Branding for the Looming Recession
Brand Strategy: How Can We Handle This Potential Downturn Differently?
A grim and uncertain economic outlook is forcing companies to reconsider their plans for the coming year. Supply chain troubles remain and have contributed to once-in-a-generation inflation. Monetary tightening may crush demand and help to create or reinforce a recession. The European and global security environments are threatened, and energy prices have risen sharply. Labor shortages are persistent, and the pandemic has not truly relented. The economic storm reminds companies that they must be ready to adapt. Where should they invest their dollars?
Companies can prepare for a potential downturn while not compromising on future growth. Here are 5 ways you can survive a potential recession.
Communicate your value
Brands are effectively competing for fewer dollars in an inflationary environment; the same is true of a recession. Communicate the overall value of your product. Consumers want to save money and be savvy shoppers. So, how are you helping them? What special benefits or discounts can we offer to maximize LTV and retention. For example, if we don’t offer BNPL or other financing, can we? What other perks can we integrate with what financial effects? BOPIS? Can we offer volume discounts?
Remember that private label brands tend to perform better during downturns and have been increasing in popularity, generally. During the Great Recession, Cascade introduced innovations in auto dishwasher detergent SKUs that provided convenience and size value and Glide introduced multi-use toothpick flossers delivering both time and money savings. Overall, communicate your specific value knowing that consumers are under more financial pressure.
Promote self-care and at-home convenience
In this uncertain market, households are likely to demand products that promote comfort, self-care, preventative nutrition, and at-home convenience. Certain categories enjoy growth during downturns or times of uncertainty. For example, ice cream tends to boom during recessions. What products in your portfolio can you promote or introduce to capitalize on predictable recession-spending patterns? Comfort and at-home items and experiences are likely to be in demand amid both recession fears and an actual recession. Instead of spending money on going out, consumers tend to be willing to spend more on DIY services.
Lego expanded into the global market during the 2008 recession and reached an all-time profitability capitalizing on more at-home play. Crest launched its at-home teeth whitening strips during the Great Recession believing that consumers will not dine out or will scale back their out of home beauty regimens. Note that consumers also want to stay healthy to avoid unexpected costs or disruptions.
Optimize your portfolio wisely
Companies must also make challenging but necessary product portfolio decisions: which categories will perform worse during a potential recession? How can companies manage risks in the short-run without hurting long-run options? A potential recession requires challenging resource allocation decisions for companies. An analytical approach favors promoting products likely to grow during a recession, while not giving up the option to market higher-end products when a good economy returns. Brands and categories such as luxury goods like watches may have recessionary risk exposure.
Companies should consider demand forecast data seriously, to assess their risks and make appropriate brand and financial decisions. During the Great Recession, Anheuser Busch was acquired by InBev and viewed the Budweiser brand family as one that should thrive. During the Great Recession thanks to continued investment post acquisition, Budweiser continued to see organic growth. During these times, it is essential to deeply understand the consumer, empathize and curate and organize portfolios around real consumer needs.
Invest in sustainability
Don’t divest from sustainability — the current climate has only raised awareness of long-run environmental issues, especially related to energy. Even in the context of rising food prices, consumers have expressed concern for the sustainability of food packaging, demonstrating that today’s recession-consumer may be different than yesterday’s. Of the many areas where budgets will be slashed, we don’t recommend cutting investments in sustainability. Especially as governments have been letting consumers down (e.g. Europe not reaching their 2030 Climate Target Plan), consumers will be looking to companies to lead on sustainability, just as they have looked to companies to lead on social action and diversity.
In 2008, SC Johnson acquired Mrs. Meyers, the earth-friendly household cleaning brand and doubled them in size in five years. In April 2022, Sam’s Club formally announced the launch, renovation and reformulation of 1200 of its private label Member’s Mark items since 2020 and introduced a new identity that included the tagline, “Made with Our Member and Planet in Mind.” The current economic environment has only increased consumers’ awareness of environmental questions and risks. Aim for a balance between value and sustainability. Communicate both.
Continue to Innovate: this time is always different
Above all, new economic environments are dynamic and change the key players. Companies should continue to innovate, because change-environments always bring opportunities. Similar to the onset of the pandemic in 2020, companies must recognize this opportunity and not cut back on innovation. There are countless examples of recession-led innovation. Charmin and Bounty introduced a “basic” lower-tier offering; Yoplait successfully targeted baby boomers with probiotics; digital financial services boomed during 2020; bulk packaging and “refills” have gained in popularity generally. Brands expand into adjacent categories, especially e-commerce when foot traffic declines.
Ask this question in your planning sessions: how will this downturn be unique and which new consumer behaviors can we bet on during this recession? For example, real estate, energy, and real goods often boom during times of inflation, but this time may be different. Does our company have unique insights on how inflation, rising interest rates, supply chain disruptions and a potential recession can create opportunities in our sector?