Short term vs. Long term – How brands can increase their chances of surviving a looming recession
Ahh, the “Great Recession” – now known as the most famous and longest recession to hit the United Kingdom. And it only happened in 2008. Caused by the collapse of the housing market and rising energy prices, it was actually the longest recession on record since the Second World War, lasting for five financial quarters.
It didn’t just affect the UK either – it was a global crisis, and it impacted all of the G7 countries. Household names like the Royal Bank of Scotland and Lehman Brothers went bankrupt overnight and had to be bailed out by the UK government. Plus, the UK unemployment rate rose to 10%.
What did the recession mean for brands?
In terms of marketing during this time, many businesses were on the fence about whether to trust the economy, which caused advertising expenditure to drop by 13%. However, stats show that those who continued with their marketing efforts welcomed 3.5 times more brand visibility during and post recession, suggesting that, regardless of the financial climate, it’s a non-negotiable business strategy.
Of course, during a recession, consumers reevaluate their priorities and begin to reduce their spending. Drops in profits are seen across the majority of businesses, and naturally, first thoughts are to then cut costs, reduce overheads, and even postpone new investments. Marketing budgets are often slashed, because if no one is willing to buy their products, why should they spend money on promoting them? However, as another recession looms, we’ve taken a look at the brands that survived the 2008 recession to work out why they came out the other side, and what we can learn from it.
While it’s sensible to contain costs during such times, it’s also important that you examine the changing needs of your customers, and don’t neglect to keep up brand appearances. Those that really look into consumer needs and adjust their marketing budgets to suit the current climate (i.e change tactics, product offerings, etc.) are more likely to survive a recession and come out stronger than those who go all-guns-blazing when it comes to making cuts.
It’s about adapting and overcoming.
The emotional aspect for consumers
There’s a term called recession psychology that separates consumers into four different categories. It focuses on the emotional reactions of customers in response to the economic environment. As a brand looking to continue with its marketing efforts during a recession, it’s worth understanding the different types of consumers, identifying where the majority of your customers lie and then tailoring your adapted strategies to meet their needs.
These groups are:
- Slam-on-the-breaks: What it says on the tin. They’re the most vulnerable consumers who typically live in the lowest income bracket, and reduce and eliminate all kinds of spending to get through the recession.
- Pained but patient: This group are often optimistic and resilient about the long-term, but less so about the near-term, and their ability to keep up with their pre-recession standard of living. They economise in all areas like slam-on-the-breakers, but they do so less aggressively.
- Comfortably well-off: This category is lucky enough financially not to really be affected by the recession. It’s made up of the top per cent of earners, plus those who are less wealthy – like those who are comfortably retired or investors who had their money in low-risk investments or got out of the market early – and feel like their finances are confidently stable.
- Live for today: These people carry on as if nothing is wrong, and are more likely to postpone larger purchases rather than scrap them completely. It’s typically made up of younger people, particularly generation rent, who spend their money on experiences, i.e holidays, rather than physical purchases.
What did brands do with their marketing budgets?
During 2008’s recession, in the US, the entire ad market agency took a 13% nosedive. Newspaper advertising fell by 27%, radio, by 22%, magazines, by 18%, outdoor, by 11%, TV, by 5%, and online by 2%. Of course, these stats will undoubtedly be different this time around, as social media and the internet are home to a lot of brands key demographic. Still, they are interesting figures.
In the UK, some brands cut their SOV (share of voice, which is the percentage of media spending by a business compared to the total media expenditure for the service, product or category in the market), and some raised theirs.
However, for those who maintained their SOV – some were able to spend less on advertisers. Why? Because many pulled budgets and reduced ad spending, which meant SOV was cheaper than in non-recession times. We used data taken from the IPA that compared three equal-sized groups of businesses from the 2008 recession that exercised different media investment strategies. Measured by ESOV (Excess Share of Voice, which is how a brand’s SOV exceeds its share of the market), the stats prove how investing in the principle allowed them to not only get through the recession but thrive after:
- Group one: ESOV at zero or performing at maintenance levels. Note they were still advertising to some degree.
- Group two: ESOV growth levels were modest, between 0-8%.
- Group three: These businesses looked at the recession as an opportunity, and their ESOV was over 8%.
The outcome? The brands that invested in ESOV experienced “five times as many large business effects”, including pricing, share, profit, penetration, etc. and “4.5 times the annual market share growth.”
What should brands do this time around?
Many of the advertising lessons learned from the 2008 recession are still valuable:
- Continuous investment in brand advertisement is advised: Of course, this is if resources are available to do so.
- Emotive advertisement is favoured: Humanity, generosity, emotions, and humour are central pillars of recession advertising.
- Use these principles in behaviour: As a brand, ask yourself, “how can I help” and implement it into an advertising strategy.
*If* resources are available to you as a business, continuing to build brand strength is incredibly important. You may not be able to afford the conventional kinds of marketing that pre-cost of living crisis days allowed, but creative initiatives that reflect the mood of current times can be taken advantage of.
During times like this, profiting through brand advertising is not the main priority – capitalising on recovering from it is. Here are some other top tips businesses can utilise:
- Unless the short-term survival of a brand is at stake, don’t pull the plug on brand marketing.
- Don’t abandon an existing campaign unless it’s unsympathetic to the times and the mood of the customers. If the campaign is still relevant, customers may find the continuity relieving.
Why SEO and Digital PR could be your best friend
SEO probably isn’t the first thing on your to-do list as you and your business prepare for a recession but it’s an incredibly effective way to boost your company’s visibility, so when you actually come to think of it – why would you neglect it during harder times?
- Organic clicks don’t cost: If you’ve got strong SEO strategies in place, you’re more likely to maximise the super important (and technically free) clicks. Unless you’ve got the know how in-house, you’ll need to hire a decent agency to implement these steps. Still, regardless of how experienced they are, even the more eye watering quoetes are likely to work out more cost effective than other strategies in the long run.
- It provides longevity: A lot of SEO is about the long game, and regardless of how amazing your agency is, no one can guarantee immediate organic clicks. However, any good agency will be able to show the results of their previous clients, and SEO is all about taking lots of steps to work towards those results. So, if you paid for an agency just before the recession, there’s a pretty good chance you’ll still benefit from their actions long after.
- Maintain conversions: As we said before, many consumers will tighten their spending habits and set stricter priorities for themselves during uncertain periods. Without a good SEO campaign, you’re more likely to lose conversions at a faster pace. Concentrating on SEO during these times can be more important than ever when it comes to making sure your customers still *add to basket* and *check out*. The customer journey is no longer linear, and with less cash to splash, any purchases made are going to be more thought through than ever before, so a strong brand presence and a site that answers all the burning questions is more likely to convert.
- It’s amendable and measurable: It’s very easy to track the performance and results of your SEO strategy, which makes it very valuable during a recession. Your metrics can focus on keyword ranking,organic traffic numbers, SERP visibility, bounce, conversion rates and click-through. By being able to monitor these factors, it means you can identify what’s not working and tweak it accordingly.
SO spending on brand building IS important?
Um, the short answer – yes. In marketing, “going dark” in terms of your advertising efforts is not recommended. Does the phrase “out of sight, out of mind” come to mind? Eradicating all coverage and exposure of your brand in a bid to save money will probably make things feel easier in the short term, but will cause long-term damage, and increase the chance of your customer base taking their custom somewhere else. Or worse, forgetting about you completely. Infact, a study from Millward Brown found that 60% of the brands that “went dark” during the 2008 recession experienced a 24% brand use decrease post recession.
In addition, keeping up a strong, targeted and consistent marketing approach enables you to utilise what would usually be a concentrated space. That means you can work for a bigger portion of the market and a bigger share of voice to make sure your brand stands out while others reduce their spending.
Which businesses thrived thanks to their marketing efforts during the 2008 recession?
There were a number of businesses that thrived during 2008’s crash, and some of them (who are big names today) were just startups at the time. Here are 3 companies that grew throughout the economic downturn, plus how they succeeded:
Don’t be fooled into thinking “of course Netflix survived, they’re literally a billion dollar company.” because back in 2008, they weren’t the major media players that they are today.
They tuned into their consumers’ changing needs and introduced a new product around the time of the recession as a response to the collapse of the video rental stores. Three guesses as to what it was. Yep, the streaming service. But as the economic crisis was in full swing, they continued their relationships and partnerships with companies like Xbox, so people could stream through those technologies.
It was innovations such as this that allowed the company to continually grow during the recession. They were even increasing subscriptions and memberships during this time while other big companies were struggling to earn.
Netflix have also had more than one run-in with recession-like circumstances. The streaming service was founded before the dot com bubble, which meant that in the early 2000s they had to navigate the adoption of the internet. It was during these challenging times that they had to find ways to continually appeal to their audience, from expanding products with the collaborators and partnerships or introducing new products altogether.
Though times have changed and Netflix may need to rethink their strategy, as data from Google shows a 10% increase in searches for “cancel subscription” and a study by Reviews.org found 1 in 4 people actually plan on canceling their subscription in the next year.
Our client and Market Analyst, Roberto, from Admirals said: “Increased competition and the current economic climate restrict Netflix’s ability to raise prices. Therefore, if they are unable to address their fall in subscribers, it is only a matter of time before this begins to impact earnings which, in turn, could impact the amount of new content Netflix is able to add to its collection. In a worst-case scenario, this could have the knock-on effect of more subscribers leaving due to a lack of new content.”
Another one of those companies you “knew” would be fine. They provide online shopping deals and coupons, so of course people would have been more inclined to grab something on the cheap. But did you know that back in 2008, Groupon was just a startup? In fact, they actually launched in the middle of the recession, so how on earth did they manage to become such a huge success?
Contrary to many people’s belief, startup companies tend to do pretty well during such crises. Why? Because they typically spot a gap in the market that fills a need, plus they’re able to spend less money due to discount prices. Of course, Groupon had an advantage because they were offering discounts, but nevertheless, it’s a thing.
The demand for discounts is next-level during recessions because consumers are looking to cut costs in every aspect of their lives. Remember the recession psychology from earlier? Plus, discounts actually offer them ways to financially survive, which is why sites like Groupon tend to do well during times of economic instability. (Primark and Costco were also examples of such stores thriving throughout a recession.)
This is a company you may have thought wouldn’t have necessarily survived an economic crisis, due to their products and services being “unessential.” If anything, toys and amusement parks live in an industry that most people would believe would be massively impacted in a recession.
However, 2008’s money crisis saw Lego decide to expand into a global market. They focused their efforts on building revenue outside of the US while it faced economic trouble, specifically in Asia and Europe. This gamble paid off, and Lego reached an all-time high profitability-wise. Basically, they knew that expanding globally while its main market was in crisis was the right thing to do.
Really, when you strip back the jargon from all the research available and take a birds eye view look at what worked, it’s clear that companies who shifted their marketing budget into an 80% long term and 20% short term (sales) approach, survived and even thrived during and post 2008 recession.
Whilst it’s often easy to pass off brand building activities like SEO and Digital PR as “nice to haves”, brands shouldn’t forget about the long term gains that these bring. SEO is often put to one side because it takes time to see results but if you imagine the start of an SEO campaign as the tiny snowball at the bottom of the hill (check the image above!) barely noticeable, by the time it’s reached the bottom it’s gathered momentum and turned into an avalanche with an impact that is hard to stop. So, yes, your short term sales efforts will drive immediate cash but if you’ve got the funds to do it, a long term brand building approach will provide you with much more stability in the long run.