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Marketing teams around the world are thinking long and hard about the “R” word. From New York to London, it’s hard to avoid stories that predict an upcoming recession. This report from the World Bank warning that the risk of a global recession in 2023 continues to rise is just one recent example.

Amid such forecasts, marketers are asking some fundamental questions as they fight to retain their budget. Conversations we’ve had with heads of growth and customer acquisition at e-commerce and direct-to-consumer brands have revealed they are under pressure from the C-suite to help them navigate the uncertain macroeconomic environment. In particular, they want to know: How will a recession impact my business? What can I do now to soften the blow?

Economic predictions, including those that aim to determine which indicators will anticipate how a specific brand is impacted by events such as a recession, are notoriously difficult to get right. But there are techniques that can be employed to help marketers prepare for what might be coming down the track.

How to estimate the impact of a downturn

For one client, Gain Theory used a “composite series” comprised of various time series selected from a wide range of economic indicators and sectors. Based on this, we were able to estimate the decline that an economic downturn between September 2022 and March 2023 would have on two KPIs – total order volume and the number of customers signing up for their service – at varying degrees of confidence.

Knowing the impact of events on key metrics is important, but it’s just as crucial to have a plan of action that enables you to mitigate any deviations from business goals and expectations from the C-suite.

Based on the modeling, we recommended our client increase their media budget in Q4 2022 and provided them with an appropriate mix of channels, partners and publishers they should target. Instead of purely focusing on growing the market, which is less realistic in the current circumstances, we put more emphasis on protecting and growing market share against targeted competitors.

The importance of using hindsight, insight and foresight

But we don’t just rely on foresight. Experience gained by working with brands during the last global recession in 2009 has informed many of Gain Theory’s recommendations to current clients. As well as knowing what the impact on a brand might be, for example, we know that shifts often happen on a consumer and segment level, which is why the right mix and distribution of the incremental budget is key.

History shows that customers who purchase less frequently and spend less on average can disappear, while others are likely to reduce either frequency or basket size. The flip side is that businesses can gain new customers who are trading down from more premium brands or are altering their behavior. Think about those consumers who, when inflation rises, move to a supermarket that offers more value brands, choose to order takeout instead of visiting a restaurant in person, or trade down from a premium spirit brand to a mid-range alternative.

To understand the impact of these different purchase behaviors, we can simulate potential scenarios. This helps to inform how to adjust media messaging, creative, promotions, and pricing strategies to maximize the potential of these changes in behavior. For example, messaging to existing customers can be tweaked to raise awareness of products that cost less or highlight promotions, free trials can be promoted to take advantage of potential new customers, and sign-up processes can be simplified to make switching quicker and easier.

Why “wait and see” is not a strategy

We understand that these are worrying times for marketers and the brands they work for. But waiting to see what will happen is not a strategy. The good news is that the proactive steps outlined above enable brands to ensure their business is in the best possible shape, whatever the economic picture looks like in the future.

Using data-informed analysis of how KPIs will be impacted and a practical plan of action to adjust marketing campaigns, ambitious brands can deliver growth even in a recession. Contact us to learn more.

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