Webster defines a recession as a period of reduced economic activity. Consumers buy less and less often. They change their buying habits and seek out companies and products that offer more value.
Some consumers start buying store brands instead of name brands. Others change where they shop. Instead of buying from big box retailers they turn to smaller, more budget friendly ones.
All of these changes that happen in and around recessions affect our businesses. Our sales numbers may dip, we may have less cash flow and our profits may plunge.
Since consumers’ change the way they shop and buy in a recession doesn’t it make sense that businesses should changes the way they advertise and market their goods too?
Have you changed your tactics since the recession began?
A natural tendency in times of recessions is to cut back. Business building activities like new product development and market research get hurt the most because they do not generate cash immediately and are therefore seen as expendable. Many businesses also cut down on the amount of advertising they do to hold onto more cash. However, the result of these actions rarely generates the desired effect businesses hope for. It turns into a downward spiral of sales and profits.
Although it goes against many business owners instincts, companies can see great profits during economic recessions by following these actions:
1. Introducing lower priced products.
You may notice a lot of your competitors lowering the prices of their goods and services in a recession. It’s a natural reaction once sales slide nationally. While dropping your prices may seem like the right thing to do let me assure you it is not. Lowering prices devalues your products and your business. Are your products and services worth less now than they were yesterday? No! Dropping your prices does not attract more customers or lift sales long term.
Instead use recessionary periods to introduce products with lower price points. Instead of listing a new service for $250 a month, offer it for $99 or $149. Consumers seek out deals in harsh economic times. Developing lower priced products meets that need without devaluing your goods and services.
These products are usually easier and faster to create too. Consumers are willing to forgo fancy packaging and tons of bonuses for products with low price points. Think courses put on CD’s instead of printed binders and downloadable products. Your production costs will be lower in turn so you should still be able to retain good margins.
2. Trial offers.
In recessions, consumers hold onto their money a little tighter and a little longer. They try to get more value from their purchases. Whereas before consumers would have readily plunked down their money for your goods, they are now scrutinizing their purchases and delaying buying for as long as they can.
The best tactic to combat these fears is to offer a free trial for your goods and services. This takes away the risk in consumers’ minds. They get to try out a product before having to pay for it. Allow your customers to try out your products for free for a week or thirty days. Then if they like them charge them full price at the end of the offer. Just make sure that you are up front with your customers what price they will be charged at the end of their free trial.
3. Changing their copy
Recessions bring about changes in what people respond to. In good times people fear having to wait to put in a pool. In bad economic times people fear not being able to pay their mortgage. Luxury goes out the window and is replaced by simpler wants and needs.
In turn you must change your sales copy to reflect these changes in people’s sentiments. Shift the message of your copy away from extras and luxury and instead focus on the base needs of your consumers. For example in better economic times mothers might have bought their toddlers brands of diapers that offer pretty patterns, flexibility or other extras. When times are tough mothers will shift their wants to only include leak guards and long lasting ability. Consumers needs get simpler when money is tight. Make sure your sales copy reflects these changes in wants.
4. Increasing the frequency of advertisements.
When money gets tight business owners naturally tighten their belts and try to cut costs. One thing that always gets cut is the marketing budget. I never understood how business owners expect to increase profits by reducing advertising. It just doesn’t make sense.
Smart business owners know that instead of reducing the amount of advertisements they produce they should opt for lower cost advertising. Businesses should shift from 1 minute to 30 second commercials, substitute radio for television advertising, and seek out cheaper lists to rent online. The idea is to reduce costs but ramp up the frequency of advertisements. This way you will still reach new clients and keep sales up.
In recessions foolish businesses follow the lead of consumers and tighten their own budgets and reduce spending. Tactics like these are why many firms fail during recessions. Not surprisingly, few companies possess the cojones to take advantage, profit and even thrive in the face of adversity. I hope you are one of the ones that do and reap the rewards.
Good luck!
Ethan Warrick
Editor & CEO
