All those expert prognosticators that have been fashioning messages of doom and gloom for the economy over the past several years may be about to see the predictions come true. Of course, it may just be the best example of “say something long enough and eventually it will come true.” History has produced numerous downturns in economic performance, but predicting exactly when one will occur continues to be a considerable challenge even for the most boisterous expert soothe-sayers. With an accuracy rate lower than that of a meteorologist, the number crunching, graph analyzing, economic forecasters are about to be vindicated; maybe.
Government over-spending, rising energy costs, higher taxes, global geopolitical problems, and numerous, troubling social issues are leading consumers to lose confidence in the health of the Nation’s economy. The overall consumer index score for April 2022 dropped seven points to negative 38, with all five measures declining relative to the previous month’s performance. Inflation is reaching levels not experienced in nearly forty years which means that the most recent two generations of consumers (the most influential group of spenders since the Baby Boomer Generation) are about to encounter a totally new experience. It’s called economic recession, and some business leaders are reporting ominous indications of impending concern forming on the economic horizon.
Generally, the initial response of business leaders to an anticipated recession is to start trimming budgets, lowering future revenue forecasts and easing growth expectations. Controlling costs is always a fundamental and prudent business practice, but during a recession, cutting non-essential costs is imperative. Fixed costs, expenses associated with operations that occur whether the business is serving one customer or a thousand, are a good place to flush-out inefficiencies. Reducing common expenses that do not hamper mission-critical marketing and business activities can be a source of immediate savings.
However, many will argue that all the foreboding and darkening predictions are an example of a self-fulfilling prophecy that leads to excessive cost-cutting and may not be the best approach to surviving the storm. “This is a time for marketers to hold their nerve, continue with their investment plans, and reassure shoppers of the true value that their brands deliver. There’s enough evidence from previous downturns to show that now is not the time to hit pause but to have the courage to think long term and beyond the current depressed consumer confidence landscape,” says Joe Staton, GfK’s client strategy director.
While sellers of larger priced products like electronics, new automobiles, vacation travel, hospitality, the sports industry, and real estate are often the most vulnerable in a declining economy, it is true that industries like food, healthcare, discount retailers, security service providers and the mechanical repair sectors are often relative winners in a recessionary period. Regardless of the industry sector, being agile and having the ability to recognize opportunities to streamline operations without negatively impacting the brand’s value and reputation is essential to navigating an economic downturn successfully. Data indicates that companies that continue to deliver a top-quality customer experience are far better positioned to withstand a recession than those that don’t. For this reason, It is important to be thoughtful when yielding the cost-cutting axe as consumers begin to retreat. Cutting too deeply into areas that may impact the quality or selection of product offerings, or those that affect the customer experience, may be short sighted. Such actions might yield short-term gains but may also introduce serious long-term risks.
Refocus attention on in-house marketing efforts and continue to create organic social media content across appropriate channels and send emails to loyal customers to let them know you are with them during difficult times. Increase regular blog posts on topics that resonate with your target audience and support local charities and non-profit activities to demonstrate support for the community. Be smart, be agile and pay attention to new trends in the marketplace. Slowing financial times can cause immediate and unexpected shifts in consumer perceptions. During an economic recession, marketing spend should center around efforts to increase brand visibility and grow customer retention and acquisition.
Warren Buffett once said, “You only find out who is swimming naked when the tide goes out.” Every marketer and business leader looks smart during the good times. It’s only when we encounter economic adversity that we discover who the real geniuses are.