Recessions see lowered economic activity impacting all players of the economy. Importantly, recessions imply that consumers have less purchasing power and therefore changes the environment in which they make purchasing decisions.
This poses a unique challenge to companies seeking to retain their existing customers and acquire new ones. To do this, during these uncertain times, it is even more important for companies to develop a strong understanding of their customers’ changing needs to help create advertising that is reflective of these insights.
The three layers to understand your audience in a recession:
Layer 1: General Insights
Recessions are characterised by predictable patterns of consumer behaviour.
1. Reduction of non-essential purchases – with lower purchasing-power, customers feel that their need for financial safety is under threat, so they may reduce non-essential spending. For example, UK homes are cancelling streaming services to balance their budget and less customers are going to pubs, making them halve their offering. This tendency has been slightly mitigated by some customers tapping into their pandemic savings, however, the longer and more severe the recession, the more these non-essential spendings will reduce.
2. Disruption of habits – external large-scale events, such as recessions, have the ability to disrupt existing habits and lay the foundations for new ones, meaning we can expect customers to spend less money eating out, and instead, cook at home to save money. Although this will pose a challenge to restaurants, it could be seen as an opportunity for supermarkets and grocery delivery services, as well as influencers in the business of providing cooking tips and lessons.
3. Intentionality – the reduced purchasing power leads to higher levels of intentionality, with more customers actively considering the options available of shops and competing brands. For example, instead of heading to their local Sainsbury’s, customers may decide to order their food online or make a trip to a superstore to save money. Price and promotions will become a strong factor in influencing decision making, meaning customers may buy non-perishable products in bulk and may wait for non-essential products to be on promotion before buying.
4. Habit Discontinuity – during times of uncertainty, consumers will alter their behaviours in predictable ways. Consumers are especially prone to look to authority figures and peers before making purchasing decisions. At worst, toilet paper panic buying during the Covid-19 pandemic well-illustrates this point. At best, brands and marketing professionals can use these insights to help customers make decisions that benefit them. These insights set the scene in understanding your audiences during a recession and the general patterns influencing their purchasing decisions.
Layer 2: Category specific insights
In times of economic downturn, some sectors are affected more than others. It is important to understand where your brand sits, as well as your customer’s behaviour within that context. Sectors can broadly be categorised by 3 main groups:
1. Victims – consumer behaviour is largely changed resulting in reduced spending. Consider how businesses fared during the pandemic, sectors such as entertainment, transport and brick-and-mortar retail struggled to stay afloat. This was largely due to lockdowns where consumers did not have the ability to make use of these services. In an upcoming recession, it is likely that sectors such as entertainment (especially theatre and concerts), furniture and potentially ready food delivery services (including meal box subscriptions and takeaways) may suffer as consumers reduce any non-essential spending, whilst actively seeking cheaper alternatives for these.
2. Survivors – consumer spending is largely unaffected as goods and services are perceived to be essential in maintaining a certain standard of living. However with that being said, consumers are likely to spend with higher levels of intentionality meaning that we will see small shifts in behaviour as opposed to large behavioural change. Consumers will be on the lookout for promotions, discounts and bargains whilst being open to trading down where possible. Experts predict that sectors such as sporting events, fitness and home improvement are likely to sit within this category.
3. Thrivers – consumer behaviour largely changes resulting in an increase of spending. We tend to think that all sectors suffer during a recession but this simply isn’t true. During times of financial crisis brands may assume that customers will refrain from any indulgent purchases, but the data suggests that this isn’t the case. In fact, research shows that in times of stress, people are actually more likely to make indulgent purchases. This is a behaviour that has been captured across a range of studies and has now been coined “the lipstick effect”. What one consumer group defines as essential will vary from another group. Luxury brands as well as other retail brands may be in higher demand during a recession as consumers feel the need to treat themselves.
Layer 3: Brand specific insights
Insights into the impact of recessions and sectors are essential to gauging your audience, however, they are not sufficient on their own. For example, while insights into FMCG brands are crucial, individual brands differ significantly – the USP and the clientele of Tesco and Waitrose are markedly different. You need to go a step further to truly understand your customers.
As a cue, customers greatly reward brands that recognise their needs and wants, as they are able to connect them on an emotional level. 62% of British customers say that they would repeatedly buy from a brand that makes them feel heard.
So, listening to customers and picking out the signals of shifting priorities and needs are of utmost importance. With strong external factors, customers may openly reveal what’s going on in their heads, or depending on the topic they may implicitly give it away with a change in their language and tonality.
In an age of omnipresent advertising, these insights are crucial to create adverts that resonate with the customers to cut through the clutter.
At Behave, we use a range of methodologies to uncover actionable insights for your brand. Whether it’s using a more traditional approach where we ask people to openly share their experiences, or a more bespoke solution using advanced behavioural technologies. We can dive into real-world conversations through social listening to identify key moments, trends, and emerging themes discussed by your consumers. And going a step further, we can uncover their unconscious responses using biometric research.