Millward Brown's POV, June 2009
Marketing During Recession:
Planning On Recovery
When sales are down and budgets are cut, it would seem that the most important thing for a business to do is to focus on survival, not plan for growth. But recovery will come, and marketers who are not ready to seize that opportunity will lose out to those who are. Brands must develop plans to regain lost customers now. And effective planning requires a detailed understanding of how consumer behavior and attitudes have changed (and how they might change again).
In his inaugural address, U.S. President Barack Obama said, "The state of the economy calls for action, bold and swift, and we will act - not only to create new jobs, but to lay a new foundation for growth." In the first 90 days of his administration, the government moved fast to make good on that promise. Marketers would do well to follow his lead. A recession is not a time to slow down. It is a time to speed up. And while it is difficult to ignore the current bad tidings, now is the time to make plans for the anticipated upturn. The brands that are prepared for recovery and are able to execute their plans quickly and effectively will be the ones that will win in the long term.
The Strategic Challenge
Most premium and mainstream brands face the same fundamental challenge when considering recovery. They need to regain the sales volume that was lost when economic circumstances forced consumers to reappraise their purchasing priorities and brand choices. In order to make their disposable income go further, consumers adopted one of three tactics: they curtailed purchasing in a category altogether, they deferred or decreased their purchasing, or they traded down to a less expensive brand.
Luxuries or items that are perceived as "nice-to-haves" are most likely to be eliminated when consumers need to cut spending. Affected product categories range from cruises and designer goods to more mundane categories like insurance or window cleaner.
Purchases of high-ticket items such as cars and appliances will be deferred when consumers are under financial pressure. People will also reduce the frequency of purchasing in categories such as casual dining and gasoline.
Traded down purchases
We see evidence that consumers have reappraised their brand choices in virtually all product and service categories. Millward Brown's tracking database finds a strong rise in the number of premium brands perceived as too expensive in 2008.
The key to successfully regaining lost sales lies in understanding consumer mindsets and motivations. Among people who have stopped purchasing a category, how many have really adopted a more frugal mindset, and how many merely need to feel more confident before they resume purchasing? When it comes to people who have chosen to buy value-priced products or store brands, how many were forced by their circumstances to trade down? How many are unhappy with their new brands? The challenge is the same in both cases - to regain sales - but the solution will vary by category and brand.
Download the full report
- The Strategic Challenge
• Curtailed purchases
• Deferred purchases
• Traded down purchases
- Strong Brands Weather Recession Best
- The "Five R's" of Recovery
• Remind people about your category and brand
• Restore confidence
• Re-establish differentiation
• Rally the troops
- Identifying the Right Turning Point
To read more about marketing during recession, visit www.mb-blog.com