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Business leader discussing strategy with team in conference room<\/p>\n
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Recessions impact consumers in different ways, depending on their financial circumstances. In most cases, though, economic downturns do some harm to consumers\u2019 pocketbooks. At the very least, signs of a slowing economy<\/a> lead to changes in spending habits and priorities.<\/p>\n With consumer spending making up two-thirds<\/a> of U.S. economic activity, penny-pinching makes business leaders start to worry. They know recessions can shrink corporate budgets as cash flows turn into a trickle. Like well-off consumers, larger companies may not be as hard hit. Those most at risk are firms toward the other end of the spectrum, including smaller businesses without substantial financial reserves.<\/p>\n But just because consumers are cutting back doesn\u2019t mean they aren\u2019t spending at all. Well-positioned brands and offerings can still win over customers when times are tough. Yes, it\u2019s possible to grow a business during a recession. Keep reading to find out how.<\/p>\n When people see their paychecks aren\u2019t keeping up with inflation, they can go into survival mode. Layoffs and reorganizations can prompt the same reaction. Anxiety and fear may surface, driving shifts in shopping behaviors. Someone who used to refuse to go to the dollar store might have a sudden change of heart.<\/p>\n It becomes a game of the survival of the fittest, with more consumers strategizing rather than buying impulsively. Business leaders usually find it best to adopt a like-minded approach during recessions. This isn\u2019t the time to abandon brand strategy in favor of piecemeal marketing ploys. Because what doesn\u2019t change is consumers\u2019 emotional connections with strong brands.<\/p>\n Sure, people are looking for lower prices. But they\u2019re also seeking quality and value when the road ahead seems rocky. Shoppers are more likely to reach for brands that comfort them and deliver on promises. While conventional wisdom says recessions can erode brand loyalty, it doesn\u2019t always happen if there\u2019s enough perceived value.<\/p>\n It\u2019s an approach workwear retailer Dungarees used to expand its business as technology changed shoppers\u2019 habits. The company focused on positioning the brand as the go-to destination<\/a> for hard-working, budget-minded consumers. Whether people shopped in-store or online, Dungarees reinforced its brand promise of exceptional customer experience, quality products, and value, as Mike McClung, Dungarees CEO, recently told me in an email: \u201cWhen consumers start paying closer attention to the time value of their hard-earned dollars and focus on longer-term budgets, brands of higher quality start to win the buying decisions. Buying one pair of pants that lasts twice as long for $50 wins over buying two cheaper pairs for $35.\u201d<\/p>\n The definition of growth isn\u2019t limited to acquiring additional customers. Businesses can also expand by leveraging relationships with existing clientele. Even in times of prosperity, the probability of converting current customers is substantially higher than new ones. Companies stand a 60% to 70% chance<\/a> of conversion with existing clients versus a 5% to 20% chance with brand-new customers.<\/p>\n It goes back to trust and familiarity. People who know what a brand offers see choosing it as less risky. When businesses reward their behaviors, it becomes more of a no-brainer. Take Starbucks as an example. The company\u2019s profits fell 28%<\/a> during the 2008 recession, prompting a refocus on customer-centric experiences. Although the coffee giant\u2019s focus back then was gathering feedback and streamlining operations, it\u2019s taking a parallel approach this time.<\/p>\n The company\u2019s current emphasis is on making it easier for rewards members to keep buying. This may take the form of 50% discounts on drinks for an extended weekend or extra rewards for repeat purchases. Regardless, existing customers feel as though they\u2019re getting a personalized treat. By growing client relationships, businesses can expand sales even when overall consumer spending is down.<\/p>\n The likelihood of slower sales can be enough to tempt business leaders to slash marketing budgets. However, cutting spending in this category isn\u2019t always a good idea. Nielsen research shows 10% to 35%<\/a> of brand equity is marketing. And brands that go radio silent typically lose 2% in long-term revenues every quarter. It can also take three to five years to recover those losses if companies restore marketing spend levels when conditions improve.<\/p>\n In challenging economic times, a wiser tactic is to reallocate advertising and promotion dollars to well-performing channels. Some of those channels can be brand partnerships<\/a> and sponsorships of nonprofit organizations. Companies can get more returns from partnerships that build credibility and extend reach. In the same way, sponsorships of nonprofits boost a business\u2019s visibility while giving consumers a feel-good reason to support the brand.<\/p>\n One example is Panera Bread\u2019s Day-End Dough-Nation program, through which it partners with nonprofits nationwide. Instead of throwing away unsold baked goods, Panera locations donate them to local organizations such as food banks and homeless shelters. \u201cSome other companies may sell their day-old products the next day at a discount,\u201d Udo Freyhofer, Florida cafe manager, said in a statement. \u201cWe don\u2019t. I feel good about having fresh items available for our customers while helping out those in need in our community.\u201d<\/p>\n1. Reinforce Brand Value<\/h2>\n
2. Prioritize Loyal Customers<\/h2>\n
3. Become a Brand Partner<\/h2>\n