The brand-building benefits of recessions
December 3, 2019
Death, taxes, and recessions
Three-quarters of economists polled by the Wall Street Journal think there will be a recession in the U.S. by the end of 2021. Bloomberg Economics thinks there’s a 27% chance of a recession in the next twelve months.
Whether it is sooner or later, in the U.S. or Australia or globally, recessions are part of the normal business cycle. However, most brands don’t plan for them, or don’t believe planning is possible. They just wait for the economic flood to sweep away their business and pray they can hold on until the waters subside.
Those who do plan usually go the austerity route. They cut their marketing, inventory and staff. Basically they hold their breath underwater.
But in fact there are ways not only to recession-proof your brand but to come out ahead. In this article I’ll discuss the former, and describe the latter in the next article.
Don’t get caught in the middle
The first step to recession-proofing your brand is to understand how vulnerable your business is to recession. After all, not all businesses are the same. If you’re in the funeral business you probably needn’t worry. Your business might even increase during hard times, and burial arrangements and cemetery plots are often pre-paid.
But if you are in the travel, automotive or restaurant industries you are particularly susceptible to recession.
It is just as important where are you positioned within your industry. For example, recessions don’t affect all restaurants the same. The high and low ends may see little reduction, as the very affluent still have discretionary income and the middle class looks for cost-savings. It’s the mid-market restaurants that take the biggest hit.
So if your positioning is in the middle, you might promote your brand to cost-conscious diners by offering vouchers, discount gift cards around Christmas, set menus, or rewards programs. Or, you might position it on the high end by offering special events and catering.
Be the easy choice
Many businesses go bankrupt during a recession not because they don’t have customers, but because they are carrying too much debt or their operating expenses are too high. And because they can’t stop making the interest payments, and can’t get out of their lease, the only way to cut back is by eliminating those things that allow them to attract customers in the first place. This tarnishes the brand, and the customers they do have see this and go elsewhere.
Ask yourself which expenses are critical to your brand identity and which ones aren’t. Most businesses ignore the potential savings here because they don’t prioritise their brand when allocating resources. At T&G we’ve gone from an airy warehouse space in Collingwood with a grand piano to a co-working environment, with no effect on our brand. However, if we laid off our people or stopped our marketing efforts, that would have an effect.
And while it is always important to understand your customers, it is imperative during a recession. Because if you don’t understand them you will lose them. But if you do have a loyal customer base built around your brand, they will keep you afloat. You can mobilise their advocacy by showing appreciation for their loyalty and by asking for referrals.
The main thing to understand is that if you think your brand is important during normal times, it is even more important during a recession.
Hard times force consumers to make tough choices. Make your brand an easy choice by recession-proofing it!