In this article Eriks Celmins summarises insights to help find opportunities to engage with customers in a recession, based on research and current marketing thinking.
What’s our usual reaction to the dreaded recession?
When we hear recession talk, we’re likely to go all doom and gloom. We shut our minds to starting or growing our small business because we think everyone’s going to stop spending.
Yet that negative mindset is way more dangerous than the recession itself!
If we’ve learnt anything at all from three years of the pandemic and lockdowns, it’s that small business can thrive in a disrupted environment.
It is possible to find business opportunities - if we’re smart about understanding customers and creatively solving their problems. Which BTW we should already be doing during the current high cost-of-living situation.
And let’s face it, a recession is not as tough as a lockdown! At least in a recession your customers have freedom in their daily life, and you have a lot more control over how you adapt your business to their needs.
Be inspired by famous brands that started in recession, such as Disney, Airbnb, Netflix, Revlon, General Electric, and Microsoft.
And how about the reassuring words of The British Business Bank which specialises in start-up loans saying “As strange as it seems, a tough economic period might actually be the best time to launch a business”, and gives a variety of examples from pet care to gin-making.
We humans are complex
A key reason for their eventual success, despite small and hard-grinding beginnings, was their understanding of primal human drivers that don’t change, whatever the economic climate.
95% of purchasing is emotional and not rational. We might tell a market researcher that our decision to buy something was based entirely on a logical analysis of features and cost. But there is much information available about the complexity of how we actually think and feel about purchasing.
Which is very useful for a small business to navigate through a recession, when you apply basic, common-sense strategies to adapt and thrive in the new environment.
Four types of customers
There’s an excellent 2009 Harvard University study by Professor John Quelch and Research Associate Katherine E. Jozc on How to Market in a Downturn.
They identified four segments of customers that emerge in a recession …
- Slam-on-the-brakes: reduce all types of spending.
- Pained-but-patient: the largest segment, who economise, but not aggressively.
- Comfortably well-off: maintain spending, but more selectively and less conspicuously.
- Live-for-today: tending younger, who mostly extend their timetables for large purchases.
Four types of products & services consumption
As further insight to what’s going on, they also described four categories …
- Essentials: central to survival or well-being
- Treats: which customers view as justifiable
- Postponables: can be put off
- Expendables: unnecessary or unjustifiable
Many opportunities
This makes for 16 possible combinations of customers and consumption to review for opportunities, or obstacles in a recession.
This is far from a blanket shutdown, in the simplistic view that unless you’re in the business of selling candles or baked beans, you’ve got no hope of surviving.
Instead, this chart derived from the article, shows 13 Recession Behaviour scenarios still with potential opportunities, depending on your type of business and target customer.
The importance of Value
It’s clear that perceived value plays a vital role in recession opportunity. As incomes are squeezed and costs go up, people still have to function in life, and fulfil emotional needs as well as practical.
People will look for a way of gaining the same value from a lower cost alternative. And in Treats it’s human nature to want a moment of pleasure, especially in tough times.
Potential tactics
A key learning from lockdown was the opportunity to keep the customer relationship going, even when they’re not spending, so you stay top-of-mind for when conditions ease.
This includes maintaining awareness and building trust by offering free advice on money-saving tips relating to your category. So that even in an Expendable category, if you help them with a temporary DIY alternative, the equity of trust you’ve created will be repaid in future.
In the age of digital marketing, you can use simple and inexpensive tools like social media to stay in touch with customers and grow your relationship with practical content. People turn to friends and community in difficult times – why not be a trusted friend in a recession?
Find business opportunities from customer insights
So far we’ve talked about generic scenarios as a starting point, but the best way to thrive in recession is to gather a much deeper understanding of your customers, and the role of your product or service in their daily life.
Because those insights will provide you with the building blocks of new opportunities and ideas to make their life better and stay with you.
It can be as simple as having an in-depth chat with five of your top customers on how they are reacting to the recession and what you can do to help them. People are usually very willing to give you feedback, especially if you have an existing relationship - which is a whole other topic!
As a guide here’s an example of a Recession Insights Story, where your questions are aimed at filling the gaps. Some of this you may know already, but it doesn’t hurt to sense-check your historical information or assumptions.
Our most useful features are ______________________________________________
And they use us when they need to do/solve this problem __________________________
When the household budget is tight our product/service is Essential/Treat/Postponable/Expendable
If for any reason they couldn’t use us anymore, they would instead do ______________
You’re exploring their world, listening carefully, looking for opportunities, when even a tiny detail can spark a new idea.
And keeping in mind that if we ask someone what they might do in the future, it may not be what happens in reality. Best way is to try and keep it relatable to the immediate ‘now’ e.g. “if you couldn’t use us today what you do instead?”
We have further practical tips on gathering customer insights in our small business education book Marketing = Customers + Heart.
Creating new opportunities
Once you’ve talked to customers and written your Recession Insights Story, you have the raw materials for challenging yourself to adapt your offering and messaging to stay in tune with what they need.
And you generate the new ideas with any of the easy creative techniques available that anyone can do.
We have a few in our book, and here’s one of our favourites called Word-Spider. All you need is a whiteboard or large sheet of paper where you write a key word from your insights story in the centre.
This is the spider’s body, and you add legs as separate word associations with the body. Keep extending the theme of each leg by constantly asking “What Else?”. Go back over your story to see how other key words might fit.
When you’ve finished, go around the legs and see what combinations of words could make up a new opportunity and concept to address it. You will find patterns of themes emerging that may seem obvious afterwards!
Key Takeaways & Actions
- You can find new business opportunities in a recession - if you understand your customers and solve their problems.
- While budgets tighten, people still have to function in life, and will find the most cost-effective solution elsewhere, if you don’t provide it.
- Treats are an emotional necessity even if small – and maybe an opportunity to add as a bonus to an Essential.
- Maintaining the customer relationship is critical, even if purchasing slows down, as you want awareness and trust to remain strong, ready for a comeback.
- Communicate, share tips. Help people weather the storm with practical advice, even if it’s not an immediate sale.
- Write a Recession Insights Story and hatch a Word-Spider to springboard new ideas.
Don’t get stressed by the doom & gloom headlines!
The smart reaction is to look for opportunities in primal needs.
The only limit is your imagination.
We can help you thrive, reach out to judy@thriveablebiz.com