Franz Fontaine, Vice President of Strategy at Bloom, recaps the content of this article in this video, explaining how ecommerce brands should approach the holiday shopping season during an economic downturn.
I’m sure the uncertain global economic outlook has been top of mind for many businesses in the last few months. The macroeconomic headwinds are strong. With interest rates rising, the war in Ukraine, inflation reaching staggering levels, most expect a recession to hit in the next 12 months, some would say we are already in one.
Consumers are worried and throughout a downturn, they typically reevaluate their consumption priorities. Most consumers become more price sensitive and less brand loyal during recessions. Despite the post-pandemic momentum, it is expected that low-income and vulnerable consumers will cut most of their spending on non-essential goods. As for higher income people, they might delay purchasing big ticket items, or seek better quality for the price.
And, this change in shopping behaviours might have an impact on your holiday sales and profit.
As a business owner, or a marketer, your first reflex might be to cut down on your marketing budget this year. And, I get that, because marketing costs can be trimmed quickly. Much more quickly than other expenses. We’ve seen this happen in 2008 and in March 2020 and we aren’t the only ones, Gartner, Forbes and the Harvard Business Review all say the same thing.
That said, there are tons of research, some even dating back to almost 100 years ago, saying that cutting your marketing budget isn’t the way to go during a recession. They actually say that advertisers that maintained or grew their ad spending increased sales and market share during the recession and afterwards. And, most importantly, they did so at a lower cost than during good times.
There are other things that you can do, as a brand, to navigate these challenging times without slashing your marketing budget, especially during this busiest shopping season of the year.
First, you don’t want to cut necessary marketing spend, but you do want to weed out inefficiencies.
- For example, you want to make sure that you are accurately tracking conversions and actions on your site. Tracking, measurement and attribution all have changed a lot over the last year, so make sure your web analytic strategy is up-to-date and utilizes new features like the Facebook Conversion API or Google Enhanced Conversions. You’ll want to make test purchases and audit your tracking as soon as possible.
- Then, deep-dive into your campaigns to find wasted resources, like irrelevant search terms that are costing you money or underperforming audiences.
Second, try to reduce as much friction and indecision to capture wallet share quickly during the holiday season.
Facebook, Google, Pinterest, all say that consumers are starting their holiday shopping early this year and they’ll be on the lookout for the best deals. So, don’t wait until the last minute to start advertising short-term price incentives like coupons and discounts. Also note that in 2021 sales were less concentrated in Cyber Week than prior years.
To help consumers pull the trigger on their purchase, companies can also reduce the thresholds for quantity discounts and free shipping or offer flexible payment options. Additionally, make sure your copy creates a sense of urgency or scarcity.
You’ll also want to build on trust and engagement to avoid competing on low prices alone. That’s where creative and branding come in.
During a recession, you don’t want to make the mistake of allocating all your media investment in performance campaigns. Performance and conversion-driven campaigns are great at achieving instant ROI and short-term sales, but they aren’t sustainable without a strong brand marketing strategy.
So, prior to this year’s Mega Shopping Days like Black Friday and Cyber Monday, make sure you are investing in brand building initiatives to increase awareness and discovery. They can take a variety of forms, such as relatable social media content or brand awareness campaigns that emphasize your brand’s rational and emotional benefits. This will help feed your performance marketing campaigns during the holiday season and beyond.
In short, navigating a recession or an economic downturn isn’t easy, but brands that are agile and continue to invest in their growth have the best odds of success coming out of it.