Marketing in an Economic Downturn
As the eCommerce industry weathered a global pandemic, navigated a recovery and reopening of the economy, we all looked toward a new “normal” and asked the question “how do we market now?” Brett Curry, CEO of OMG Commerce released a version of this article initially to address how to market your business in the time of COVID-19. In the years since the initial release, business owners have added supply chain struggles, labor shortage, inflation and the possibility of a recession looming on the horizon. With all of that facing an eCommerce owner, marketing may not be top of mind. However, your customers need to and want to hear from you now.
We’ll always need stuff. Whether fun or essential, we’ll always buy. That hasn’t changed and won’t change in this or any future downturn. What we buy and WHY we buy does change a bit. eCommerce was already growing at 15% per year on average, but with COVID-19 that growth rate accelerated. While some growth has receded as people have returned to pre-pandemic buying habits, ecommerce has not returned to pre-pandemic levels.
As we approach the uncertainty before us, we want to revisit key considerations for you and your marketing team. Looking at both the mindset and overall approach (the strategy) as well as ad creatives and things to consider on various ad channels (the tactics).
Understand New Customer Psychological Segments
One of the best articles about marketing in a downturn is this article published in the Harvard Business Review. It was written and published during the Great Recession of 2008-09. During times of uncertainty new psychology segments emerge that are more important than standard demographics like age, income, and geography. Here’s a quick overview of the 4 segments. I highly recommend you read the HBR report in its entirety. It’s well worth the read.
- Slam on the breaks - This group of consumers take swift action by eliminating, postponing, decreasing, or substituting purchases. The downturn impacts essentially all shopping for this group of consumers. They are still making purchases and they still might buy from you, but they are the toughest crowd to win over.
- Pained but patient - This is the largest of the 4 segments. This group is best described as longterm optimistic but short term cautious. They cut back in some areas and adjust in others but not like the slam on the breaks segment. If news gets too bad, this group can shift to slam on the brakes behavior.
- Comfortably well off - This segment is made up of the top 5% of income earners. If you’re in eCommerce you likely have at least some customers in this segment already. During times of uncertainty they spend almost the same as they did pre-downturn. This group is still strong financially even if they’ve taken a hit. They are confident in their ability to ride out the storm. If you market to this group, you have ample opportunities ahead.
- Live for today - This is the Carpe Diem segment. They consume at pre recession/pandemic levels and only shift behavior if their financial situation is drastically changed.
Know What “Categories” of Products are Selling and Why
Understand that each of these product categories is subjective. During times of uncertainty the above psychological segments will perceive products slightly differently. Products that one segment perceives as expendable, other segments might perceive as an essential. Understanding where your product falls here is important, as well as understanding how you can shift your message just slightly so that consumers who may initially see your products as a postponable will now see it as a justifiable treat.
- Essentials - Really none of the psychological segments stop buying essentials. Shoppers might look for value or new options, but they won’t stop buying in this category. During times of uncertainty or hardship consumers are more open to trying new brands and new products. Brand loyalty often goes out the window. This actually gives us an opportunity to win over new customers.
- Treats - Indulgences that are viewed as justifiable. Maybe not quite an essential, a treat is still something that most segments will spend money on even in a downturn.
- Postponables - Maybe it’s a new couch that the shopper has been wanting. Depending on the psychological segment, shoppers may postpone these purchases. But if you can create proper justification or incentives, all segments except for slam on the brakes would buy something like a couch.
- Expendables - Considered unnecessary or unjustifiable by the pained but patient and slam on the breaks segments. Comfortably well off and live for today don’t really have many products they consider unjustifiable. Your goal, if you sell what’s perceived as expendable, is to shift perception so that your products are seen as a justifiable treat. See the section below on creative messages.
See Growth Opportunities that Your Competition Misses
I’ve heard it said that more millionaires were made in the Great Depression than at any time in history before it. Sure it was a time of great pain and hardship. Opportunities were harder to find. But, there were still opportunities. Big ones. The same is true now. There’s a great Forbes article highlighting brands that grew in a recession. Worth mentioning here is Kellogg’s who trailed category leader Post up until the Great Depression. During the depression Post scaled back on advertising while Kellogg’s doubled down on spend and released their new cereal - Rice Krispies. Kellogg’s grew profits 30% during the depression and became the category leader - a position they’ve held for decades. Another great example is Toyota who used the recession of 1973 to invest more in advertising touting their fuel economy. They used the recession and their renewed marketing efforts to pass Volkswagen as the top import car manufacturer in the US.
Reposition Your Product with Relevant Creatives
I would never suggest you change the core of your brand or position. But you should consider marketing new use cases or new reasons to buy now. Here are some examples:
- Big Blanket Company. These are the biggest and best blankets you’ve ever seen. They’re 10x10 and measure 100 square feet. They dwarf any king sized bed. Interest has been high for these blankets and while they are a great value, they aren’t cheap. During quarantine we thought a great new use case for these blankets is building epic blanket forts. Customers were already building blanket forts. Here are sample ads.
- BOOM! By Cindy Joseph - A long time client created an email that was extremely timely and effective. They created a spa at home kit and encouraged people to relax and de-stress. Reducing stress is also good for your immune system, which is a timely message.
- Pela Phone cases. This is one of my favorite examples. Cell phones are dirty. I’ve heard they are just as dirty as your toilet. The best and most sanitary method of using your phone is to wear a case one day and wash it the next. Pela Cases created a wear one, wash one BOGO sale.
- WFH sale - Huckberry. I have mad respect for Huckleberry's email game. Recently they created the WFH Sale and talked about the WFH Mullet. In case you don’t know what the WFH Mullet is, it’s business up top (for video conference calls) and party below. They used the WFH mullet to promote some new amazing sweaters.
Maximize Search and Shopping
During tight economic times, you don’t want to miss any now buyers. Those who are actively looking and shopping for your products, you can’t really afford to ignore. Missing opportunities is a bad idea but so is waste. That’s why you need to think beyond the keyword. While Google and Microsoft Search and Shopping ads are query or keyword based, you also need to consider the person behind the query. Here’s what you should be doing now.
- Sharpen the scalpel on your search term reports - We audit hundreds of eCommerce Google Ads accounts each year. We often see campaigns where it’s clear that no one is really paying attention to search terms. If search terms prove they are losers, add them as negatives. Adding negatives and adding in new keyword targets are the blocking and tackling of search advertising. Doing it well is imperative.
- Watch Google Trends. During times of uncertainty and certainly during times of crisis search behaviors change. Consider how Elderberry absolutely spiked during the Coronavirus pandemic.
- Remarket aggressively. You’ve already paid for first time visitors to come to your store. Now is not the time to “save money” by reducing remarketing efforts. By reducing remarketing you’re likely losing sales. Be smart about remarketing, but don’t cut your budgets. Instead consider these tips:
- Discovery Ad remarketing. Discovery ads are my current favorite ads for the Google Display Network. They’re a unique format and allow placements on YouTube, Gmail, and the Google App. We’ve often seen CPAs of 20-50% less for discovery ads than for standard display ads. Here’s what they look like.
- YouTube ads remarketing. If you aren’t running YouTube remarketing ads, you should be. At least target product detail page viewers and cart abandoners. Show them a video ad that offers more proof that your product is great and shows them why now is the time to buy.
Invest in Top of Funnel
At the time of publishing this article, YouTube and Facebook ad costs are down 20-40% depending on your audience. Costs will rise again, but now is the time to get in front of new shoppers. Build remarketing lists. Gain Subscribers. Promote offers. Now is the time to press ahead if you can.
- Free offers/Trial offers. This could be a free guide or webinar. It could be free training. It could also be an extended trial offer. Companies like Beach Body for fitness and Digital Marketer for online marketing training have both run successful FREE extended trial offers that have resulted in 10’s of thousands of new sign ups.
- Discounts and incentives. Can you offer a discount? If you can, and you can present it in a way that doesn’t hurt your brand, times of uncertainty can be great times to push and incentivize. Call it your own “stimulus package” and present it as a way to help out.
- Reason why ads. Maybe you don’t want to or can’t offer a discount. No problem. Just focus on your core message and emphasize why NOW is the time to consider your product. Talk features and benefits.
Though it may be tempting to cut costs and scale back on marketing, there are many ways to utilize your budgets wisely to grow your business, even in a downturn.