Is Understanding Recession Psychology the Key to Survival?

Posted on Monday, June 29th, 2020

Our modern economy hasn’t had to deal with a pandemic before, but it has had to ride out recessions.

According to the OECD, the UK economy is likely to suffer the worst Covid-19 damage of any country in the developed world. The forecast is for a 11.5% drop in national income.

That’s a challenge to businesses working hard to re-merge from lockdown.

But, at least the idea of a recession is more familiar than a pandemic. It is, at least, something many people have previously experienced, and there are ways to market yourself during a recession.

Marketing in a Downturn

There are two things business owners should be trying to do:

  • Hanging on to their existing clients, and
  • Winning new ones.

During a downturn, both can be a struggle.

With existing clients, it’s about ensuring you build value into every transaction, and ensure you can demonstrate this.

Winning new clients is a tougher proposition, but there are certain critical aspects to proactively engaging with potential prospects:

  • Don’t cut back on your marketing
  • Focus on a niche
  • Use different marketing methods
  • Follow up on older leads.

Downturns are all different, and the post-Covid landscape is going to have some defining characteristics around restrictions on movement and space.

There is also the issue of confidence: it’s not just about whether people will want to buy, but what risks they may have to consider. These may now be health- as well as finance-related.

The other factor influencing the current situation is that no one knows what the eventual outcome will be. Things are volatile and changeable.

Therefore, everyone has to adapt. In some sectors, customers’ habits may change permanently.

Businesses in these sectors will have to redesign the customer journey accordingly.

Understanding Recession Psychology

Successfully marketing a business is not simply down to strategy, tactics or perseverance.

It is about what consumers feel like:

  • Do they have disposable income?
  • How confident are they feeling about their future?
  • How much trust do they have in business and the economy?

During a downturn, and coming out of Covid-19 lockdown, clients and customers can fall into different groups.

  • Some may simply have slammed on the brakes. Eliminating any economic activity that they feel is inessential.
  • Others may be resilient and optimistic about the longer-term, but in the short-term they are reigning in their spending.
  • There may be customers who will have weathered the storm, and who have the necessary resources to feel secure and equipped to ride out any future turbulence in the economy.
  • Then there can be a more live-for-today group, willing to take their chances and, in business terms, explore and make opportunities.

However, all these groups will, to some degree, prioritise their consumption, by sorting out products and services according to need.

These include:

  • Essentials
  • Indulgences or extras
  • Postponables
  • Expendables.

The only group less likely to re-order its priorities are those in a live-for-today state of mind.

Assessing Opportunities

Any business must consider its offerings in terms of its target market and how what it offers will sit in any order of customer priorities.

How does it maintain its relevance to core customers, and to what degree must it adapt to changing patterns of consumption or use?

Also, what are the opportunities to win new business through changing habits? Customers are likely to change hands more at the bottom of a recession.

A business going into a recession will not be the same coming out of it, because of this need to adapt to survive.

What it cannot afford to do in the current economic situation is to sit on the fence.

Are Hybrid Business Models the Future?

The lockdown has boosted digital activity massively.

The growth in online shopping, the use of remote conferencing software such as Zoom, and the need to work from home are all part of how we have been living and working.

But in what forma might this continue?

There are different impulses shaping change:

  • Staying safe
  • Re-engaging with the world
  • Re-establishing some sense of normality
  • Re-booting the economy.

How can these impulses resolve themselves into a whole way of existing economically?

One solution may be the hybrid economic ecosystem. Businesses such as retailers, for example, could define and occupy the intersection between digital and physical.

This is already in evidence with how the internet of things is transforming manufacturing.

And indications are that the hospitality industry will have to integrate digital and online activity into how it manages physical space, where customer numbers will be closely managed.

Surviving, and even thriving, during a post-lockdown recession will involve adapting out of necessity, but in so doing, it can bring new opportunities.

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MEG is Manchester Enterprise Group, normally networking in the heart of Manchester. We’re not meeting up face-to-face at the moment, but we are staying connected and exchanging information, insight and stories.

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