Published in Philippine Daily Inquirer, November 21, 2008
A GLOOMY ECONOMIC scenario, consumer lifestyles are expected to change. Businesses are likewise expected to adjust to these changes.
Marketers cannot operate the same way they did in robust times. The market becomes a buyers market and competition becomes even more cutthroat.
Todayâ€™s economic downturn is nearly the same as the 1930s great depression that hit the US but its scale and impact is much larger and more adverse. This is because 24 percent of the worldâ€™s GDP is from the US and many developed, developing and emergent markets rely on the US for trade. In the 1930s, global trade and financing such as the scale today was virtually non-existent.
Scenarios marketers face
Following are potential landscapes in an economic meltdown that marketers need to be aware of:
Contraction versus expansion. Marketers and businesses need to review their performance and operations with more detail. While expansion can happen even in an economic downturn, marketers must objectively and cautiously assess the demand side of the expansion. Nonperforming assets or liabilities need to dissolved or liquidated quickly.
Highly and sustained demand product and service lines need to be supported, if not built even more strongly. Now is the time to feed or reallocate more investments to star, even cash cow products or services. Extending your star productâ€™s glitter into new markets is wise where demand has been identified. Question mark products may have hidden opportunities after careful assessment.
Brand versus commodity. A buyers market happens when consumers become more cautious about the money they spend, when the level of demand and buying turnover has been drastically reduced, when there is far more supply than the market can sell and when buying inertia happens i.e. consumers are simply reluctant to spend. Occasions like these are opportunities for brands that have over time, spent building the trust and goodwill of consumers. In downtimes, consumers are likely to support reputable brands with more flexible value messaging and offer than generally unknown, generic items.
Optimistic spendthrift versus prudent, pessimistic consumers. When money easily flows in, credit is widely available and there is more disposable cash; consumers are naturally more optimistic to spend and buy. When people have to hang on to their jobs and are fearful of losing employment; and businesses are skeptical about consumer spending, consumer confidence to spend is compromised. Marketers face a challenging task to move consumers from their fear of spending to buying and consuming goods and services that are perceived as helpful or valuable even in their present mood state.
Reach versus focus. Marketing objectives have to be smarter and measurable in times of crisis. Consequently, use of marketing money must be more efficient and hardworking. Here comes an assessment of the brandâ€™s objective and target market â€“ is the brand at a brand building phase and thus, imminently general awareness must be created or is awareness sufficiently extensive among target consumers that it becomes more efficient to concentrate solely on the user market.
Media versus retail space. Integrated marketing communications including advertising on media and the retail space are complementary and pretty much implemented in bullish times. But when there is an economic crunch and money supply is tight; business owners need to prioritize expenses. Media aims to capture consumer awareness and create stock knowledge about a product or service. This ensures being part of the userâ€™s selection criteria and the consumers shopping list. Retail advertising is meant to disrupt the consumersâ€™ pre-planned purchase and encourage impulse or trial purchase in the store. In downtimes, mainstream consumers generally carry a list and their minds are made even before they enter the retail space.
Home versus out-of-home. Much has been said about the out-of-home retail space being the consumer battleground. In times of tight money supply, people are naturally watchful about their expenses and movements are largely restricted. But who is not to say that the home cannot be an ideal place to indulge even in an economic crisis. More attractive food delivery value offers, affordable in-home entertainment, do-it-yourself home spas, etc. can help sustain demand. In an economic crisis, the home is the next best alternative to indulge.
Economic substitutes versus indulgent products and services. Expectedly, in an economic downturn, there is weaker demand. But as long as there are people, there will be economic activity â€“ buyers and consumers. What is challenging for marketers is to convince the potential consumers to buy now and not later. Consumers are likely to listen to economic and value-driven brand stories rather than pure indulgence communication messages.
This is not to say that when there is a recession, it is with certainty that splurge products and services will not survive. Indulgence products and services have their opportunities too, in downtimes. Highly exclusive brands have the option to sell on mark-down basis or offer high-value, short-term offer collection lines or even bring back the retro, basic, starter designer models at a more affordable, premium pricing range.
Indulgence versus cause-related messaging. Exclusive, affluent brands can take on more substantive messaging in an economic crisis. This sends the signal that even the affluent market is grounded on more important issues that affect the world and humanity. Buying designer brands may not be bad especially if the exclusive brand takes concrete steps to alleviate world issues like climate change, poverty, healthcare, etc.