Ritson’s recession playbook: 9 steps marketers should take to survive the dark times
With the tasteless timing of a drunk hitting on a widow at her husband’s funeral, marketers are in Cannes this week as the big grey clouds of recession barrel overhead.
While our economy constricts and inflation escalates, our best and brightest are on the French Riviera listening to Paris Hilton and Gary V explain what the NFT revolution means for brands.
Further down Le Croisette, middle aged men in faded black T-shirts angrily proclaim, “we put up with too much shit from people that don’t love creativity” while strikes, budget cuts and supply shortages take their toll.
A recession is a peculiar thing. No economist can ever accurately predict when one will arrive, how big it will be, or how long it will last. But once it begins everything is affected in an entirely predictable way. The only silver lining for marketers is that while we have no clue when the recessionary curtain will drop across our businesses, we know from experience how we should handle things once we are plunged into darkness. Provided you accept that we aren’t living in a paradigmatically different era of marketing in which history means nothing, there is a decent playbook that spells out the correct approach for the tricky months ahead.
R is for retaining the long
There is an idiot move at the top of the agenda of all those who do not understand history. They see marketing as a cost. Advertising as a luxury. And brand building as the ultimate vanity. Ergo, when times get tough it’s obvious that the first thing to go is the esoteric brand budget and not performance marketing with the proven and immediate ROI.
It turns out that is exactly the wrong move. In case studies going back a century the story is always the same. The companies that maintained ad spend, or even increased it, during a recession saw little advantage during the hard months of the squeeze. But the minute the green shoots of growth appeared, their growth was spectacularly superior versus competitors that cut back during the recession. You maintain the long of it because its impact is delayed but substantial and it will kick in exactly when you need it as the recession ends.
E is for excess share of voice (ESOV)
The reason the long of it not only works through a recession but works harder for your brand during a recession is ESOV. You have to ignore all the blowhards on marketing twitter that critique ESOV for this reason or that. It is the closest we have to a scientific law of advertising and it says an equilibrium exists between a brand’s share of voice and its share of market.
If a company increases its relative share of voice above it share of market, the equilibrium will eventually restore itself and market share will also grow.
Fuck failure, it’s really not welcome. It’s certainly not essential to success. And it’s especially unpopular when recession makes it a potentially fatal experience not a teachable moment.
In a recession this happens differently. Many, perhaps most, of your competitors will cut back on their advertising spend. Especially the brand building stuff. If your category cuts half its ad spend and you maintain your ad spend, for example, you get a massive boost in your ESOV simply because everyone else is investing relatively less. And if multiple industries cut back their spending, as they usually do in a recession, the cost of media often drops ensuring your relatively big ad spend is now stretching to even more media value.
Summarising a century of data, the reason brands should maintain their brand building budgets in a recession is not because of the recession itself, nor the behaviours of consumers. It’s because your competitors lose their nerve and are vulnerable because of it. If you can keep your head and your brand budget while those around you are reducing theirs, you will earn the post-recessionary benefits.
C is for consider maintaining the shorter spend too
This one is a little less definitive because it will depend on your category and the impact the recession will have on it.
If you market a consumer staple then it should be performance spend as usual. But if you work in an area which will be hit by recessionary head winds – luxury retail, restaurants, etc – then it may make sense to cut back on your shorter-term marketing spend while the recession impacts your target customers. Note, this is the reverse of traditional corporate logic which maintains short marketing spend at the expense of longer-term branding. If you really are going to cut anything, and you may want to maintain it all, it’s the performance stuff that should be reined in.
E is for the elusive balance
The greatest single analysis of the recession is Nitin Nohria’s assessment of the global financial crisis and the 9% of companies that came out of that recession in better shape than when they went in.
The secret? Smart companies learn where to cut and where to maintain their spend as the recession blows in. Firms that cut back dramatically on everything performed the worst in Nohria’s analysis. It was companies that deployed a mix of defensive moves to reduce costs while offensively investing in growth strategies that were most likely to not only survive but thrive in the recessionary and post-recessionary months ahead.
“These companies,” Nohria concluded, “reduce costs selectively by focusing more on operational efficiency than their rivals do, even as they invest relatively comprehensively in the future by spending on marketing, R&D, and new assets.”
Ignore the dumb debate from those suggesting you can spend your way out of a recession or the equally dumb counter that companies simply cannot afford to maintain their ad budgets because of cash flow. There is a more nuanced approach that can allow companies to cut the operational fat while building the branding heft. Balance is the key.
S is for strategic changes to targeting
It’s an over-simplification to suggest a recession simply shuts down some categories because they are too frivolous for the serious economic times at hand. I remember working in the champagne industry during the global financial crisis and watching, with growing admiration, as several big prosecco brands saw economic constriction as a brilliant opportunity to make a move on customers and consumers that – until then – had been firmly and exclusively located in champagne territory.
It’s a similar story for the supermarket private labels that wait for the winter of recession to arrive before entering the baskets of the middle-class shoppers. And when the spring and summer of recovery arrive and their presence, value and quality have been proven they remain a regular purchase.
There are usually tiers within most established markets. As recession hits don’t mourn the loss of some of your traditional customers trading down and away from you. Look up to the premium customers who may well be in the elevator heading down to replace them. If you, ahem, run an online training programme then you are likely to lose some of the people who would otherwise have invested in themselves during better economic times. But there are suddenly 500 multi-nationals that cannot justify flying their teams to a five-star hotel for a four-day training course with three course meals. A dozen big companies saving 90% of their training budget on a superior solution will more than fill the gap. And they will probably stick around.
S is also for strategic changes to positioning
Hand in hand with a readjustment in targeting comes a review of product positioning. Your product or service might be the same, and the competitors just as they were before, but your customer has changed. They are now risk averse, keen to save, uncertain of the near future, tentative. These changes mean opportunity for those companies nimble enough to recognise and respond accordingly to market moves.
Ryan Reynolds, as usual, is already all over this approach. Get past the drop-dead handsomeness and Monty Python absurdist humour and Reynolds efforts with Maximum Effort and MNTN are in the vanguard of modern advertising. No surprise then that Reynolds is already positioning his Mint Mobile brand to recession hit consumers and against apparently recession ignorant competitors. His target consumer might remain the same but his message to those customers is very different. Mint gets it. Your phone company doesn’t. We are here for you.
I is for increasing prices
Recessions and inflation are usually seen as polar opposites of each other. The former slows the economy while the latter speeds things up and sends prices sky rocketing. We appear to be heading for a particularly strange period in which both forces will be at play at the same time. Sometimes called “stagflation”, it signals a more serious and enduring period of consumer pain.
It also means a particular pressure on prices. With…