bad move. Taking drastic action like budget-cutting can be damaging too. So, what’s the best way to proceed?
Times are tough. But hey, we’ve all been here before. That’s why it’s wise for digital marketing teams to look back at the last financial downturn and see what lessons we can learn.
Evidence shows that knee-jerk reactions, such as cutting your ad budgets, can undermine your ability to recover quickly. This is not the way to grow future market share and profits.
Countless brands found this to be true during the ‘Credit Crunch’ of 2007-2008. This was also the case when the global pandemic first took hold in 2020.
Now, as 2022 draws to a close, we face a volatile stock market, inflation worries, and cooling consumer spending. Marketers know from experience that when the economy turns, their budgets are a tempting target for the finance director.
Digital marketing needs to be protected, however. Targeted digital campaigns can play their part in survival and recovery. No matter what, customer engagement should not be consigned to the back burner. That’s a route to brand stagnation.
How can we ensure we don’t make the same mistakes as last time? What are the guiding principles for making digital marketing work during a downturn?
Here are 6 lessons digital marketers can take from the last financial downturn:
1. Retain Your Existing Customers
This is simple but often forgotten. It's more cost-effective to retain your customers than it is to convert new ones. In fact, in digital marketing, acquiring a new customer can cost five times more than retaining an existing one.
Retention is commercially astute when your marketing budgets are stretched. The success rate of selling to existing customers is 60-70%, while the success rate of selling to a new customer is just 5-20%. And it’s well known that high customer retention rates drive up profitability.
Epsilon’s retention solution helps brands deliver one-to-one personalised digital media, at the moments when existing customers are most likely to make a purchase. This is a great way to grow a lifetime of loyalty. Data platforms like this can even help brands identify their most profitable customers.
Top tip: Don't Forget the Lapsed Customers!
The beauty of digital marketing is that you have customer data that can be used to spark fresh interest in people who have been inactive for a while. If you can reactivate them (using personalised digital content and attractive, relevant offers), you will retain market share and achieve growth through the downturn.
2. Plan for the Full Economic Cycle
Do not slash digital marketing budgets without planning for the inevitable upturn. Some brands, notably British Airways, pruned budgets so severely during the pandemic that they couldn't satisfy customer demand when the turnaround came. Interestingly, BA has now vowed to keep on marketing and innovating through this coming recession. It can’t afford to see customer engagement dwindle.
Remember that if you had a marketing approach that worked well before a recession, it will work after. Too often, brands assume that basic consumer behaviour will change permanently. In reality, people won’t be cost-conscious forever.
The drive to spend money on products and services outside of basic needs will return, often to a greater degree. High-end luxury brands tend to suffer during recessions but recover just as quickly, and perform even better, once prosperity returns.
Top tip: Never Shelve a High-Performing Campaign
From your data, you’ll know which campaigns have smashed the most KPIs. Cherish these top performers. Do not ditch them. Instead, pause, rework, and restart your best digital marketing campaigns as soon as conditions improve.
3. Attune to the Customer's Recessionary Mindset
If your brand is struggling to navigate the economic uncertainty, why not soak up consumer sentiment for guidance? When economic change impacts customer behaviour, it makes sense to align with these needs and emotions.
Rather than pivot the budget, pivot the way you interact with people who buy your stuff. Perhaps they want marketing communications with an empathetic edge? They probably want discounts. They almost certainly want loyalty rewards. They might even appreciate content marketing emails that make them smile.
Use your social channels and your consumer database to gather consumer sentiment insights.
In a recession, marketers taking a different line from the usual sell, sell, sell, do well. So be conscious of the fact that disposable income and discretionary spending are pretty tight, and tailor your campaigns and messaging accordingly. Poignant personalised marketing can be powerful when the going is tough for your fanbase.
Top tip: Tap into the Lipstick Effect
Customers are super price-sensitive in an economic downturn, but they still have aspirations and need treats.
US lipstick sales famously rose in the 2008 recession. Work on promoting a range of less costly luxury goods that will hit that sweet spot for targeted, cash-strapped customers.
4. Deliver Personalised Experiences
In past recessions, brands have made the mistake of assuming their customers are all in the same boat. They are not. Some will be financially cushioned from the downturn. Others will be struggling.
Segmentation and personalisation are very important as you reach out to these disparate sub-groups. Use your data to work out which customers will be able to pay full price and which ones need to be tempted with a money off incentive.
Cut-price hotel deals, money off gym subscriptions, two-for-one meal vouchers – these promotions can be tailored to a micro-level. If you can deliver one-to-one personalised experiences based on data knowledge, not guesswork, you will catch the mood and win sales. You will garner long-term loyalty. You can also save money by not resorting to blanket discounting.
Top tip: React in Real-Time with an AI Marketing Platform
To stretch your digital marketing budget as far as you can, it will help to harness industry-leading AI.
With the right platform, you can make intelligent decisions in milliseconds about who to reach, what to say to them, and how and when to deliver your marketing.
5. Measurement is Key to Maximising the Impact of Marketing Spend
Measuring the performance of campaigns is a good idea all the time. When budgets are super-tight, it's a no-brainer. If you can master digital media measurement, you’ll get more bang for your buck, which is so important in a downturn.
By analysing your data reports from email and PPC campaigns, you’ll be able to fine-tune activities based on insights gleaned.
Many companies will have a user-friendly data analytics dashboard in play. They will have the people skills and systems in place to measure the impact of the brand’s marketing efforts. The outcome? Better customer experiences, less marketing ‘waste’ and a higher ROI. Just when it matters most.
Top tip: Use Identity Resolution
A great way to avoid marketing waste is by using ‘identity resolution’, a process where identifiers are matched across devices and customer journey points to create a complete, privacy-compliant picture of your customers.
The first-party data you glean provides maximum reach and match for optimisation and personalisation. As a result, you can tailor every message based on what they need and want during that specific interaction.
6. Outsourcing versus insourcing
Not every company has the internal resources to adapt sophisticated digital marketing successfully and survive a recession. As tough times loom, each brand will be coping with its own unique set of challenges.
Average spend per visit may have crashed. Restaurant bookings might be down. Email click-throughs could be way too low. Cautious marketing directors might think insourcing is the most cost-effective way to address these pain points.
Others see the bigger picture and seek out specialist help. For advanced digital marketing support, such as AI modelling, it’s best to call in the experts. Often outsourcing can be the key to achieving the best results in the digital space.
Here at Epsilon, we’ve helped brands with particular issues find powerful solutions and win back customers and sales. Outsourcing is a great way to drive measurable results by harnessing external know-how and the very latest analytics systems, tech, and creative.
Top tip: Ask for the Perfect Digital Formula
The beauty of outsourcing your digital marketing is that you can start by asking: What would work best for us? Performance-oriented digital agencies will focus on key business objectives. If you want to acquire new customers, reactivate lapsed ones, retain existing customers – or all three – the experts will come up with the right digital formula for success.
Customer Insights Matter More Than Ever in an Economic Downturn
At Epsilon, we have hundreds of analysts, statisticians and consultants ready to enhance your data with ours, and pull insights across a complete range of methodologies, creating profiles, models, segments, strategies, and any other support you need.
As a marketing expert, you know that not acting, not adapting to recessionary influences, will lead to brand inertia. Think of this as an opportunity.
As some competitors dial back their spending during the turndown, advertisers who stay the course, and seek expert help, are likely to realise big benefits. This is your chance to stand out across digital channels, simply by staying in the game.
Is your brand struggling to navigate the economic uncertainty? Epsilon can help you develop an online marketing strategy to stabilise your business, and prepare for the future.