Will this be your first recession rodeo?

In a previous article I referenced Mark Twain’s quote, “history doesn’t repeat itself, but it often rhymes.”  If true, then this is a poem about marketing in a recession by reflecting on lessons which I will attempt to freshen...Ok, no more poetry.

I recently revisited the WikiBranding articles I wrote during the 2008-2009 meltdown that spotlighted best practices from a range of marketers.  It struck me that those of us who guided businesses through The Great Recession can share lessons we learned with managers for whom this downturn might be their first.  (Bob Barrie, Stuart D’Rozario and I had just co-founded BD’M; learning how to navigate the recession was not a choice!) 

 

Who decides if we’re in a recession? 

 

Spoiler alert:  the consumer decides.

 

News stories about the economy lead us believe we’re in a recession – the “R-word” is having its moment.  

 

Economists might say otherwise, based on their often used definition of a recession, i.e., two consecutive quarters of falling GDP.  Other economists take a more holistic view to define a recession, e.g., labor market, consumer and business spending, industrial production, and income. 

 

Taking that wider view, payrolls increased in June, as did hourly wages, both growing faster than expected, as well as consumer spending.  

All good, right?  Hardly.

 

These broader data points miss a deeper point.  Consumer spending accounts for 70% of GDP, therefore when consumers feel we’re in a recession, their behaviors follow suit.

 

And that seems to be what’s happening.  

New polls show 58% of Americans believe the country is in a recession, up from 48% in May.  Unsurprisingly, consumer confidence has declined for three consecutive months.  And all this is happening in an environment where inflation is at a 40 year high and the average 401k is taking a beating.  It’s easy to understand why consumers feel anxious.

 

Lessons from the Great Recession

 

It’s worth taking stock of the present day and see how the forces that caused the Great Recession differ from what we are currently experiencing.

   

The 2008 recession was caused in large part by greed.  Lenders knowingly dealt toxic subprime mortgages and consumers gorged on easy credit to borrow and buy more than they should.  Financial regulators were asleep at the wheel, or worse yet, complicit.  (I’m dusting off “The Big Short,” Michael Lewis’ epic recount of that economic wildfire.)

 

This slowdown is different; it was caused largely by the pandemic.  In 2020 companies worldwide shut down, reduced output, and laid off workers.  Fast forward to 2022 and we see how this crippled the global supply chain which cannot keep pace with the post-pandemic spike in demand (i.e, “pleasure revenge”), leading to inflationary prices.  

 

So here are some lessons from the Great Recession that today’s marketing leaders may want to consider. 

 

Fear was the enemy:  

In 2008, in an environment of layoffs and home foreclosures, the vast majority of consumers were not at risk of losing their income or home, yet began cutting back on spending because they were uncertain about the future.  Back then, most automotive marketers defined affordability as the problem and set out to solve that through cut rate financing and lease rates.  

Hyundai did something different.  The company correctly diagnosed fear as the problem to be solved – the consumer’s uncertainty about might happen – and launched its successful Assurance program, allowing consumers to return their new car within a year if they lost their job. 

 

Discounting didn’t differentiate:  

Marketers in many categories attacked the affordability problem through unsustainable price cuts that eroded long-term pricing power.  Circuit City filed for bankruptcy, proving discounting alone was a race to the bottom.

Best Buy, a client of BD'M that was facing the risk of becoming Amazon’s showroom, took action on two fronts by matching online pricing while also adding unique value (and customer reassurance) through its in-store Blue Shirts and in-home Geek Squad.  Both actions helped Best Buy beat online retailers by offering something they could not – service and support.  

 

Customers have long memories:  

Many B2B companies slashed support budgets – e.g., downsized sales force, training, and customer service – as a way to cut costs, leaving their customers to dangle in the economic wind.  

Other companies found unique ways to get closer to their customers.  American Express launched Small Business Saturdays to support main street merchants hammered by the downturn.  Ford Dealers still recall how Ford Motor Credit was their lifeline during the Great Recession, extending much-needed lines of credit.  Allergan ran outreach programs to train physicians to run a more profitable medical practice.

 

Don’t let a good crisis go to waste:  

If necessity is the mother of invention, then a recession is the father of cool objectivity.  A recession creates a rare opportunity to reevaluate strategies that worked in good times; a time to think how you might refocus and reprioritize your product portfolio, marketing and media mix for the road ahead.

BD'M worked with United Airlines to develop Travel Options – an a la carte pricing program that enable flyers to design and pay for the experiences they valued – a merchandising strategy United still uses today.

 

Don’t put innovation on pause:  

Customer, marketplace and competitive dynamics move too fast to make standing still anything less than a corporate death-wish.  Even in a recession, consumers have needs that remain unmet by the competition.  

Remember, Apple waved its magic wand and lifted our spirts (and opened our wallets) during the Great Recession with must-have iPhones and MacBooks.

 

Marketing as a service.

What if we re-imagined marketing as a way to serve customers?  What if we designed it as a way to provide real-time value and utility to customers?

Our SXSW panel at explored these issues and more.  Marketing as a service harnesses Big Data to provide more meaningful and helpful experiences for customers.  It is a principle born of the belief that the dynamics of customer loyalty have fundamentally changed.  Loyalty can no longer be solely defined by customers staying loyal to a brand.  Because the internet provides us with unlimited choice, the tables have turned – brands must now demonstrate their loyalty to customers by serving them.

Digital marketing as a service.

Today at a global marketing meeting I was asked for my point of view on which company is doing digital right.  My answer?  Delta.  The reason I chose Delta is two-fold:  First, they're using digital to reshape marketing as a service (MaaS); second, they are quickly distinguishing themselves in an industry often associated with poor customer service.

I admire what Delta has done over the last few years to employ digital tools to transform marketing into something that serves customers and not simply sell to them.  Witness these examples.

The Delta mobile app provides friction-free service.  I can shop, book and manage my account while sitting in Starbucks.  It will help me remember where I parked my car at the airport.  The iPad version even includes something called Glass Bottom Jet, in which I can watch the world pass underneath me in-flight.  Several weeks ago, in that wretched moment when the baggage carousel stopped without first producing my bags, the app enabled me to scan my boarding pass and find my bags.  That is mobile marketing as a service.

Delta uses social media (@DeltaAssist) to provide real-time, personalized customer service.  Their social service team attempts to resolve customer complaints on the spot.  It's impressive.  A colleague recently told me how on a recent flight his family's seat assignments were scattered throughout the plane.  So, after not receiving help at the boarding gate, he tweeted his plea to @DeltaAssist and received a direct message resolving the issue by seating his family together.  That is social marketing as a service.

By the way, I'm posting this using GoGo in-flight wifi, a standard on almost every Delta flight.

Lucky idea.

iPhone apps are proving to be some of the most innovative marketing programs around. The latest to catch my eye is from Lucky, the Conde Nast magazine.

For those who don’t know Lucky, it's basically a fashion catalog posing as editorial. Lucky is for young women who like to shop, which gives it a potential subscriber base of a zillion. ;)

The Lucky app allows users to search for a specific designer hand bag (or shoe or dress or…) and use the phone’s GPS function to pinpoint the closest store that is selling it. Lucky’s call center will also contact the store and have the item set aside, sending a confirming text message to the user. Best of all, this is all free.

If this app is as good as it sounds, I think Lucky could have charged a buck or two for the download. But it sounds as if Conde Nast’s real play is to use this tool to drive magazine advertising revenue, both as an added-value lure for advertisers and as a research tool to demonstrate audience engagement.

I hope it works. Magazine publishers need to show a bit more innovation across the board.

Serving the customer...what a concept!

Best Buy is winning with a simple idea: do what's best for the customer. (Best Buy is a client of BD'M.) It's amazing how such a simple idea can be so successful. Conversely, it's equally amazing how few companies show the ability to grasp this idea.

Yesterday's article in the Wall Street Journal featured a side-by-side comparison of shopping for a TV at Sears, Circuit City and Best Buy. The article's concluding thought underscores the power of Best Buy's strategy: "We left Best Buy feeling confident we'd end up with the right television."

Best Buy is not alone in viewing service as a competitive advantage. The folks at Starbucks, Enterprise, FedEx, WaMu, Southwest and Ace Hardware win using the same simple formula.

Treat the customer well and they will come back. What a concept.

What's Danish for smart branding?

I've written about the power of brand design in an earlier post. The story of Jyske Bank in Denmark is another example of the role design can play in helping a company achieve its marketing objectives.

Jyske (pronounced "Yeeska") set out to increase the number of customers it serves. That's a brief we've all seen before. But instead of resorting to free toasters, viral films or more advertising, Jyske Bank opted to change the experience itself. They used design thinking to redefine the very concept of banking. They made the brand tangible and physical in a manner that evoked an emotional connection. They created that special "third place" -- a haven that is neither home or work -- that has been the secret sauce behind Starbucks' success

The result? Jyske Bank doubled its customer base in one year by improving loyalty while attracting brand new customers.

Take a look at this video. You'll see a great case study and brush up on your Danish.