Consumers everywhere are cutting back on purchases.
The most recent consumer price index, the standard measure of inflation, found that the cost of food is up more than 11% since this time last year. This represents the largest one-year increase since May 1979.
Unfortunately, there is little hope things will improve soon. A confluence of factors, including the remnants of COVID lockdowns, the war in Ukraine, the global food crisis, and Europe’s energy shortage, are responsible for the current situation.
As brand marketers in many industries are scrambling to adjust to reduced consumer spending habits, many have found retail media networks (RMNs) to be a light at the end of a dark tunnel.
These innovative networks of online platforms, in-store ads, and multi-channel media are offering consumers exactly what they need when everyone is tightening their belts. Namely, access to coupons, promotions, and sales for products they need.
Still, establishing your own retail media network takes time and effort, especially for smaller businesses. Likewise, small- or medium-sized brands can have a hard time navigating the many RMNs available.
Is the cost worth it?
In this guide, you will learn how to increase sales during a recession – and why that starts with marketing in a recession.
What is a Recession?
This is a period of general economic decline caused by widespread reductions in spending.
Recessions are periodic and temporary. Economists consider two quarters in a row of falling GDP to constitute an official recession.
As of the writing, the U.S. economy is not in a recession. However, economic growth could turn around as The Federal Reserve continues to raise interest rates to slow down inflation.
For now, inflation is the most pressing issue facing U.S. consumers, global brands, and retailers.
Marketing in a Recession in 2022
Recession or not, it’s clear that consumers are trying to spend less today.
During times of economic uncertainty, brands often cut their marketing spending first.
The logic is sound: consumers are spending less, so they should be less receptive to advertising, and you can save money from a business standpoint by eliminating useless ads.
Don’t be fooled.
Cutting marketing in a recession is not only a bad idea, but you should actually consider increasing your marketing spend.
The reason is simple: consumers may be buying less, but they are more responsive to certain types of ads when on stricter budgets.
Sales, promotions, and coupons reign supreme in the marketing landscape in 2022.
The Outcomes of Advertising in a Recession
There is a simple logic behind the idea that advertising even when people are temporarily unable to buy your product is a good thing.
Consider the following:
- Other companies will be cutting marketing budgets during recessions. This leaves ad space for you to take up.
- A reduction in demand for advertising platforms means ad spots should become less expensive, effectively increasing your advertising ROI from both ends of the equation.
- Consumers don’t stop spending altogether – they just slow down.
- Recessions are temporary. Your company needs to remain on people’s minds during the downturn so that you’ll be the first name they think of when things get better.
There are decades of research showing that advertising during recessions – or times of general economic downturn – results in increased sales.
A study by McGraw-Hill on the 1981-82 recession found that companies that advertised aggressively despite recession saw a 256% sales lift over companies that paused ads!
These results are extraordinary, and subsequent studies have continuously shown large and sustained sales lifts from companies that keep advertising even when times are tough.
How to Market During a Recession
The best business strategy during recessions is creating ads that inform the public about sales, promotions, or coupons. Anything that can help customers save money.
Identifying these products and designing promotions based on them is a key function of a retail media network.
During times of economic uncertainty, efficiency is the name of the game.
Your business will need to work harder and smarter for every dollar. There is less spending, meaning less revenue and less forgiveness for mistakes on ad spends and promotions.
However, there is also a tremendous opportunity to increase your brand presence and awareness by capitalizing on the lack of advertising from competitors.
Here is how to increase return on ad spend while marketing in a recession:
1. Focus on Webpages and Mobile Apps
Online advertising is extremely effective. 88% of consumers say they sometimes or frequently notice brand advertising on websites and apps (eMarketer). Additionally, 48% use retailer websites and apps to find promotions, deals, or coupons. In fact, this is the most frequent use for these platforms.
Webpages and apps are ideal places to target ads, too, given that online shoppers are far more likely to be members of a loyalty program where they share their data. This data allows retailers to direct relevant ads to customers.
Worried about appearing a little too much like “big brother” by advertising specific products based on consumer data? Worry not: 77% of shoppers partially agree they enjoy it when retailers advertise products that they purchased in the past.
2. Improve Ad Targeting
It’s no secret that customers prefer personalized experiences, including targeted ads. It’s also true that targeting ads effectively means spending less time and resources sending ads to people who don’t care about it.
To effectively target ads, you’ll need a lot of customer data. You’ll want to collect this data at every step of the process, from consumer browsing to checkout, to optimize which ads you send to which customers and when.
3. Engage in Multiple Formats and Channels
You need to go to where customers are to meet them. If you’re only advertising on a single channel, you’re missing out on the several potential customers that don’t use that channel.
If you focus too much on one channel, you’re bound to see your ROI fall over time as that channel becomes more and more saturated with customers who have already seen your ads.
Companies that engage with multiple media formats and use multiple media formats for their ads see the best returns on their advertising spend during recessions.
4. Optimize Ad Spending by Region
Economic difficulties don’t affect everyone equally. Certain parts of the world may still have disposable income while others are hunkering down and closing their wallets.
Even during economic prosperity, focusing on optimization is the best method for learning how to decrease ad spend while improving ROI.
You’ll need sophisticated consumer data and analysis that reveals insights like what part of the country is still spending money on your products. A low ROI might not be a sign of ineffectiveness in advertising, but perhaps too little of it.
Retail Media Networks Tick All the Boxes
eMarketer’s recent report on grocery inflation revealed some key insights for brand marketers.
For example, the fact that 59% of survey respondents said they’re purchasing more on-sale items than before.
44% of consumers have begun using more coupons to deal with the cost of inflation, while 20% have signed up for free loyalty programs.
These phenomena fit perfectly into the framework of retail media networks, where the main draw for consumers is the ability to find highly relevant products from retailers they already know and trust.
RMNs enable this because they generate massive amounts of consumer data to enable product research and sales that companies without them have a hard time matching.
How RMNs Generate Loyalty
Picture a customer who has given up on affording a product they often used to enjoy.
Your RMN knows about their preferences thanks to your consumer data, and your aggressive multi-channel marketing can place ads in places the customer cares about, like their email inbox.
A message about a sale on the item from his favorite retailer could convince them they can afford it again. The gratitude this customer will feel from being able to get that product back in their life will generate invaluable trust and loyalty.
Can you accomplish this without an RMN? Yes, but without the existing framework of data collection, research, and direct ad targeting from an RMN, it’s going to take a lot of work.
The Pros and Cons of Hiring an Advertising Agency
If you’re a brand marketer who is unfamiliar with RMNs, you’ll soon learn how diverse they can be.
Each retail media network has its own formats, customer base, products, and competition to consider.
As much work as it is to efficiently advertise without the benefit of a retail media network to guide you, it can take just as much work to manage a quality RMN.
An experienced agency can navigate these troubles for you, but they’ll come with extra costs that may make you pause.
The Pros of Working with an Agency in the Age of RMNs
- Agencies know how to manage RMNs from all retailers. If they don’t know, they’ll take the time to learn themselves since that’s what you’re paying them for.
- You won’t need to worry about pausing advertising or do anything about advertising besides working with the agency.
- You’ll never need to worry about how to target ads using RMN data.
- Dealing with the many RMNs today consumes a ton of time and resources that could be better spent elsewhere. An agency can do this work for you.
The Cons: Why You May Want to Go It Alone
- Advertising agencies are not free. Hiring one may actually represent an increase in your short-term marketing spending.
- ROI is not guaranteed. This makes some uncomfortable, especially when you’re not directly involved in every step of marketing.
- You may miss opportunities to form personal relationships with retailers, since a middleman will be doing much of the communication for you.
FAQ About Marketing in a Recession
Here are some questions internet users often ask about marketing in a recession.
How Do You Market During a Recession?
Focus on increasing efficiency on all fronts. This means better ad targeting, multi-channel engagement, and designing sales and promotions your customers will find relevant and enticing.
Should You Advertise During a Recession?
Decades of research have shown that the answer to this question is a resounding yes. Spending on advertising during a recession results in massive sales lift.
How Does a Recession Affect Marketing?
As spending slows down, many companies cut their marketing budgets quickly. This leaves openings for companies that are still advertising. However, these ads need to be more efficient for the ROI to make sense.
What Markets Do Well in a Recession?
Inelastic goods like healthcare, food, fuel, and other consumer staples always perform well during recessions. In general, if there’s a product people can’t live without, it’s probably doing well despite economic difficulties.
What Falls Most in a Recession?
Industries producing luxury items that people don’t really need tend to suffer during downturns. When things get really severe, like with the current increase in food prices, people will tend to avoid products that spoil easily.
What Should You Avoid During a Recession?
Avoid the urge to skimp on advertising budgets. You also want to avoid inefficiency since you’ll need to work harder for every dollar you make.
You Should Continue B2B Marketing in a Recession, and E29 Can Help
E29 is a team of experienced advertising executives who understand retail media networks on a fundamental level.
From capturing data to sifting through it and designing creative advertising campaigns, E29 can help your business navigate the evolving media landscape.
Our shopper marketing, marketing analytics, and digital advertising expertise make us ideal candidates for brands that are wary about the time and effort it will take to work with retail media networks.
We pride ourselves on our commitment to partnership and look forward to the opportunity to grow alongside your business.
Contact our team today to learn more about how E29 can manage your retail media networks and take on your advertising work.