How To Grow Your Business During A Recession

Introduction

In February 2024, it was widely reported that the United Kingdom entered into a recession in the second half of 2023. However, whilst grappling with the challenges of a tough economy, businesses are presented with a unique opportunity to not just survive, but thrive. In times of adversity, marketing budgets are frequently the first targets for cost reduction, yet such a myopic strategy overlooks its potential as a catalyst for enduring expansion.

Instead, companies should view marketing investment as pivotal to sustained growth. Contrary to popular belief, recessions need not spell doom for enterprises. In fact, with the right strategies in place, companies can emerge stronger and more resilient than ever. In this article, I explore the critical role of marketing in navigating a recession and provide actionable insights for businesses to maintain a competitive advantage in turbulent times. So don’t pull the plug on marketing plug - just yet!

Historical Data Supports Marketing During Recessions

Before diving into specific strategies, it's essential to glean insights from history. Previous recessions offer valuable lessons for businesses seeking to weather economic storms. Analysing how successful companies adapted their marketing strategies during downturns can provide invaluable guidance for the present.

Samsung

The onset of the global financial crisis in the late 2000s served as the catalyst for Samsung's decision to undergo a rebranding process, transforming itself into a more customer-centric innovation company by significantly boosting its investments in research and development. This strategic shift in brand direction diverged sharply from the cost-cutting measures adopted by its competitors, yet it proved immensely advantageous for Samsung, yielding substantial gains.

A robust brand strategy can enable a business to cut through the clutter and focus on developing products or services that truly resonate with its consumers. Samsung's pivot in branding strategy proved to be a resounding success both in the short and long term, particularly evident when it introduced its inaugural Galaxy smartphone to compete directly with Apple's iPhone in 2009. Presently, Samsung occupies the fifth position on Interbrand's Global Best Brands list, a remarkable ascent from its 21st ranking in 2008.

Amazon & Netflix

More recently, in the aftermath of the 2020 global pandemic-induced recession, companies like Amazon and Netflix continued aggressive marketing campaigns, leveraging digital channels to expand their customer base and reinforce market dominance. These examples underscore the importance of sustained marketing presence in driving brand visibility, consumer engagement, and long-term business success during challenging economic conditions.

Bubbles Pop, Downturns Stop!

In an article published in the 2019 McKinsey Quarterly titled "Bubbles Pop, Downturns Stop," it was discovered that amid the Great Recession of 2008, companies that pursued growth strategies during challenging economic periods enjoyed total shareholder returns (TSR) exceeding the market average over the subsequent decade (see Exhibit 1).

How Consumer Behaviour Changes During a Recession

Understanding shifts in consumer behaviour is crucial for crafting effective marketing strategies during a recession. In times of economic uncertainty, consumers tend to become more discerning with their spending. They prioritise essential purchases while becoming increasingly value-conscious. Savvy businesses can leverage these insights to tailor their marketing messages and offerings to meet evolving consumer needs. Here are some examples of how consumers shift their behaviour during tough times:

• Shift Towards Value-Consciousness: Consumers tend to become more price-sensitive and discerning in their purchasing decisions. They prioritise value for money and seek out cost-effective alternatives for essential goods and services. Brands offering high-quality products at competitive prices stand to gain market share as consumers gravitate towards perceived value.
• Emphasis on Essential Purchases: During a recession, discretionary spending tends to decline as consumers focus on meeting basic needs. Non-essential items and luxury goods may experience decreased demand, prompting businesses to reposition their offerings or adjust pricing strategies to align with shifting consumer priorities. Essential sectors such as food, healthcare, and household essentials typically remain resilient amidst economic downturns.
• Increased Frugality and Savings: Economic uncertainty prompts consumers to adopt more frugal spending habits and prioritise saving for unforeseen expenses or future financial security. This heightened emphasis on thriftiness influences purchase decisions, with consumers seeking out bargains, discounts, and promotions to stretch their budgets further. Businesses can capitalise on this trend by offering value-added incentives, such as loyalty rewards or bundled discounts, to attract cost-conscious consumers.
• Preference for Trusted Brands: Amidst economic volatility, consumers tend to gravitate towards established brands with a reputation for reliability, quality, and trustworthiness. Trusted brands offer a sense of reassurance and confidence, mitigating perceived risks associated with discretionary spending. Investing in brand-building initiatives and maintaining consistent messaging can help businesses reinforce brand loyalty and retain customer trust during uncertain times.
• Shift to Online and Value-Based Shopping: The proliferation of e-commerce and digital channels has transformed consumer shopping behaviour, particularly during recessions. Online shopping offers convenience, comparison shopping, and access to a wider range of products and price points, making it an attractive option for budget-conscious consumers. Businesses that adapt their marketing strategies to embrace digital platforms and highlight value propositions are better positioned to capture online market share and engage with digitally savvy consumer.
• Delayed Purchases and Longer Decision Cycles: Economic uncertainty often leads to hesitancy and caution among consumers, resulting in delayed purchase decisions and extended consideration periods. Businesses must understand and accommodate these longer sales cycles by nurturing leads, providing comprehensive product information, and offering flexible payment options to facilitate conversion. Building trust and rapport through targeted marketing communications can help alleviate consumer apprehensions and expedite purchase decisions.
• Focus on Health and Well-being: The COVID-19 pandemic heightened consumer awareness of health and wellness, driving demand for products and services that promote physical and mental well-being. Businesses operating in sectors such as healthcare, fitness, and self-care can capitalise on this trend by tailoring marketing messages to resonate with health-conscious consumers and highlighting the benefits of their offerings in supporting overall well-being.

12 Marketing Strategies to Navigate a Recession

1 Review the Business Plan

A recession necessitates a thorough reassessment of the business plan. Companies must critically evaluate their objectives, target markets, and competitive landscape in light of economic challenges. By identifying areas of vulnerability and opportunities for growth, businesses can recalibrate their marketing strategies to align with shifting priorities and market dynamics. A good place to start is by adopting PR Smith’s SOSTAC ® Planning Framework to review all aspects of the business plan.

2 Stay Visible & Relevant

In times of economic turmoil, maintaining visibility and relevance in the marketplace is paramount for businesses seeking to sustain growth and competitive advantage. This entails proactively engaging with target audiences through strategic marketing initiatives, maintaining a consistent brand presence across multiple channels, and adapting messaging to resonate with evolving consumer needs and preferences. By staying top-of-mind with consumers and demonstrating agility in responding to changing market dynamics, businesses can position themselves as trusted partners and industry leaders, fostering customer loyalty and long-term success amidst economic uncertainty.

3 Focus on Customer Retention

During a recession, customer loyalty becomes a necessity. Businesses must prioritise nurturing existing customer relationships to safeguard revenue streams and foster long-term sustainability. Here are three ways that a business can cultivate loyalty and differentiate themselves from competitors:

1. Personalised Communication and Engagement: Maintaining strong relationships with existing customers becomes paramount during a recession. Businesses can implement personalised communication strategies to stay connected with their customer base. This can include sending targeted emails or newsletters addressing individual customer needs and preferences, offering exclusive discounts or promotions based on past purchase behaviour, and providing proactive customer support to address concerns or inquiries promptly. By demonstrating attentiveness and appreciation for their patronage, businesses can foster loyalty and encourage repeat purchases, mitigating the risk of customer attrition during challenging economic times.
2. Loyalty Programs and Rewards: Implementing loyalty programs and rewards initiatives can incentivise repeat business and enhance customer retention. By offering points, discounts, or exclusive perks for loyal customers, businesses can incentivise continued engagement and foster a sense of exclusivity and value. Loyalty programs can be tailored to reward various customer actions, such as making purchases, referring friends, or engaging with the brand on social media. Additionally, businesses can leverage data analytics to identify high-value customers and customise rewards to match their preferences, driving increased loyalty and lifetime customer value.
3. Exceptional Customer Service and Support: Providing exceptional customer service is essential for retaining customers, particularly during times of economic uncertainty. Businesses should invest in training and empowering their customer service teams to deliver timely, empathetic, and solutions-oriented support. This may involve extending customer service hours, implementing live chat or chatbot functionality for immediate assistance, and adopting a customer-first mindset across all touchpoints. By exceeding customer expectations and resolving issues quickly and effectively, businesses can strengthen trust and loyalty, leading to increased customer satisfaction, retention, and advocacy even amidst economic challenges.

"Customer retention is paramount during economic downturns. Businesses that invest in personalised communication and loyalty programs can foster long-term relationships and mitigate the impact of market volatility."

4 Create Opportunity Amid Uncertainty

Amidst economic uncertainty, businesses have a unique opportunity to innovate, adapt, and position themselves for long-term success. Rather than succumbing to fear and hesitation, forward-thinking companies can leverage the challenges of a recession as a catalyst for growth and transformation. This involves identifying emerging market trends, exploring new revenue streams, and capitalising on untapped opportunities. By embracing agility, creativity, and a proactive mindset, businesses can navigate turbulent waters with confidence, turning adversity into opportunity and emerging stronger and more resilient on the other side.

5 Introduce New Products and Services

While caution is warranted, recessions also present opportunities for innovation and diversification. Launching new products or services that address emerging consumer needs or pain points can inject vitality into a business and open up additional revenue streams. However, thorough market research and validation are essential to mitigate risks and ensure the viability of new offerings.

"Embracing technology is essential for business survival in a digital age. By leveraging data analytics and digital platforms, businesses can enhance operational efficiency, streamline processes, and stay competitive in a rapidly evolving marketplace."

6 Use Technology to Your Advantage

In an increasingly digital world, leveraging technology is essential for businesses to thrive, especially during a recession. Embracing digital tools and platforms enables companies to enhance efficiency, reach new audiences, and stay ahead of the competition. From AI, data analytics and customer relationship management systems to e-commerce platforms and digital marketing channels, technology empowers businesses to streamline operations, personalise customer experiences, and drive innovation. By adopting a strategic approach to technology integration and staying abreast of emerging trends, businesses can unlock new opportunities, optimise processes, and position themselves for long-term success in a rapidly evolving marketplace.

7 Cut Marketing Costs

Cost-cutting measures are often unavoidable during a recession, but indiscriminate slashing can be counterproductive. Businesses should adopt a strategic approach to cost reduction, focusing on eliminating inefficiencies and non-essential expenses while preserving investments in critical areas such as marketing and innovation. This disciplined approach enables companies to streamline operations without compromising long-term competitiveness.

Advantages of cutting marketing costs:

• Increased Profitability: Cutting costs can lead to higher profit margins, improving financial health and resilience.
• Enhanced Competitiveness: Streamlining operations can make businesses more agile and competitive in the marketplace.
• Resource Optimisation: Cost-cutting measures can help allocate resources more efficiently, maximising value for stakeholders.
• Improved Cash Flow: Reducing expenses can bolster cash flow, providing greater flexibility and stability during lean times.

Disadvantages of cutting marketing costs:

• Quality Compromise: Cost-cutting may result in decreased product/service quality, undermining customer satisfaction and loyalty.
• Short-term Focus: Overemphasis on cost reduction may neglect long-term investments critical for future growth.
• Employee Morale: Layoffs or benefit reductions can negatively impact employee morale and productivity.
• Innovation Stagnation: Drastic cost-cutting measures may stifle innovation and limit opportunities for growth and differentiation.

8 Consider Diversifying

Diversification can serve as a safeguard against economic volatility by spreading risk across different product lines or market segments. Businesses should explore opportunities to diversify their revenue streams while leveraging existing capabilities and resources. Strategic partnerships, acquisitions, or expansion into adjacent markets can broaden the business's revenue base and enhance resilience against economic downturns.

9 Operational Efficiency

Efficiency gains are particularly crucial during lean times. Businesses should scrutinise their operations to identify opportunities for streamlining processes, reducing waste, and optimising resource allocation. Embracing technology solutions, automation, and lean methodologies can drive operational efficiencies and improve the overall competitiveness of the business. Here are seven examples of finding operational gains to enhance efficiency:

1. Process Optimisation: Reviewing and streamlining internal processes to eliminate redundancies and inefficiencies, reducing waste and enhancing productivity.
2. Automation and Technology Integration: Implementing automation tools and integrating technology solutions to streamline workflows, reduce manual tasks, and improve accuracy and speed.
3. Supply Chain Management: Enhancing supply chain visibility and resilience through better inventory management, vendor partnerships, and logistics optimisation to reduce costs and improve responsiveness.
4. Lean Manufacturing Principles: Adopting lean manufacturing principles to minimise waste, improve production flow, and increase overall operational efficiency.
5. Energy Efficiency Measures: Implementing energy-saving initiatives and adopting sustainable practices to reduce utility costs and environmental impact.
6. Employee Training and Development: Investing in employee training and skill development to enhance capabilities, improve job satisfaction, and increase efficiency.
7. Data Analytics and Performance Metrics: Leveraging data analytics and key performance indicators (KPIs) to monitor performance, identify areas for improvement, and make data-driven decisions to optimise operations.

10 Support the Marketing Employees You're Retaining

Amidst cost-cutting measures, businesses must prioritise the well-being and morale of their marketing team (and wider workforce). An engaged and motivated marketing team can be an essential asset during a recession, driving productivity, innovation, and customer satisfaction. Here are four examples of how businesses can support the marketing employees they retain during a recession:

• Professional Development Opportunities: Offer training programs, workshops, and skill-building sessions to help employees enhance their expertise and stay relevant in a changing business landscape. Providing access to online courses, certifications, and career development resources can empower employees to grow professionally and contribute more effectively to the organisation.
• Flexible Work Arrangements: Implement flexible work policies, such as remote work options, flexible hours, or compressed workweeks, to accommodate employees' individual needs and preferences. Flexible arrangements can improve work-life balance, reduce stress, and increase job satisfaction, ultimately boosting morale and productivity among retained staff members.
• Transparent Communication and Feedback: Foster open, transparent communication channels to keep employees informed about company updates, performance expectations, and future prospects. Encourage regular feedback sessions, one-on-one meetings, and team discussions to address concerns, solicit input, and maintain a sense of trust and engagement. Transparent communication builds a supportive culture where employees feel valued and connected to the organisation's goals and vision.
• Wellness and Employee Assistance Programs: Prioritise employee well-being by offering wellness initiatives and support services to help manage stress, promote mental health, and maintain work-life balance. Implement employee assistance programs (EAPs), access to counselling services, and resources for physical fitness and wellness activities. Investing in employee health and wellness initiatives demonstrates a commitment to employee care and can lead to higher retention rates, improved morale, and greater overall productivity.

11 Demonstrate Value - Focus on What You're Really Good At

In times of uncertainty, it's essential for businesses to play to their strengths. Identifying core competencies and doubling down on areas of expertise can provide a competitive advantage and reinforce the business's value proposition. By focusing resources and efforts on key strengths, businesses can maximise impact and resilience in the face of economic headwinds. Here are some examples on where to focus your effort and resources:

• Identify Core Competencies: Businesses must first identify their core competencies - the unique capabilities and strengths that set them apart from competitors. This could be exceptional customer service, innovative product design, superior quality, or efficient operations. By understanding what they excel at, businesses can strategically leverage these strengths to deliver exceptional value to customers.
• Specialisation and Niche Positioning: Focusing on what a business does best allows it to carve out a niche in the market and establish itself as a leader in that space. Specialisation enables businesses to become known for their expertise and reliability in a specific area, attracting customers who value excellence and specialised solutions. By narrowing their focus, businesses can differentiate themselves from competitors and command premium prices for their specialised offerings.
• Consistent Brand Messaging: Demonstrating value requires consistent and compelling brand messaging that articulates the unique benefits and value proposition of the business's core competencies. Businesses should communicate their strengths clearly and persuasively across all marketing channels, highlighting how their expertise addresses customer needs and delivers superior outcomes. Consistent branding builds trust and credibility, reinforcing the perception of value in the minds of consumers.
• Customer-Centric Approach: Demonstrating value requires a deep understanding of customer needs, preferences, and pain points. Businesses should align their core competencies with customer priorities and aspirations, ensuring that their offerings address real-world challenges and deliver tangible benefits. A customer-centric approach enables businesses to tailor their products, services, and solutions to meet specific customer requirements, enhancing value perception and fostering long-term loyalty.
• Strategic Partnerships and Alliances: Collaborating with strategic partners and alliances can amplify the value proposition of a business's core competencies. By partnering with complementary businesses or industry leaders, businesses can access new markets, expand their reach, and offer integrated solutions that address broader customer needs. Strategic partnerships enable businesses to leverage their strengths while mitigating weaknesses, creating synergies that enhance overall value delivery.
• Measure and Communicate ROI: Finally, businesses must measure and communicate the return on investment (ROI) of their core competencies to customers. Providing evidence of the tangible benefits and outcomes delivered by the business's expertise reinforces its value proposition and justifies premium pricing. Case studies, testimonials, and performance metrics can effectively demonstrate the impact of the business's core competencies on customer success, building confidence and trust in its ability to deliver value consistently.

"In times of recession, businesses must focus on resilience and adaptability. Fractional marketing leadership offers a strategic advantage by providing immediate access to seasoned professionals who can navigate uncertainty and drive growth."

12 Fractional Marketing Leadership

During a recession, businesses often face the challenge of navigating a turbulent market landscape with limited resources. When senior marketing team members exit the organisation due to restructuring or cost-cutting measures, it can leave a leadership gap that jeopardises the continuity and effectiveness of marketing efforts. The role of Fractional CMOs (chief marketing officers) has emerged as a pragmatic solution to address this gap by providing interim leadership and strategic guidance without the need for a full-time hire. These seasoned professionals bring extensive experience and strategic acumen to the table, offering immediate support and expertise to steer marketing initiatives through challenging times.

Learn more in our article: 10 Ways a Fractional CMO Can Grow a Business.

Conclusion

While navigating a recession presents formidable challenges, it also offers opportunities for businesses to innovate, adapt, and emerge stronger than ever. By embracing strategic marketing principles and leveraging insights from past recessions, businesses can maintain a competitive edge, nurture customer relationships, and position themselves for long-term success. By focusing on resilience, agility, and customer-centricity, businesses can not only survive but thrive in the face of economic uncertainty.

About the Author

Paul Mills is CEO and Founder of VCMO, a Fellow of the Chartered Institute of Marketing (FCIM), and a SOSTAC® Certified Planner. He possesses an impressive track record of delivering strong results both domestically and internationally and specialises in the transformation of professional and financial services businesses. Read his full bio.

About VCMO

VCMO helps SMEs and investor-backed portfolio companies with a £2 million or higher turnover that operate without a full-time Chief Marketing Officer. Our Fractional CMOs and tailored services transform marketing potential into a competitive advantage that delivers scalable and predictable growth, increased profits, and enhanced enterprise value.