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This is the first of a two-part blog on marketing in a recession.

Our economy has taken a triple hit. First, we were buffeted by rising gas prices, then a wave of inflation that hadn’t been seen in 30 years, and then the current recession. For many, this “perfect economic storm” has changed our “personal rules” that anchor us and help us to simplify the tasks of managing our monthly and longer term budgets. People are thinking about what they didn’t have to think about. Just having to rethink your everyday purchasing tradeoffs will create anxiety and make life more stressful. In fact, there was a remarkable article in the NY Times that talked about the anxiety people are feeling who aren’t even directly financially impacted. It is a society-wide trauma.

People are rethinking value and making different tradeoffs that involve money and time. Private label market shares are steadily increasing. People are planning their shopping trips differently according to IRI. There is also a huge jump in traffic to websites that offer coupons and to coupon use. Bain and Company anticipates a 7% drop in worldwide luxury goods sales.

A key question is, “Will things go back to ‘normal’ when the economy improves?” I think it is impossible for three reasons, so marketers need to be at the top of their game to come out of the recession poised for growth.
1. Historically, private label brands do not give back all of their share gains after the recession ends (as documented by Prof. Jerry Tellis at the last ARF Conference.)
2. The media world, especially social media, will be so different when the economy recovers that there is no “normal” media environment to return to.
3. Consumers have been profoundly impacted by the feeling of deprivation and how they cope with that. This is the same conclusion reached in a recent article in The Economist. For example, those who have switched from national to store brands and are concluding that performance is acceptable, will be harder to switch back to national brands even when the economy rebounds. Those of us in our 50s or 60s, know how different our parents’ sense of frugality was because they lived through the depression.

Marketers need to use inspired research and listening methods to gain windows into the souls of today’s consumers and shoppers to position themselves for growth once the economy begins to rebound. That will be the focus of my next entry.

Next: Recession strategies for the short and long-term.

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Comments

5 Responses to “Marketing in a recession: people rethink what value means”

  1. Interesting post. I hope it is true (maybe the US will no longer be the disposable economy it has been…) but somehow I doubt it. I certainly agree with #2 – regardless of the recession. Also #1 to some degree (historical data shows it). But I’m not so convinced of #3. My grandparents raised families during the World Wars in England… and frugality became ingrained. I don’t think the average US consumer is there yet…. yes, they’re learning to do more with less right now because they have to. But I’ve a feeling when economic tides turn again many will go right back to their happy spending ways.

    FYI: here’s a recent article I’ve written on marketing in a recession: http://www.easy-marketing-strategies.com/marketing-in-a-recession.html

    Joanna

  2. I have a feeling that while many things will change, some things will remain the same. Major media agencies will continue to control aggregated buying and media distribution. There is simply too much money at stake for them to change. They will hold on to old models until Google starts a satellite Internet network free of local cable providers and telephone companies built on old media advertising and limited control.

    I may be exaggerating a bit, but like the record industry, until the primary method of distribution changes from cable, local radio and other physical “pipes”, old media will remain strong.

    Once someone can change the distribution model of media from a linear time based format to an fully on demand, anywhere, anytime, any device deliver system, then the old media structures will fall.

  3. [...] Inevitably the focus changes during a recession, and especially so during what some friends now refer to as TGR – The Great Recession. There is lots of material around at the moment; the most recent from the erudite Joel Rubinson Marketing in a recession; people rethink what value means – here. [...]

  4. All good points but a few thing are missing from your argument.

    First, while private labels are going strong(er) than brands, we have to see which are the ones losing market shares. Are they they to category leaders or runner ups or are they the third, forth or fifth brand? While all might lose shares, it is those who can’t afford the marketing, and R&D during these tough times that lose to the private labels the most. The big boys will do fine when this is over.

    Second, we have to look at pattern of behavior from decade to decade. I don’t believe that my son who is six and doesn’t understand what is going on and honestly doesn’t feel the pinch is going change his future behavior. Consumer behavior might change in the short run but in the long run, those that don’t remember will increase there spending when the economy is good. Most won’t remember this long term. As a person in his 30′s, i can’t remember any other recession affecting me. Paco Underhill was quoted as saying like (and I paraphrase) 1/3 are in trouble, 1/3 know someone in trouble and 1/3 are just being cautious. That means 2/3 are just being cautious and in time will return to a n% of the old activity.

    Third, while this recession is long, it is by no means the longest or hardest (as of today, this can change if it goes longer) and it is far from the Depression. You can’t compare 25% unemployment to 10% unemployment; that 15% makes a huge difference.

  5. [...] features in one of its discussions the two-part series of  Marketing in a Recession. This is again another case where we can see the thin line separating marketing and customer [...]