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It’s official. The numbers are in and the credit crunch has become a recession. The BBC financial crisis graphic on the 10 o’clock news has turned into an emphatic red downturn logo. When the economy gets its own branded identity, you know the tone has been set for the marketing year and it is going to be a tough one.

Every day brings new indications of the crisis…

• 30% increase in UK companies going into administration in the last three months of 2008
• 50% rise in small business failures – up to 60 a day at year end
• Big ticket items like cars and houses are worst hit:
- Honda announces a four-month lay-off
- Property and construction company failures up 73%
• Recruitment company closures up a staggering 232%

The high street has also been suffering, with many big names struggling or throwing in the towel. But to be honest, most of the current crop of failures consists of companies whose time was up. Their business models were out of date and they hadn’t done enough to reinvent them. Check out this list:

 

Most of these companies are ones you might expect to flounder in a market downturn. But it seems likely that other, fitter operations will face similar problems unless they get to grips with their marketing operations (among other things!). This means a return to marketing basics and a shift in focus to rediscovering value and differentiation if you want to survive and thrive in tough market conditions.

So what do companies need to do to keep the wolf from the door in a downturn? Here are a few ideas:

Keep backing your brand

There’s plenty of research out there to suggest that the worst thing you can do in a downturn is cut your marketing spend. McGraw-Hill Research analysed 600 US companies in the early 1980s recession and found that, by 1985, those that had been advertising aggressively had out-performed those that had cut their spending by 256%. But it’s still a tough call to make when the choice is between losing jobs or advertising slots. The very least marketers can do is to lay out the facts and argue their case. This should allow them to hold on to more money and speed up their recovery when the market picks up again.

Understand customer needs better

The value of research and customer insight tends to go up rather than down in a recession. Companies have to work that much harder to get under the skin of what customers want in order to differentiate themselves. It is still early days in tracking the success of this approach in this economic cycle, but intuitive marketers are already taking action and reaping the rewards. Examples include:

Focus on trust – Asda reports booming sales of trusted brands like Bird’s Custard, Heinz Beans and Fray Bentos.
Do-it-yourself entertainment – Off-licences and fast food sales are growing, with KFC and Domino’s Pizza announcing plans to hire 9,000 and 1,500 new staff, respectively.
Smarten up – Shirt-maker TM Lewin’s sales are up 20%.

We can expect more marketing activity based on fundamental needs in the months ahead.

Re-tune your messages

At a recent Forrester Research conference, the keynote address launched a piece of research which identified a new consumer needs model. Maslow’s hierarchy of needs theory as dismissed as being ‘so last century’. The Forrester model defined consumer behaviour in terms of four key drivers – individuality, variety, comfort and connection. It was supported by examples of the evolution of personal care advertising, which shifted from strong individualism in the booming Twenties, to a more nurturing style in the recession-hit Thirties and war-torn Forties.

More recently, the same model seems to apply. Through years of unbroken growth in the Noughties, we witnessed a boom in ego-driven advertising and a dramatic increase in demand for prestige luxury brands. But in the last six months, there’s been a rapid shift back to ‘comfort’ and ‘connection’ in communications. Specific examples include Lloyds TSB, which has started promoting its status as ‘Britain’s safest bank’ (for the last eight years), and Churchill Insurance, which has changed its campaign theme from ‘Challenge Churchill’ (we’ll give you the best deal) to ‘Count on Churchill’ (we’ll always be there for you).

Find business where you can

At times like this, you need to revisit previous prejudices about where customers come from and open yourself up to new opportunities (such as aggregators like confused.com and comparethemarket.com for general insurance or affiliate programmes and viral discount vouchers for lingerie and many other items). Refer a friend schemes are getting popular again, as companies look to make marketing budgets stretch further.

Multi-product businesses can also refocus on counter-cyclical products and services, such as corporate restructuring, pawnbroking, shoe repairs and craft stores. These tend to prosper, while other more upbeat services are languishing.

More value, less prestige

All of a sudden, it has become fashionable to be value conscious again – even Wayne Rooney and Coleen are said to be using two-for-one meal deal vouchers! This trend towards value is producing more winners and losers.

On the high street, sales at John Lewis, Waitrose and Tesco are reportedly slowing. ‘Never knowingly undersold’ and ‘Every little helps’ are probably missing the point when others are giving 70% discounts. By contrast, Sainsbury’s, Morrisons, Asda and Aldi are all benefiting by offering options for those wishing to trade down without compromising too much on quality.

The travel sector is also under severe pressure. Easyjet and RyanAir continue to prosper at the expense of national airlines, while hotel chains, and hire car companies are even more active in pushing out-of-season discounts.

Think differently

Sales of luxury goods are falling worldwide, but some consumers will have difficulty kicking the buying habit. They could trade down to a lower price point, but that won’t work for everyone. In Japan, a staggering 94% of women in their twenties own a Louis-Vuitton product and 41% of the entire population are customers of the company. As the Japanese economy nosedives, women are choosing to rent handbags for key social occasions rather than buying them out right – maintaining their image but sparing their bank balance.

Another example of thinking differently is Dell’s ‘IdeaStorm’ website. This is an online tool for tapping into the thoughts and aspirations of their customer base. It has generated over 11,000 ideas and nearly 85,000 comments so far, many of which have been fed into product and service development programmes. It has also helped to reposition the brand as a supporter of innovation rather than a me-too manufacturer.

In summary, then, marketing survival in the current tough conditions is likely to rely on a combination of back-to-basics fundamentals, plus an ability to use new ideas and technology to refresh tired or outdated business models and reconnect with customers.

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