Marketers need to make the best of the current circumstances by tuning into consumers’ economic anxieties and concerns. Here are three strategies to consider.
Regardless of whether the US is technically in a recession already or not, the majority of Americans have been under increasing economic pressure for a while already due to the highest inflation in 40 years, which is dramatically eroding their purchasing power.
Despite the fact that many of the forces driving inflation are well outside of the Federal Reserve’s sphere of influence — the pandemic, the national housing shortage, Russia’s war against Ukraine, snarled global supply chains, etc. — the Fed is committed to additional steep rate hikes. Higher interest rates on mortgages, credit cards and other loans will reduce economic activity, almost guaranteeing a recession by the end of next year.
In the meantime, marketers need to make the best of the current circumstances by tuning into consumers’ economic anxieties and concerns. Here are three strategies to consider:
Optimize For More Deal-Seekers
As belts tighten, more people look for deals. According to Numerator research, 50% of consumers plan to seek out additional discounts and promotions in response to rising prices. However, not all deals are created equal. Consumers value some offers more than others, and some of the ones that they prefer cost brands less than others that are equally preferred.
The opportunity for marketers is to test and discover which promotions maximize perceived value and minimize the cost to them. That optimal deal will vary across audience segments and vary across your product selection. For example, lower-priced items tend to do better with percent-off discounts, while higher-priced items do better with dollars-off discounts in terms of the value-cost equation.
That said, don’t ignore two important audience segments:
- Full-price buyers. These customers aren’t price-sensitive and in some cases recoil from coupons and sales.
- High spenders. These customers will overlap with your full-price buyers to some degree, but simply spend significantly more than your average customer.
Make sure that you’re using personalization and segmentation to get the right content in front of these customers via your marketing channels. Doing this poorly will not only cost you margin, but also sales.
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Highlight Lower Prices
In addition to discounts, consumers are looking to buy cheaper products. According to that Numerator study, 60% of consumers plan to switch to lower-priced options.
The opportunity for marketers is to explore the relativity of lower prices by testing how to present price differences in various ways. Here are a few tactics to consider:
Promote Private-Label Goods
Pandemic-driven supply chain problems have dramatically expanded the number of consumers who are open to buying private-label goods. According to McKinsey & Co. surveys, nearly one in five consumers said they bought more private-brand products during the pandemic than before it. And more than 90% of US consumers indicated they will buy the same or more private brands after the pandemic. That’s an indication of strong satisfaction.
So, if you offer private-label goods, consider surfacing them more frequently in your messaging. When you do, be sure to highlight the potential saving over name-brand goods. And when a customer demonstrates an interest in private-label goods, be sure to increase their exposure even more using personalization and segmentation in your marketing messages.
If you carry products at multiple price points, leverage that as an opportunity to drive consumers toward the mid- and low-priced items. B2B SaaS software brands are masters of this. Almost without fail, they offer three pricing tiers, with the middle tier labeled the “most popular” or “best value.” So, position some of your bestsellers next to higher-priced options to make them even more attractive.
Highlight Products Where Prices Haven’t Changed
Chances are that your company has been raising prices on some products or services. But for those that you haven’t, draw attention to that fact: “Same price as when launched.” “Same price as in 2019!”
Just look at how much positive press that Costco has gotten for continuing to hold the price on their $1.50 hot dogs. Even though they’ve raised prices on lots of other items, their refusal to raise the price of one of their most visible items creates the desired impression that they’re resisting increasing prices.
Related Article: Handling CX in an Economic Downturn
Filling More Than One Need
Value isn’t just in the price that you pay. It’s in how many needs a purchase fills. With that in mind, here are a couple of tactics to consider:
Demonstrate Value & Versatility
Sleeper sofas. Tables that expand for more seating. Vehicles with seats that fold down flat for hauling. People like products that can serve more than one purpose.
While sometimes versatility is a product feature, other times it’s a matter of educating customers. For example, apparel brands could use their marketing messaging to demonstrate how a skirt or top could be dressed up or down with the right accessories. If you can convince customers that buying one product keeps them from having to buy a second or third, that’s a powerful value statement.
Two for the Price of One
With the holiday season quickly approaching, consumers will be looking for gifts for people (as well as snatching up some deals for themselves). Look for opportunities to give buyers two gifts with one purchase with:
- Buy one get one (BOGO) offers.
- Free gift card with purchase offers, where the gift card becomes a gift or stocking stuffer for someone else.
- The suggestion that customers break up gift and sampler sets (perfume sets, cooking sets, etc.).
Conclusion: Stay Nimble, Conduct Rigorous Testing
Even if brands use these tactics well, some are still going to feel the brunt of the recession as they have in the past, although there may be new wrinkles. For example, travel and restaurant dining usually struggle during recessions. However, the pandemic has led to pent up demand for both of those, so the decline may be more muted, especially if new coronavirus variants are held in check.
Other purchases that consumers cut back on during recessions include TVs, smartphones and other electronics, as well as furniture and other home furnishings. Those categories enjoyed outsized spending during the pandemic, so these consumer needs are quite satisfied. Combine that with a projected slowing of the housing market and the pullback with those categories could be more intense than usual.
Staying nimble and doing rigorous testing to see what resonates with your audience will be more essential than ever in the months ahead.