In early October, the Conference Board indicated that there was a 96% chance that the US would enter a recession within the next 12 months. By adopting the right approach, you can help your business thrive during and after a recession.
It’s hard for any company to go through a recession, but most companies are going through just that. Not just once, but probably many times. Authors John Kerch and Catherine Jost have studied depression since the 1970s. In an article published in harvard business reviewthey not only observed that each recession was different from the others, but also suggested that there are ways to manipulate and market your company until some degree of economic normalcy is restored.
The author addressed the normal behavior of a customer or client during a recession.
“Of course, during a recession, consumers set tougher priorities and spend less. When sales start to fall, businesses typically cut costs, lower prices and postpone new investments. Spending ….is often cut across the board, but such indiscriminate cost cutting is wrong.”
Instead of slashing your marketing spend overall, consider slashing your costs to save money. Try to distinguish between necessary marketing expenses and wasted or unproductive expenses.
During the growth period, business and personal spending is based on disposable income from a consumer perspective and overall profitability from a business perspective. If there is trust, that money will be spent on the purchase. If you are not confident, your expenses will be reduced.
Quelch and Jost take the unique position of classifying customers/clients in four ways. Hit the brakes, be patient with pain, be comfortably wealthy and live in today’s category. While most of their research focuses on individual consumers, business-to-business (B2B) marketing Easily adaptable within a category.
As you review each of these categories, take a step back and think about the specific customers that might fit into each segment. Hopefully, you’ll be surprised at how useful this approach can be in segmenting people and businesses that react this way during a recession. , these categories can be viewed as varying degrees of coordination.
Press the brake pedal: This group or category feels most affected during a recession. “This group cuts spending of all kinds by eliminating, postponing, reducing, or substituting purchases.”
Painful but patient: This market segment “tends to be resilient and optimistic in the long run, but less confident about the prospects for near-term recovery.. less aggressive, but saving in all areas” They make up the largest segment……..As the news gets worse, painful but patient consumers are increasingly moving into the brake segment slum.”
Comfortably Wealthy: This category is far more resilient to recessions. They represent B2B customers or recession-proof consumers. They typically represent the top income brackets of consumers and represent the top performing businesses.
Live for today: The segment has “responded to the recession primarily by extending the schedule for large purchases.” They are most likely not to change their behavior unless a major event directly affects them.
In proposing solutions to solve these various categories, Quelch and Jost suggest: All companies are increasingly competing on price. They go on to suggest that “many marketers should increase the frequency and depth of temporary price promotions.” Affordability can be improved by lowering prices, giving customers credit, or layaway plans. It’s an effective tactic, and it helps service industries such as cable and mobile operators to lower initial consumer adoption costs and cut penalties.”
In summary, consider how beneficial it would be to analyze some of your top customers to see which of these categories they fall into. If you succeed in placing them, you and your business may be able to prevent business loss by acting proactively.