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Marketing during a recession

Should you continue to promote your business during a recession? In most cases, it is wise to carry on with your marketing plan with modifications that reflect the changing economic conditions. History and research shows that businesses that cut back on their marketing during slumps tend to fall short in regaining their customers.

Canadian Spending Habits

Canadians still spend money during economic downturns. In fact, many businesses manage to increase their sales, as well as their client-base.

Several factors determine whether sales increase or decrease, including:

• Type of business
• Characteristics of clientele (demographics)
• Originality
• Quality of service
• Economic situation of a given community

Some consumers refrain from purchasing luxury items during a recession, but they continue to buy essential items such as clothes and food. Some consumers, whether through choice or necessity, stick to such basics throughout their lives, not just in economic downturns.

Economic stimulus packages and low interest rates may also encourage spending during a recession. So, while people who have lost their jobs or have seen their hours cut back may be spending less, other people who still have stable jobs may be spending just as much or more than they would have previously.

The bottom line is that you should think about your clientele and your client's recession psychology.

First of all, consumers classify their spending into prioritized groups:

• Necessities
• Reasonable comforts
• "Nice to have" items
• Luxuries

Secondly, each consumer reacts differently to a recession. Consumers may have plenty of disposable income or very little, they perceive the economic situation differently. Philosophies range as do behaviours:

• Spending more - taking advantage of tax credits or low interest rates
• Spending as much as before - live for today, see no need to cut back
• Spending wisely - look for value, buy cheaper brands, compare stores
• Spending little - buy some comfort items, but certainly hold off on big ticket items
• Spending not - purchase pure essentials only

Focusing your marketing efforts

If you feel a need to cut back on marketing, think of focusing your efforts instead. Your efforts should support your strong brands, customer loyalty and competitive prices.

• Instead of being everything to everyone, focus on what you do best and make sure the public knows it. Market one brand or model, the one that is already popular among your clients or the one you feel has the most appeal. Pick your top seller and keep it fresh in the public eye. Keep reminding the public of how useful your product is and how much they need it.
• Spend time rather than money. Are you worried that business is slow? Take advantage of the situation! You can use your free time to market your products and yourself often without spending a dime. For example: Communicate with the public - your customers - at local events. Sponsor an event for your own community. Get yourself known and liked in your community. Now might be the perfect time to go online and show off as being better than your competitors.
• Treat your clients well and gain their trust. Worried and leery consumers seek out products and services they trust. They want to feel valued and they need to trust that they are getting value for their dollar. All consumers like to be treated well. If three, five or one hundred competitors offer pretty much the same service or goods for the same price, the consumer will opt to do business with the one that provides personal care and extras. Cutting down on staff when business slows down is an all too common mistake. If you neglect your service level, your clients will go elsewhere and may never come back.

• Offer lower thresholds for quantity discounts. For example:

  a) Encourage clients to come in larger groups in order to get a lower price. Since most people would prefer paying $60 rather than $80 for a given activity, you may end up bringing in more money overall. Let's say you make five sales at $60 for a total of $300 - you will bring $60 more than if you make three sales at $80 for a total of $240;

  • 5 adults x $60 per activity = $300
  • 3 adults x $80 per activity = $240

  b) Quantity discounts can also encourage clients to buy more of a product, right away. Although a lower per-item price tag translates into a lower per-item profit, more items sold could increase your profit overall.

  • 100 items x $1 profit = $100
  • 75 items x $1.25 profit = $93.75

If you can appeal to customers with a discounted group rate, they'll do the marketing for you by getting others to come along for a given activity. If we are talking household items and food, let consumers pay the price of storage - they'd rather do that, if it comes with a lower price tag.