How to recession-proof your value proposition
It’s impossible to predict what’s going to change when we come out of crisis mode and enter the depths of the coming recession.
Recessions breed uncertainty — for consumers and marketing teams alike. But they also breed opportunity: the trick is to spot the latter whilst mitigating the former.
The key is to focus on the things we do know, namely:
- Similarities and differences to past recessions
- Current behavioural data and cultural insights
- Pre-crisis consumer trends
A Bain study into the early 2000s recession found that by the time it was over, 20 percent of industry leaders (top quartile performers) had fallen to the bottom quartile, and 20 percent of laggards had jumped to the top. A reshuffle indeed. But how do brands prepare for it?
Spotting the right opportunities becomes easier the more you know your brand’s value.
That’s because perceptions of value change in tough times, even if the things we value fundamentally do not. When money’s tight, luxury takes on new meaning. When the future is unclear, we prioritise the short term. When we’re fatigued by anxieties and worry on all sides, we seek out familiar shortcuts.
There are five dimensions of value that consumers perceive or are influenced by differently during recessions. Understanding all of them takes time and strategic thinking. But there are a few golden rules to keep in mind for each.
1 Price, or value for money
Many brands attempt to slash costs and reduce prices when a recession threatens. But price changes during a recession don’t alter underlying market share trends for the long term. You may win or lose share in the near term, but the net effect is balanced out over time and tends to match where a brand was already headed.
Instead it’s best practice to maintain an appropriate price differential to the competition. Know your worth and defend your value. Consumers tighten belts in tough times, but they’re also loath to change their behaviours drastically.
2 Utility, or functional value
Recessions are the time to double down on the core of your proposition — or start figuring out what it is.
Post-2008, Starbucks was struggling to justify its premium proposition as it shuttered locations and rapidly let go of staff. Quick-service competitors like McDonald’s responded by improving their coffee offering at a competitive price appropriate to their brand. Starbucks eventually recovered, but McCafé also became a category leader in the decade that followed.
Tough economic times force consumers to re-evaluate the utility – functional or hedonistic – of their purchases.
KitKat in the 1970s is another perfect example. In the depths of this worldwide recession, KitKat thinned out the covering on their wafers to cut costs as the price of chocolate rose. Mars kept their products the same. KitKat suffered share losses that took years to recover.
The market is not stupid: know your value and stick to it.
3 Experience, or the value of convenience
Saving consumers’ time and energy is disproportionately valuable in a recession, when everyone’s horizons are blurred by uncertainty.
Reducing anxiety and risk are among the top three priorities for consumers right now. This will only become more accentuated during the coming recession, as anxiety and risk assault consumers from all sides.
Even now, during the COVID crisis, Harry’s has seen a surge in demand in their core product range. That’s because men still want to shave in lockdown — they just also want a convenient shopping experience.
Remember: the D2C economy was born out of the last recession. Consumers will not suffer experiences that lack logistical, mental or emotional efficiency.
4 Equity, or emotional value
Recessions are the time to seek a return on your emotional investment in consumers’ lives.
BrandZ has shown that brands with strong equity recover faster out of a recession. And during tough times, brands with existing relationships have more of a right to play in consumers’ lives.
In 2008, Starbucks responded to the crisis by investing heavily in customer insight. The next several years saw the chain transform into a customer-centric “third space”, successfully pivoting away from its “premium coffee shop” positioning to offer new value to communities.
In the 2020s, we will continue to expect more of brand citizenship. Brands that need revitalising in the coming recession should prioritise the creation of meaningful social or economic impact aligned to their purpose.
5 Innovation, or creating new value
Consumers know instinctively that innovative brands are strong brands, but in tough times the market won’t tolerate innovation outside a brand’s core.
Past recessions show that most marketing teams tend to overreact to economic uncertainty. This can encourage two damaging innovation strategies, which cause brands to lose out on valuable opportunities: hunkering down to weather the storm or straying into unknown territories. Both are damaging.
Recessions are still a time to innovate: just don’t stray from the brand’s core.
Never before have brands had such acute awareness when a recession hit. They had to react.
This time they can get proactive. The coming storm has hundreds of variables in play. The only thing we know for sure is that when it’s over, the landscape will look different.
The next step is to move — or risk being moved.