Any successful business owner can tell you that tracking consumer spending is a vital key to marketing strategy. Mini recession bursts and a decrease in consumer spending becomes part of the trade as a business owner. Conference Board chief economist, Dana Peterson, said at CNBC’s Small Business Playbook that there are significant roadblocks ahead that could cause consumers to cut back this coming Fall and Winter.
First, there has been an aggressive interest rate hike made by the Federal Reserve over the past year and a half. Anything that needs a loan, such as housing or auto, has slowed down due to this. While credit card companies have not seen the same trend, the debt service will kick in. Secondly, any sort of savings left from the pandemic era are likely to be completely exhausted this coming fall. JPMorgan Chase CEO, Jamie Dimon said when $1.5 trillion in excess stimulus program ran out in 2023 it “may very well derail the economy and cause a mild recession that people worry about.” Lastly, student loan payments are returning in October after a three-year pause. About40 million Americans have debt and the typical monthly bill is $350 on average. This will cut consumer spending.
So, what can businesses do during consumer spending downturns? Here are some recession survival tips.
Understand Your Customer Base
During a recession, people’s needs change and essentials will take priority. Groceries and rent will come first, followed by personal care then healthcare for last. Some consumers will still spend on digital entertainment and investing in clothing. People are looking for a bargain during a recession.
The first thing you should be doing is protecting your consumer base.
- Make sure they are happy with current products and/or services through survey feedback
- Offer loyalty discounts to existing customers
- Offer loyalty programs that rewards repeat business. Think of the Star rewards program by Starbucks
Many customers purchase from brands they feel represented by. Revamp your marketing techniques by becoming more engaged with any current events and/or topics going on in your community that could reach a target audience. Your goods can tap into a potential marketing niche, and then hone in on it. Just be careful not to go too crazy in this venture during a recession as it could drive potential customers off.
Focus on Value
People like to feel that their money is being well spent. They will be sensitive during a recession about pricing and spending. Ideally, your marketing strategy is creating a need for your goods and services to consumers.
- Offer discounts or other incentives such as "buy 2 get 1 free" promotions or limited-edition products
- Careful not to compromise profit
- Employ pricing strategies such as discounting older items, or competitive-based pricing
- Focus on the need for your products
Create a Sense of Urgency
Consumers hesitate to make purchases during a recession, even when pricing strategies and value are marketed well. Customers will think that they can return another day to purchase products, but eventually forget about it instead. Creating a sense of urgency will incentivize customers to purchase the products.
- Highlight the unique benefits of your products.
- If there is a limited-edition product or pricing, then emphasize the promotion.
- Market quality over quantity
Having a market strategy in place can provide support for your business, and knowing when to employ these strategies, like during a quick recession, will elevate your business. But it shouldn’t be a final resort. A marketing strategy is a proactive plan. A fall-back plan would be to prepare early. As a business, we know the economy moves in waves. Small businesses have more flexibility during recessions, as they can change their business models and increase or decrease their prices. When times are good, it is time to prepare for tough times. Businesses should have a savings fund to prepare for any future ventures.
However, we know times can be tough and not everything goes according to plan. During tough times, funds can be low, customers may be meek, and business projects may never make it past the planning stages. Idea Financial can offer lines of credit to ease any financial worries and needs. With a line of credit, you only borrow up to what you need and save the rest for later. Don’t let the trending downturns catch you off guard, and make an investment plan today.
