As we discussed in Part 1 of Marketing during a Recession, marketing is critical to your business's survival. In Part 2, we discuss how understanding consumer spending during a recession can help you create an effective marketing strategy. 

Consumers are the key drivers of your business. Your business performs better when consumers spend more money at your company. The key to high-return marketing understanding during a recession is knowing how consumers spend their money.

Recessions are characterized by unemployment, low wages, and inflation, which reduce consumer spending. As Americans brace for a possible 2023 recession, understanding consumer spending habits can help you survive and increase your market share in the long run. 

Why You Should Understand Consumer Spending during a Recession

Here are some reasons why understanding consumer spending during a recession is important:

1. Consumers Are Key to Business Survival

Successful organizations build their marketing strategies based on consumer behavior data. Marketing is not about your goals and ideas but about what customers want. You can encourage consumer spending during a recession by understanding consumer spending habits.

2. Informs Marketing Planning

To increase or create product demand, you should adapt your marketing strategy to consumer spending habits during a recession. For instance, your marketing message should address specific consumer pain points. You can also adjust your product lines to deliver what consumers want.

3. Ensures Customer Satisfaction

Competition among businesses is normally high during recessions as customers become pickier in their purchase choices. Knowing your customers can help you create a better customer experience to keep and attract loyal customers. 

What Consumer Spending during a Recession Looks Like 

1. Consumers Cut Back Spending

Consumer spending during a recession tends to be more cautious as the costs of goods and services rise. According to a poll, 64% of consumers would decrease their budget in case of a recession.

Consumers also try out cheaper alternatives and may stick with the new products in the long run. To maintain brand loyalty, you need to implement strategies such as focusing on value, creating unforgettable customer experiences, and practicing empathetic marketing. 

2. Consumers Focus on Essential Goods

Consumer spending during a recession moves toward self-preservation, allocating more to essential goods and cutting back on discretionary ones. The demand for services such as leisure, travel, and entertainment subsides. 

Consumers will likely spend more on essential goods such as food and groceries, housing bills, and personal care products. Healthcare is also necessary during a recession. Brands can benefit from maintaining consistent messaging of essential goods. 

3. Customers Still Demand Non-Essential Services 

While consumer spending during a recession decreases because of tight budgets, people still have some dollars to spare for non-essential services. Research on consumer habits indicates that over 10% of consumers spend on digital entertainment, while 7% go to restaurants to eat. A higher percentage of consumers, 16%, still spend money on clothes and apparel.

If you sell non-essential products, persuasive, value-based marketing can help you increase sales. 

4. Customers Love a Good Bargain

Consumers actively seek out bargains during recessions. Many shoppers head to the internet to find a good deal and get easy access to products. Other research by Paul Flatters and Michael Willmott of Trajectory and McKinsey indicates that consumers' thrifty behavior and mindset can continue up to two years post-recession. 

How to Adapt to Changes in Consumer Behavior and Habits

Here are some of the ways you can change your marketing habits to suit consumer's needs:

1. Market Essential and Affordable Products More

Consumer spending during a recession is more focused on essential products rather than luxuries. A recession is a perfect time to increase marketing and boost sales for your essential products. Marketing your most affordable products can also be a good strategy to increase sales during a recession. 

Consider discount options for other products. You can do that without hurting your business by:

• Giving new customers a special offer
• Rewarding loyal customers
• Giving early-bird discounts for new products
• Rewarding referrals
• Retargeting visitors with a special offer

2. Focus on Value

It won't be easy to persuade people to buy non-essential products. Consumer spending during a recession focuses on getting the most value for their money. Highlight a product's necessity in solving your customer's problems.

User-generated content (UGC) and storytelling that connects with your target audience can be useful value-based marketing strategies. 

3. Embrace Your Core Message

Maintaining brand loyalty during a recession can be an uphill task as consumers look all over for cheaper products. 

You can maintain loyalty by defining and communicating your value proposition. Studies indicate that 77% of consumers buy from brands that share their values. So, go beyond performance campaigns to help your customers understand your vision and values to build a foundation for the future.

For example, the outdoor clothing and gear company and 1 billion dollar powerhouse, Patagonia, was known for its strong mission, “We're in business to save our home planet.”

4. Demonstrate Empathy

According to a Marketing Daily report, three-quarters of consumers are keen on how brands respond during a crisis that affects future purchases. To survive a recession, you must reinforce an emotional connection to your brand and demonstrate empathy through advertising and comforting messages. 

Step into your customers' shoes to understand how their pain points affect consumer spending during a recession and include that in your marketing messaging. For instance, during the 2020 COVID-19 pandemic, 38% of consumers deemed humor in marketing insensitive. 

5. Update Research on Your Ideal Customer

Conduct research to understand how your ideal customer's preferences have changed during the recession. While customer loyalty programs are valuable tools, they may be ineffective if they do not meet your customers' needs.

Find out why your ideal customer is shopping, what they need, and how your brand can meet their needs. One effective way to get information is to collect feedback from customers who purchase your product. Use the feedback to inform your future marketing strategy. 

6. Enhance the Customer Experience

Customers value human experiences more than ever. 58% of consumers will pass a brand that provides a poor customer experience. Creating an experience doesn't have to be costly. It's the little things that help customers connect with your brand. For instance, regularly keeping in touch with your loyal customers shows them that you care. 

Takeaway: Understanding Consumer Spending Habits Equals Effective Marketing

Consumer spending during a recession focuses on buying essential items. While consumers will think twice before splurging their money on discretionary items, there will still be demand for non-essentials.

You can survive a recession and secure long-term growth by implementing marketing strategies that align with your customers' needs. These strategies include value-based marketing, improved customer experience, empathy in marketing, and focusing on your core message. Viral Solutions is a full-service marketing agency that uses concrete data to market your business. We help you create a solid marketing plan to see your business thrive through the seasons. Request a free consultation with us today to get the most value out of your marketing.