“Rare is the business that has a formal disaster plan, let alone one that covers a global Black Swan event.”Tim Stewart, trsdigital
An article on growth and marketing in the middle of a crisis—the current one or any other—can seem tone deaf. But nothing gets better if we stand still.
Work can be a welcome intellectual distraction. It can also keep your employees employed or help you retain your job—a modicum of security in uncertain times.
We don’t have to go back far to find another period of economic disarray. The financial crisis of the late 2000s reinforced, countered, or updated many lessons gleaned from previous turmoils.
Historically, epidemic-inspired slowdowns have behaved differently (but consistently) compared to other causes. Still, no one knows how this one will play out.
This post surveys what people have done in the past—and what marketing leaders are doing now—to make it through tough times and thrive in the post-crisis era.
Table of contents
- What the big studies have shown
- Knowing your customers—and how they may change—is key
- Why brand matters more than ever
- How to use tough times productively
What the big studies have shown
In 2002, McKinsey published a study of 1,000 U.S. companies covering the period 1982–99, which included a recession during 1990–91.
The study focused on what happened during the recession that affected performance after the recession. Those who came out on top were classified as “leaders.” As the authors found:
While most companies tightened their belts, successful leaders, trading lower short-term profitability for long-term gain, refocused rather than cut spending [. . .] Yet in expansionary periods, successful leaders spent significantly less on [selling, general, and administrative costs] than did their former peers.
Greater discipline during boom times offered more flexibility during lean years. And getting it right during the lean years, Bain reports, has a massive impact on companies’ growth rate after things improve:
The authors of the Bain study use an auto-racing analogy:
Think of a recession as a sharp curve on an auto racetrack—the best place to pass competitors, but requiring more skill than straightaways. The best drivers apply the brakes just ahead of the curve (they take out excess costs), turn hard toward the apex of the curve (identify the short list of projects that will form the next business model), and accelerate hard out of the curve (spend and hire before markets have rebounded).
A Harvard Business Review (HBR) study of 4,700 public companies looked at the three years before, during, and after recessions. They divided companies’ responses—their “driving” strategies—into four categories:
- Prevention. A focus on cost cutting—every decision is viewed through a loss-minimization lens. They do more of the same with less, often lowering quality and customer satisfaction.
- Promotion. A heedless optimism that ignores the gravity of the situation and early warning signs. Companies in this category add features when customers desire greater value.
- Pragmatic. A haphazard combination of prevention and promotion characteristics. These companies tend to over rely on reducing the number of employees.
- Progressive. These companies get the prevention-promotion balance right by evaluating every aspect of their business model—making near-term changes that reduce costs now and after demand returns (unlike layoffs).
The HBR study contrasts Office Depot and Staples during the 2000 recession:
Office Depot cut 6% of its workforce, but it couldn’t reduce operating costs significantly. Although the company created an incentive plan to boost sales, its sales growth fell from 19% before the recession to 8% after—five percentage points below Staples’ postrecession sales growth rate.
By contrast, Staples closed down some underperforming facilities but increased its workforce by 10% during the recession, mainly to support the high-end product categories and services it introduced. At the same time, the company contained its operating costs and came out of the recession stronger, bigger, and more profitable than it had been in 1999.
As the authors found, “Firms that cut costs faster and deeper than rivals don’t necessarily flourish. They have the lowest probability—21%—of pulling ahead of the competition when times get better.”
Honeywell CEO Dave Cote also cautions against shortsightedness during economic downturns:
I’ve been a leader during three recessions and I’ve never heard a management team talk about how the choices they make during a downturn will affect performance during a recovery. There will be a recovery and we need to be prepared for it.
Trying to prepare for a recovery in the midst of a crisis may seem like a luxury. Indeed 17% of the businesses from the HBR study didn’t survive the recession period.
Yet as the Bain study concludes, companies that struggled post-recession had often “switched to survival mode, making deep cuts and reacting defensively.” That “survival mode” meant “that they later must spend far more than they saved in order to recover from their prolonged absence from the media landscape.”
“If your first reaction is to cut all costs, all people, all marketing,” cautions Tim Stewart of trsdigital, “you have fewer tools available for your remaining choices.”
So how do you figure out which tools you’ll need?
Frameworks for businesses during a crisis
The studies above argue for a balance of cost cutting and investment. That’s easy to recommend and hard to execute. Each study, however, offers a framework to help with decision making.
Bain offers a rubric based on your current market position and financial strength:
The HBR study builds a three-by-three block based on prevention- and promotion-focused strategies. Their recommendations derive from sales and EBITDA (earnings before interest, taxes, depreciation, and amortization) for the companies in their study:
As the authors conclude, “Progressive companies stay closely connected to customer needs—a powerful filter through which to make investment decisions.”
In other words, user research is more important than ever.
Knowing your customers—and how they may change—is key
“Behaviors and attitudes will change,” says Ben Labay, Speero Agency’s Director of Research. When it comes to identifying what has changed, Labay continues:
I’d think the first stop is analytics—who dropped off, what channels, who remained, etc., but polls and surveys are obvious choices, too.
Don’t use one source of data—triangulate from a mix of data to get a data-driven roadmap on how customers have changed behavior and perceptions, and how to respond and test accordingly.
Ross Simmonds of Foundation Inc. echoes Labay’s sentiment:
Search habits change. Social habits change. Email habits change. Smart marketers will recognize this and be empathetic to the realities of journalists, customers, and their industries. They will adapt the way they write, promote, and conduct outreach.
Customer segmentation is essential, not just to identify where buyers pull back but also to “reveal products primarily purchased by people still willing to pay full price. Use that intelligence to inform product portfolio and investment choices.”
Of course, some segments will be hit harder than others, as Ann Smarty has already experienced with her consultancy:
The only thing is that we have lost two travel clients pretty fast. They both started feeling the impact immediately and paused any marketing activity right away.
To identify risks and opportunities, write John Quelch and Katherine E. Jocz, you may need to change how you segment your audience:
Marketers typically segment according to demographics (“over 40,” say, or “new parent” or “middle income”) or lifestyle (“traditionalist” or “going green”). In a recession such segmentations may be less relevant than a psychological segmentation that takes into consideration consumers’ emotional reactions to the economic environment.
A psychological segmentation divides buyers into four categories:
- Slam-on-the-brakes. The hardest-hit segment, which may reduce, delay, or eliminate spending. It includes lower-income buyers and high-anxiety buyers of all wealth levels.
- Pained-but-patient. The segment with near-term anxiety but a positive long-term outlook. This is often the largest segment. Buyers economize across all areas. More bad news may push them into the slam-on-the-brakes segment.
- Comfortably well-off. The segment that continues buying at almost the same level, with some additional selectivity about purchases. It’s made up mostly of wealthy consumers.
- Live-for-today. A segment that skews young and urban, with a focus on experiences over stuff. They are generally unconcerned about savings, though they may delay major purchases.
The attitudes of those segments, in turn, affect decisions about different product types:
Where do your consumers fall? There are many ways to find out. Our CRO team uses ResearchXL, which is a comprehensive framework for identifying test ideas, though its methods apply broadly.
If you’re looking for quick answers via surveys or interviews, we have resources for that, too:
- The Optimizer’s Guide to Conducting User Interviews & Analyzing the Data
- Improving Survey Analysis: 3 Steps to Get More from Customer Feedback
- How to Create Customer Feedback Loops at Scale
- How to Boost Conversions with Voice of Customer Research
- The Advanced Guide to Qualitative Research
- How To Use On-Site Surveys to Increase Conversions
- 6 Ways You’re Messing Up Customer Surveys
- Everything You Need To Know About Designing Valuable Customer Surveys
- Survey Design 101: Choosing Survey Response Scales
- A Guide to Open-Ended Questions in Marketing Research
- Good Survey Questions: Master the Art of the Ask
- Leading Questions: Great for Marketing, Terrible for Research
Once you’ve identified key segments, what’s the best way to reach them?
Marketing strategies for new and changing segments
There are options for every segment:
- “Prospects are reasonably good for value-brand essentials sold to slam-on-the-brakes consumers, who will forgo premium brands in favor of lower prices.”
- “Value brands can also effectively reach out to pained-but-patient consumers who previously bought higher-end brands, a strategy Wal-Mart aggressively used with its ‘everyday low prices’ policy in the 2001 recession.”
- “Repair services can market to the pained-but-patient group, who will try to prolong the life of a refrigerator rather than buy a new one.”
- “Premium-brand market leaders [. . .] can introduce a ‘fighter brand,’ a lower-priced version of the premium offering sold under a different name and backed by minimal advertising.”
- “Restaurants and other businesses often configure offerings by using key retail price points proven to resonate with customers, as with the 99-cent burger or the $399 dishwasher.”
Novel pricing strategies beyond the $0.99 something-or-other can help a range of businesses:
- “Results-based pricing, a concept pioneered by consulting firms that links payment to measurable customer benefits resulting from use of a product or service”;
- “Changes in the pricing basis that would allow a customer to, for example, rent equipment by the hour rather than by the day”;
- “Subscription pricing, by which a customer purchases use of a product—say, a machine tool—rather than the product itself”;
- “Unbundling of a service so that customers pay separately for different elements of what was previously an all-in-one package, as airlines have done with checked baggage and in-flight meals and entertainment.”
Other ideas include:
- Reducing the thresholds for quantity discounts;
- Extending credit to customers;
- Having layaway plans;
- Reducing item or serving sizes, and then pricing them accordingly;
- For service businesses, lowering consumers’ up-front adoption costs and reducing penalty charges.
You can find more ideas here:
- Product Pricing Strategies and Techniques
- Pricing Experiments You Might Not Know, But Can Learn From
- Should I Lower My Prices To Compete?
- Constructing Pricing Strategy For Subscription Products
- Product Bundling Strategy: How to Get It Right
It may be easier to make radical changes—like revamping your pricing model—during a crisis. “Recessions offer opportunities for change,” says Raffaella Sadun.
Others share her opinion:
When survival is at stake, it is easier to get companywide buy-in for revising marketing strategies and reallocating investments. Managers can defy old mind-sets and creatively search for superior solutions.
No matter what you choose, it will help—now and later—if those choices strengthen your brand.
Why brand matters more than ever
“There is no better time to be real, authentic, and human as a brand,” writes Dave Gerhardt. He continues:
It’s OK to continue to operate. We need business to boost the economy. But you can do better than slightly editing the copy your lawyers would write.
A 2 minute iPhone video from your CEO would have such a bigger impact than a highly manicured campaign or corporate sounding email.
Laura Blue of LaunchLink PR corroborates Gerhardt’s message:
It is during these times that brands need to be especially considerate about what and how they are communicating to customers, partners and stakeholders. Are they genuinely aiming to help or are they obviously pushing product or another agenda?
Businesses need to stay true to their brand and their overarching mission during uncertain times—as this is what really counts and what people will remember them by.
“Your products probably aren’t high on people’s priority lists right now,” says Kristen LaFrance.
But your community does matter. Your people, too. Authenticity requires imperfection. And right now, there’s no such thing as the perfect move, so don’t try to make it. Aim yourself towards the things that make you proud of yourself, your brand, and your people.
What does a thoughtful campaign look like? Hyundai’s Assurance program, which debuted during the 2007–08 financial crisis, is a great example. They offered car buyers the opportunity to return a purchased or leased car if they lost their income within a year of the sale:
Sky is hitting this balance now as well, affirming their commitment to current customers while subtlety explaining why they won’t turn their service into a free-for-all:
The overlap between marketing and PR increases during crisis times. “For so many companies,” explains Animalz’s Jimmy Daly, “content marketing is their only PR. And it’s more important than ever to communicate to their customers, prospective customers, and the rest of their industry.”
Some marketing strategies for a struggling economy can undermine a brand:
Marketers catering to middle- or upper-income consumers in the pained-but-patient segment may be tempted to move down-market. This could confuse and alienate loyal customers; it could also provoke stiff resistance from competitors.
Marketers that drift away from their established base may attract some new customers in the near term but find themselves in a weaker position when the recession ends. Their best course is to stabilize the brand.
De Beers made such an investment, even though a brand campaign could only soften the decline in sales during the 2007–08 crisis:
Ally faced a different challenge. As the recession wrapped up, they had to remind consumers of lean times. Because their brand challenged existing banking options, CMO Andrea Brimmer explains, they had to “fuel dissatisfaction” because post-recession customers would be “fat and happy again, not remembering what they missed.”
Brand campaigns can be a difficult sell—attribution is harder, and time-to-value may be longer. As Simmonds says:
Many leaders will view brand driven efforts or projects that don’t have a direct impact on the bottom line as expendable.
The questions that clients ask in the coming months are going to be more focused on business results and less on trends and vanity metrics. It’s very fair for clients to start questioning the results of their agencies, teams, and even CMOs.
Yet, Stewart notes:
Brand campaigns “convert poorly,” but they are not meant to convert. They build trust and confidence, which is what is needed right now. It will reassure those who can’t buy now but will buy again later—and attract more of those who can or need to buy now but are being hard-pitched by everyone else.
So don’t skimp on brand. But what else can you do?
How to use tough times productively
Marketing budgets are always at risk—it’s easier to reduce ad spend than to close a manufacturing facility. But crisis periods afford companies with opportunities, too.
At the end of the day, says Stewart:
Business is about prioritization of resources. Building a method for production that makes this efficient enough for profit. Managing the means of production to fit the circumstances.
The temptation, therefore, is to stop everything, to clear bandwidth for some very real and very pressing crisis management. And, short term, that may be the only option. You can’t take later action if your first step prevents there being a later step.
But it needs to be a brief pause and reposition—not a hard stop. And that pause needs to be as short as possible, so you start on the new plan with as many of the original resources as possible in place.
Here are some things you can do.
1. Learn from forced efficiency
“I built my first startup in Argentina during the economic crisis-turned-revolution in 2001,” writes Frederic Kerrest, “and my co-founder and I started Okta in the depths of the U.S. recession in 2009.”
The added challenges, Kerrest argues, provided long-term benefits. There were obvious ones, like how scarce capital forced frugality. But there were others, too:
In 2010, Okta had only ten customers on board. We spent the entire year focused on their success, iterating and discovering what they needed and how we could best deliver. By 2011, we had 50 customers; today we have over 2,000. Use a down period to nail down the core product features, get your architecture right and make sure your first customers see value in the product.
The vacuum of innovation is the perfect time to bring new ideas to market, since it means that there is significantly less competition in the market for your idea.
Successful product launches, notes Jeff Neff, have often taken place in difficult moments. They were “natural offshoots of the conditions created by or causing the crisis, i.e. high gas prices spawning fuel-efficient cars, interest-bearing checking accounts that sprang from high interest rates in the 1970s and ’80s, or declining gas prices and gas-guzzling SUVs.”
As Rand Fishkin explained, Moz leaned into some of those advantages as it navigated the 2007–08 crisis:
The company’s structure—relatively few employees to revenue ratio, large cash reserves, and relatively frugal spending (until our massive funding round at least) made us a great candidate for survival and growth in rough times.
Competitive pricing ($39/month in 2007), Fishkin continued, and timing also played a role:
Moz succeeded in a recession because it helped people with an emerging form of marketing that spoke to recession-based concerns.
It helped companies save money on expensive ads by investing in high-ROI, but hard to measure and understand content marketing and SEO.
Moz grasped onto a fast-growing industry at just the right time. The reputation of SEO was finally moving away from slimy and manipulative, and Moz both helped to ride that wave and to amplify it.
Some timing is beyond your control, for better or worse. Amazon, for example, raised $672 million in convertible bonds a month before the dot-com bubble burst, giving it ample resources and eliminating competitors.
Even if you’re not so lucky, you may still enjoy less competition—for a while.
2. Take advantage of less competition, lower costs
If you have the resources, competing may be less expensive during a downturn. As Simmonds notes:
The world is being struck with closures, quarantines, curfews, and work-from-home mandates. This means more people behind a screen, which means more opportunity across distribution channels.
Brands who double down on their investment while others pull back will likely see a lower cost for results, and brands who use this time to add value to their audience rather than sell, sell, sell will build relationships on trust and earn their customers budget/wallet by focusing long term.
We are also encouraging people to use this down time to ‘put money in the bank,’ i.e. add to their library, have content ready when things clear up, and maybe do some work on their sites that they otherwise don’t have time to do it, like pruning, refreshing, cleaning up internal links, etc.
Aaron Orendorff of Common Thread Collective offers a caveat:
CPMs have hit lows, harkening back to Facebook and Google’s golden age. The problem is that a low CPM doesn’t mean a high ROAS. Even less does it mean high transaction volume or revenue.
That’s because tough times make for hesitant buyers. For anyone that’s experienced a ROAS decrease by 10% or more over the last seven days, it’s crucial to pinpoint where those drop-offs are occurring.
Orendorff recommends setting up a funnel analysis in reverse to identify the top sales (not just low CPM) opportunities:
- Cost per acquisition;
- Cost per unique initiate checkout;
- Cost per unique add to cart;
- Cost per click;
That, says Orendorff, can help companies test communications on key pages and “message the moment”:
Evaluate the effect of banners, header bars, and push notifications that address concerns like shipping and product safety. Look for opportunities within displaced groups like musicians, chefs, and minor-league sports figures (i.e., micro-influencers or content producers).
Consider hosting “show it off” on social events, particularly for products that depend on social non-distancing motivations. Think through options like family-friendly and kid-focused editions for an at-home audience. Or, the opportunity with special packaging and bundling for “care package” gifting.
The winners will be those who can creatively, sensitively, and analytically eliminate barriers while giving tight-fisted window shoppers every reason to say yes.
How you execute campaigns may change, too. Stewart again:
The half-life of learning will become shorter, the audience more volatile, how representative the current sample is to the current and later population less strong. Decisions need to be made on less data, in shorter periods, which is more difficult.
It may mean that the testing platform and team are not running true tests and exacting standards for statistics—they’re using their expertise and the technology to be flexible and reactive to support these low-data decisions, decisions that have to be made.
In normal times, it’s the antithesis of what is supposed to happen. But in times of uncertainty, it provides an option for flexibility and guidance based on current user behavior over guesswork.
Flexibility is essential for decision making and leadership, too.
3. Evaluate your organizational structure
“One [piece of] advice,” Sadun notes, “would be [to] really think carefully about your organizational structure because that’s one way you cope with uncertainty.”
Decentralization, Sadun argues, is key: “What decentralization does is match decisions with expertise.” Companies, she continues, have a tendency to hoard decisions during times of crisis, which limits the ability of an organization to adapt and experiment.
At the leadership level, Ronald Heifetz, Alexander Grashow, and Marty Linsky argue, crisis demands a precarious balance:
Keeping an organization in a productive zone of disequilibrium is a delicate task; in the practice of leadership, you must keep your hand on the thermostat. If the heat is consistently too low, people won’t feel the need to ask uncomfortable questions or make difficult decisions. If it’s consistently too high, the organization risks a meltdown: People are likely to panic and hunker down.
Crisis leadership is, the authors conclude, “an improvisational and experimental art” to “distinguish the essential from the expendable.”
“If you move fast, with less information, there will be mistakes,” admits Stewart. “Accepting that is key. Suspend normal targets and criteria for success. You’re no longer in a growth and acquisition position, so KPIs based on revenue targets, etc., are moot.”
Inaction is almost guaranteed to cause greater issues, as by lack of action you are still making a choice, and an inflexible one that will limit choices you can make later, potentially fatally.
Likewise, with action, sticking to a rigid plan made when information was different is also likely to compromise chances for success (or survival).
Bill Sebald of Greenlane Marketing is preparing—as much as one can—for uncertainty:
Today’s situation is not something I’ve seen in my lifetime. It seems impossible to predict what will come next. That makes it quite hard to map out scenarios and contingency plans. So, Greenlane is taking the “business as usual…with some tweaks” approach. We’re also expecting curveballs.
Lessons learned during a current crisis can help companies navigate the next one.
4. Prepare for future downturns
“Do you know what the red flags are in your business?” writes Brian Moran, who shuttered his publishing business following the 2007–09 financial crisis.
That crisis saw a global spending decrease of 9%, with U.S. ad spend going down by 12% and agencies losing between 3 and 30% of revenue.
Moran highlights several ways to preserve flexibility and ask hard questions before the answers are a foregone conclusion:
- “Take time to look over your contracts and agreements. Is there an ‘out’ clause? Can you re-negotiate agreements into annual contracts? Even if it means paying a slightly higher rate or fee, you will appreciate the flexibility if the economy slides into a recession.”
- “Look at every segment of your business and ask a simple question, ‘What if?’ What if a recession hits our business? What if the bank pulls our line of credit? What if our largest customer goes out of business and takes our receivables with them? What if we lose our top salesperson?”
David Rhodes and Daniel Stelter suggest asking similar questions:
What effect would a 20% decline in sales volume and a 5% decline in prices have on your overall financial performance?” You may be surprised to find out that, even in the case of a still-healthy company with operating margins (before interest and taxes) of around 10%, such a decline in volume and prices could turn current profits into huge losses and send cash flow deep into the red.
Anxiety-provoking questions are far more pleasant to answer as hypotheticals.
“Crash diets don’t work,” says Stewart. “Trim some fat by working out more, don’t cut back on protein or energy to fuel the growth of tougher and leaner machinery. In other words, in times of crisis, smart companies use data and optimize more than ever, not less.”
You’re looking for the right balance of cost cuts and investment, of organizational flexibility and stability. Knowing your customers better than ever helps. Knowing that this crisis, too, shall pass does as well. And clinging steadfast to your brand is non-negotiable.
“Stress and economic uncertainties have already led a few clients to ask for a pause while they regroup,” says Sebald.
Of course, we’ll honor that—that’s what good partnerships are about. Even during that time, we will be available to everyone. For the sake of businesses everywhere, I hope this wraps up soon. But, the truth is we’re all in this together, and should be there for each other. The world isn’t actually stopping.
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Awesome job, Derek! Really well thought out and good advice. Thanks for sharing with the community.
Fabulous article, well researched, straightforward and relevant. Congrats!
Actionable, timely advice. Well done.
This well-researched article is must-read. Thanks for sharing handy tips, Derek!
Most welcome. Thank you.
Drop the mic, sir. Amazing article! It is packed full of so much knowledge. I am sharing this with everyone I can today, clients and co-workers. As a huge F1 fan, I love the racing anaoalgy. Makes me sad that the Monaco Grand Prix is cancelled for the first time since 1954 this year!
Thanks, Chris! I’m an IndyCar fan myself, so it resonated with me, too. I’m not optimistic about the Indy 500 happening this year, but we’ll see.
One of my favorite days of the year is Memorial Day. I get to watch the Monaco Grand Prix, Indy 500 and Coca-Cola 600 or at least I have for years until this year. Guess I will just sleep in a little this year. Thanks again for writing this.
I feel ya. Let’s hope things are looking better by May. Cheers.
Great article Derek!
I rarely comment on articles. This one moved me. Extremely well written, thought-out, researched. Amazing job!
This current situation will make us to think how to face these type of un-certain times in future? How to overcome? Many more ….
Super hands-on. Great guidelines for how to act. It just helped me validate some investment and branding positions we’re making for a new monetization channel. The rubric based on current market position and financial strength is my favorite chart.
Great to see how consistent you are about your high quality writing Derek, love the combination of journalism, community, resources, and depth.
Many thanks, Branko!
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