How to market in a down economy: the latest research and expert advice
Consumer spending is impacted by financial threats like the cost of living crisis and the possibility of a recession. Brands must stay on top of these changes to succeed this year.
I spoke with Dr. Aulona Ulqinaku, Associate Professor of Marketing and MSc Consumer Analytics Program Director at Leeds University Business School. Dr. Ulqinaku's research focuses on the impact of financial threats on consumer behaviour.
Whether you're a seasoned marketer or just curious about consumers, this is science-backed research you don’t want to miss. So, buckle up, grab a notebook, and let’s uncover the best approaches to marketing in a down economy…
BRAND MESSAGING AND COMMUNICATIONS
Brands that adjust their messaging during the current cost of living crisis will be better positioned to connect with consumers, build trust, and ultimately drive loyalty.
According to Dr Ulqinaku, “consumers tend to prefer brands that communicate with more caring, warm tones rather than assertive problem-solving ones”.
Demonstrate that you understand what your customers are feeling right now. This is not a time when businesses with a ‘sell sell sell’ mentality will thrive. Customers are being more particular about where they spend their money and they’re looking for brands that are more empathetic in their communications.
But perhaps more importantly, brands need to better personalise their communication. In other words, don’t keep offering products to customers that don’t usually buy them.
Start by understanding customer activities and behaviours. What pages do they visit? Where do they buy their products? What kind of areas do they live in? What kind of things might they be feeling right now? Then, you can customise marketing promotions accordingly.
As Dr Ulqinaku puts it, “it’s so important not to exploit consumers in this period. We have to be more ethical as marketers. Don’t exploit consumers that are already vulnerable by trying to sell them even more.”
TAKEAWAY: Customers shouldn't be pressured to buy products they don't need or want. Show empathy and give personalised recommendations based on what you know they usually purchase.
BE HONEST AND TRANSPARENT
As well as using personalised communications and an empathetic tone, brands should be honest and transparent. It all comes down to a brand's ability to build relationships with customers.
If you need to pass on higher costs to end customers, tell them. Give them a breakdown of why prices are going up, and what you’re doing to mitigate rising costs.
Beauty brand The Ordinary shared an upcoming price increase with their customers on social media. The company wrote, "As the world continues to face rising costs, it's important that we review all areas of our business, to ensure we are able to operate sustainably and responsibly long into the future. This is the way we will bring good products at sensible price points to many more people around the world — and how we will continue to take good care of our team.” This is the kind of honesty and transparency that allows brands to connect better with customers during this time.
TAKEAWAY: Be honest and transparent with your customers and communicate any price changes with them. This builds trust which leads to a loyal relationship.
WHAT NOT TO DO…
When it comes to brands communicating to customers in the wrong way, the insurance industry stands out. You often see life insurance commercials focused on the negative - “if you don't take out life insurance, here are all the terrible consequences for your family…”. It’s based on fear. Consumers can't digest fearful messaging at a time when there are so many different threats.
Instead, brands should frame their messages positively. For example, “if you buy our life insurance, here are all the amazing benefits you get, such as peace of mind and stability for your family…”.
Dr Ulqinaku published a paper alongside her colleague in the journal of advertising about how to frame advertising - and whether it should focus on what customers could achieve, or what they could avoid.
They found that “when consumers are financially constrained, they want messages that are easier to digest - and those are positive ones. Instead of saying to them, “if you do not use our financial service, you will end up without money for retirement”, you should say, “by saving money with us, you will have a better retirement”. The smallest changes we can make in advertising to make it more positive will have a significant impact, especially on vulnerable consumers like those struggling with their finances.”
TAKEAWAY: Frame your advertising positively by focusing on what can be gained rather than what could be lost.
CHOOSING THE RIGHT PROMOTION STRATEGIES
Dr Ulqinaku was also part of some research on scarcity promotions and consumer anger. Scarcity promotions refer to adverts that use messaging such as “buy now before it's gone” - highlighting a lack of availability and pushing customers to make quicker purchase decisions.
“This was research led by one of my colleagues at Leeds University Business School. Many businesses play with the message that there is limited availability. Are there really only <100 products available or did you choose for there to be a limited stock to drive sales? If it’s the latter, consumers will switch to another brand.
When brands unnecessarily play with scarcity promotions, they risk creating consumer anger and consequently pushing their customers to switch. Research does show that ‘limited availability’ promotions attract attention, but companies should be cautious about how they use them because they can backfire…” says Dr Ulqinaku.
TAKEAWAY: Be careful with using scarcity promotions. It’s better to use time-based promotions such as “10% discount if you buy in the next 2 weeks” rather than quantity-based promotions.
MORE TIPS AND TRICKS
Dr Ulqinaku advises brands to emphasise the entire customer experience: “it's particularly important when you start the experience before a customer purchases anything, and continue the experience after they do. It’s not the moment of the transaction that matters - customer experience does not start and stop there. It’s a whole journey - and it starts before we even realise that we need something.”
Creating a wonderful experience will entice consumers to return even without a specific need. It will be easier for them to spend their money with you if you can create a really valuable experience for them from the beginning to the end.
She continues, “And great experiences don’t just create repeat customers - they also make it more likely that your customers will refer your business via word of mouth. Customers will tell other people about your products and services, even when they are not being instructed to.”
TAKEAWAY: Your customers' experience doesn't start or end when they make a purchase. You need to provide them with a great experience across the whole customer journey.
WHAT MAKES YOU LOYAL?
I asked Dr Ulqinaku what makes her loyal to a brand. Here’s what she said…
“I tend to be quite habitual in my purchases. The brands that I like are the ones that make me feel like they care about me. They give me some type of entitlement or special treatment. Take British Airways for example. As a member, they really make you feel part of their ‘club’. They tell you all of the exclusive things you can get from being a member. It makes you feel special. It’s clear how they differentiate you from non-loyal customers.”
Many businesses put all their efforts into their products - and sometimes neglect the experience they’re offering. If you’re a British Airways club member, you’re not just purchasing a plane ticket. You’re purchasing a travel experience. And that’s where they deliver value.
An interesting thing that we’re seeing at White Label Loyalty is that, with all these price increases, there are a lot of companies that can’t compete on price anymore. So instead, they’re offering an experience that gives more value by using rewards or member perks. They are saying to customers - “we recognise that you’ve chosen us. We may not be the cheapest on the market. But here’s what we’re going to give back to you, so that you get more value and have a reason to stick with us”...
A recession is one of the major instances where consumers won’t react to advertising efforts in the way that marketers want. There are many factors that affect consumer behaviour during economic downturn:
The most important thing brands can do at this time is analyse and understand consumers’ changing needs. Get into the heads of your key customers and start to adjust strategies, messaging, and offerings in response to changing consumer behaviour.
- Use empathetic messaging - understand and acknowledge how your customers might be feeling right now.
- Don’t pressure customers to buy products they don’t want or need. Support them with personalised recommendations that are relevant to what you know they usually buy.
- Be honest and transparent with your customers - this helps build trust.
- Don’t exploit customers by playing with scarcity promotions unnecessarily.
- Frame your messages in a positive way - focus advertising on what can be achieved rather than what is at risk.
- Create a great experience across the entire customer journey - not just at the point of purchase.
- Make your customer feel extra special by offering them rewards or perks for choosing you.
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Senior Content Marketing Executive
Helen is our Senior Content Marketing Executive. She shares valuable information about the Future of Loyalty and will keep you up to date on the latest industry insights...