April 28 2009|05.37 PM UTC

Stan Reybern

12 Ways Companies are Reacting to the Recession

Category: Personal FinanceTags: , ,

Recessions mean big changes for everyone and everything, including the marketing campaigns businesses use to reach customers. During economic downturns, the “same old, same old” advertising that carry businesses through prosperous times simply will not cut it. Our current recession is no exception, as businesses take to the Internet, radio, television, and billboards with marketing tactics that target the needs and concerns of consumers under duress rather than the products themselves. Here are twelve examples of such recession marketing strategies, as well as the companies known to employ them.

Ads That Explicitly Emphasize Money or Savings

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While plenty of companies advertise the savings of using their products or services, during a recession this tactic can become paramount. It’s no secret that jobs are being lost by the thousands each month, and anything that offers the prospect of saving people money holds great appeal. This insight has led to the creation of marketing campaigns almost exclusively centered around the savings aspect of the company’s offerings, rather than the quality or the nature of the product. In short, these ads, as the one above simply are meant to communicate to the customer, “If you use our service, you will save money.”

Who’s doing it?

One of the most widespread savings-themed marketing campaigns currently making the rounds is the “This is the money you could be saving with Geico” ads (pictured above). In these adverts, a stack of money with eyeballs is shown following people around on airplanes, on dates, and in their cars, explaining that switching to Geico saves people money. No mention of better coverage or customer service is involved. In fact, an individual could watch these commercials and not even know that Geico was a car insurance company.

Relentlessly Focusing on Value (instead of features or luxury)

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Brands built on perceptions of luxury and prestige often find that consumers are less swayed by these things during tough economic times. When this becomes apparent, luxury-based brands often begin to modify their advertising in efforts to portray their product or service as being a good value for the money spent (in addition to possessing the luxurious qualities their ads were emphasizing before.) The angle is therefore to make otherwise luxurious product seem like it can now be had at an unbeatable price, rather than the  product is worth it’s high-end price tag.

Who’s doing it?

Luxury car makers are a primary exemplar of this tactic, with everyone from BMW to Lexus running ads that tout their vehicles as a good value when factors such as ‘total cost of ownership’ are taken into account. Fuel economy has also been stressed as important for its ability to save consumers money at the pump.

Bundling Products or Services to Boost Perceived Value

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Another hallmark of recession marketing is the bundling of products and services into one common offering. The aim is to portray a higher cumulative value with a package deal, than if the products or services are possessed individually. Since it’s easier to sell one product or service at one price than multiple ones at multiple prices, this tactic is a tried-and-true sales booster.

Who’s doing it?

The companies using this tactic most aggressively are cable, phone, and Internet providers striving to offer all 3 services for one flat monthly rate. Heavy promotion of Optimum’s Triple Play and AT&T’s U-Verse packages are ongoing and should see significant exposure for the duration of the recession.

Increased Use of Coupon Advertising

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The current financial meltdown has seen a resurgence in coupon clipping, even though several years ago, most people thought this was outdated habit from a bygone era. According to the most recently analyzed data, Americans used roughly 10% more coupons in the fourth quarter of 2008 than in the earlier quarters. This number has undoubtedly grown as the economic landscape has further worsened in the last several months. This, in turn, has led more advertisers to utilize the coupon strategy in their campaigns.

Who’s doing it?

Grocery and retail stores (pictured above) are the original coupon kings, and many of them have embraced a return to heavy coupon promotions. However, it is worth noting that other types of businesses have jumped on the coupon bandwagon, including restaurants, cable providers, and other service-based businesses.

Ads That Emphasize Family Values and Situations

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When the threat of job loss or economic catastrophe looms, the first thing a breadwinner fears for is the well-being of his family. How will they be provided for? Will painful sacrifices be necessary? These and similar questions plague the minds of adults during recessions, and this helps to explain the effectiveness of ads that target family needs, concerns and solidarity.

Who’s doing it?

Wireless phone providers are famous for showing families in advertisements for their “family plan” wireless packages. Insurance companies are another frequent source of family-themed ads which portray signing up for a policy as a means of keeping one’s family safe from disaster.

Direct Price Competition

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One of the most obvious truths of any recession is that consumers become more cost-conscious. For many, every dollar is seen in a new, scarce light, leading merchants of all kinds to cut prices as close to the bone as possible. Some companies have recently changed their policies to include price matching, but in any case price-cutting tactics have been known to be one of the most effective methods by which companies advertise in a recession. The reason, because people want to save money.

Who’s doing it?

Pictured above is an ad from a hardware store pledging to beat prices from Home Depot or Lowes. Such ads are also commonly seen at automotive retailers like Town Fair Tire and AutoZone. Check out this link to see a list of other retailers that offer price-matching, or price guarantees.

More Direct Response and Less Branding

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Common wisdom says that pointless impulse purchases should be minimal or non-existent, especially during a recession. Yet according to the Daily Princetonian, sales via direct-response infomercials are thriving. Profits are up for the makers of ‘Awesome Augers’, ‘Sham-Wows’, as these and other similarly hyped products are being sold by the thousands. The reason: the airtime for infomercials (which are not given any guaranteed time for when they will run) are typically cheaper versus traditional commercials. As a result, their marketing/advertising budgets are less and thus their margins are greater.

Who’s doing it?

Enthusiastic, high-energy pitchmen like Billy Mays and Vince Offer are claiming the bulk of direct response infomercial sales, but these are not the only profits being had. Direct response mediums of all kinds (e-mail, direct mail, telemarketing, postcards, etc.) are often found to be outperforming traditional “image”-based advertising that strives to portray companies favorably without calling for action.

Openly Discussing the Recession in Ads

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Some companies have faced up to the recession without hesitation, going so far as to make it the centerpiece of their ad campaigns. This can take the form of offering “recession specials”, or by otherwise playing on the theme of economic struggle, to position their product or service as desirable in light of it. The core of this strategy is an attempt to empathize with customers by acknowledging their hardships and concerns while at the same time, encouraging customers to buy their products.

Who’s doing it?

While virtually any merchant could incorporate the recession into their ads, it has to this point been used most often by retailers, restaurants, and other businesses whose products could be seen as “non-essential” during hard times.

Portraying Competitors as Too Expensive or Undesirable

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One particularly shrewd and aggressive tactic is using the recession to cast one’s competitors in a negative light. This is especially effective when competitors are known for their high prices; this strategy puts them on the defensive, coaxing customers to see their pricing as out of touch with reality and portraying one’s own products or services as much more affordable.

Who’s doing it?

Microsoft’s latest ad campaign features a video with the basic theme is that it’s “uncool” to buy a Mac during a recession. This point is hammered home by following a shopper on a mission to buy a laptop for under $1,000. The actress visits a Mac store, but finds just one laptop (an unsatisfactory one at that) for less than her budget. Shortly thereafter, she is shown going to other retailers, where she is able to find many affordable laptops that run Windows, for well under $1,000. You can watch the video here.

Guarantees That Kick in if The Buyer Loses His/Her Job

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One thing that all marketing campaigns must do is overcome objections, and in 2009, a very common objection is, “what if I lose my job and cannot continue making payments on this?” In response, certain types of businesses (particularly those offering very expensive products that are paid off over time) may offer to buy back the item if the buyer losers their job and cannot continue to pay. Other variations include companies that will take over payments for their customers (should they find themselves abruptly unemployed) until they are able to do so themselves.

Who’s doing it?

Car companies such as Hyundai and Lincoln are pinning their hopes on assurance programs that promise to buy back the vehicle of any new buyer who loses his job and finds himself unable to pay. On the other hand, Saturn offers to make the payments on your car for you – if you are unable to make your payments – for up to nine months (up to $500/mo). While we have yet to see this tactic used by non-car companies, it could plausibly be applied by anyone selling a major, paid-for-over-time item.

Offering no-Interest Financing

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Offering financing is a common and effective means of increasing sales (and also make more $$), but during a recession, this may not be enough. Consumers are weary of paying interest on the money they borrow to make major purchases, especially with all of the talk of rapidly devaluing currencies, as well as that of the current economy further worsening. This has led many merchants to offer low-interest and no-interest financing deals along with their products as an incentive for purchasing.

Who’s doing it?

No-interest financing deals are typically offered by businesses selling major, paid-over-time purchases like cars, motorcycles, and ride-on lawn mowers. Such deals are also offered by computer and entertainment center retailers. Even though no-interest financing is typically contingent on an individual’s credit, this type of marketing is used to sell products to customers with all types of fico scores.

Rewarding Repeat Customers

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An age-old adage in marketing is that it’s easier to sell to existing customers than it is to go out and find new ones. This has given rise to the recession marketing strategy of rewarding repeat customers with discounts, loyalty programs, and other forms of preferential treatment.

Who’s doing it?

Customer loyalty programs are used in service businesses where repeat business is critical to profitability. If sales are slipping, such businesses are well-served to focus on pleasing and retaining existing customers, rather than going broke trying to advertise for new ones. Zappos.com is one of the most noted companies to employ these tactics, as they offer a 365-day return policy. They also try and surprise most customers with free overnight shipping, even though free ground shipping is advertised as being included free with their purchase and overnight shipping is usually in the domain of their Zappos VIP service. Their ethos is to ‘wow’ first-time customers into becoming return customers.

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{ 1 comment… read it below or add one }

Wojciech @ Fiscal Fizzle April 29, 2009 at 4:13 am

The nice thing is – all of these result in some pretty good price and incentive benefits to the buyer. If there’s anything a recession is good for, it’s getting good deals. Now, if we only had some money stashed away…

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