Why direct marketing is more effective than traditional methods during a recession

Introduction

It's no secret that the current economy is tough, with one in four businesses reporting that inflation was their main concern and UK GDP falling 0.3% in April 2022. With consumers also feeling the pinch and spending less, it is no wonder that business owners are starting to feel concerned that there is a recession on the way. But while many businesses are focusing on ways to save money, there are still opportunities for those who know how to take advantage of them. One such opportunity is direct marketing.

Many studies including the Harvard Business Review have found that direct marketing in a recession is a good thing, and slashing all marketing in a recession is a mistake. However, the companies that refocus their budgets and efforts on measurable forms of marketing like direct marketing, weather the economic storm better, build market share and flourish after a recession. Building and maintaining strong brands also remains to this day the best way of weathering an economic downturn.

In this article, we will discuss why it is so important to continue direct marketing in a recession, how to it is an effective way of beating a downturn, and why direct marketing is the best method of doing this.

What direct marketing is
The benefits of direct marketing over traditional methods
How to direct market in a downturn
Tips for creating a direct marketing campaign that works

1. What direct marketing is

Direct marketing is a form of marketing that involves direct communication with potential customers. This can be done in a variety of ways, including postal mail, email, phone calls, SMS, and advertising. It is a way of marketing that allows businesses to target specific consumers based on their interests, which can result in higher conversion rates.

2. The benefits of direct marketing over traditional methods

There are many benefits to direct marketing over traditional methods, particularly in a recession. One of the main benefits is that it is more cost-effective. By cutting out the middleman, businesses can save money on advertising costs and pass those savings along to the consumer.

Another benefit of direct marketing is that it is more targeted and offers measurable returns. Businesses can target specific consumers based on their interests, which can result in higher conversion rates. Additionally, direct marketing allows businesses to track results and ROI more effectively, making it easier to adjust and improve campaigns incrementally.

3. How to direct market in a downturn

Now that we've covered the basics of direct marketing and some of the benefits it offers, let's take a look at how direct marketing works in a downturn.

One of the most important things to remember when direct marketing in a recession or downturn is to understand the psychology behind economics. It is also crucial to adopt a consumer-focused mindset.

Downturn Psychology

Each recession is unique with different factors contributing to the downturn. The recession of 2009 was driven by banking practices and bad debt, The Great Depression on the other hand was a fragile post-war economy, speculation, and mistakes made by the US Federal Bank. These factors will impact consumers very differently and will determine in part their mindset as well as how they behave.

How does consumer spending change during a recession?

Consumers no matter how affluent, tend to categorise their expenditure in the following way:

Essentials – These are the items that consumers cannot go without such as food, water, shelter, and clothing.
Discretionary – These are the items that consumers do not necessarily need but make their life more comfortable. These include items such as entertainment, eating out, holidays, and new clothes.
Deferred – These are the items that consumers may want but due to the current circumstances, they are not able or willing to purchase them. These include big-ticket items such as a new car or home improvements.
Expendables – These items are neither essential nor discretionary for living a full life, and are the first things to be cut when consumers are feeling the pinch. These include items such as luxury goods, eating out, and subscriptions.

To succeed with direct marketing in a recession, it is crucial to understand which of these categories your service or product sits in and formulate a recession strategy based on how consumers will treat spending in your vertical.

For example, if you are a luxury goods manufacturer you may need to consider new markets where the downturn has had less of an impact or economies that have not been impacted at all. Or, if you sell a discretionary product, you may change your messaging to suggest that your product is a little luxury that makes life worth living.

Wherever your product or service falls in consumers spending priorities, acknowledge it and plan according, even if the means slashing budgets early. Whether or not you have products in demand during recession there will be a strategy that works for you.

Portfolio Audit

If you have more than one product it is really important to perform a portfolio audit to understand which of your products and services has the highest cost base, profit-based, as well as long-term market potential.

This is where potentially hard decisions need to be made. It may be that you have a new launch product that everyone is behind, but it doesn't have long-term growth potential and in the short term it is going to be a big drain on your resources. Sometimes closing this type of enterprise might be the right decision, or just servicing existing customers might be viable.

This will depend on your own business and circumstances. Only you will know the right thing to do.

Opportunites

Next it is time to look at the positive and discover the opportunities that sit within your portfolio of products or services. If you only have one this is still a useful exercise to undertake.

For each product, of service sketch out a business model canvas and then decide how things could be done differently. SaaS founders should also consider whether their per-seat pricing model is still viable as AI reshapes how software delivers value. Ask yourself the following questions:

Could we generate recurring revenues by converting products into services?
Could we better integrate our products or services?
Are there additional customer needs we could satisfy?
Could we add extensions to our Value Proposition?
There are other jobs could we do on behalf of consumers?
Can we replace one-time transactions with recurring revenues?
Are there other elements that customers be willing to pay for?
Could we standardise or cut some of our Key Activities?
We can benefit from a growing market?
Could channel efficiency or effectiveness could be improved?
Could we use less costly resources to achieve the same result?

Once complete you should have a list of key opportunities that you can then rank by the impact that they will have on your business.

Recession marketing strategy

Now that you have all the information together it is time to formulate a recession-beating strategy. First focus on your portfolio and in light of all the work that you have done, be honest about your prospects.

Better to discontinue some product lines now and thrive, than have your whole company brought down by the products or services that clearly will not weather the storm.

Next, consider where you can place your investment in marketing. Take scalpel to the rest of your budget and work out the bare minimum you need to spend on things like communications, display media, and any long-term branding projects that are underway.

To counteract this also consider how and if you can discount your product. Consumers in a recession do appreciate value, so ensure that your offering does represent good, or better value than before.

Then once this is done consider whether based on your existing metrics how much of this could or should be reallocated to your direct marketing budget.

Refer back to your consumer psychology and opportunities and start to formulate some hypotheses of direct marketing strategies you could undertake to increase sales.

Finally, formalise the budgets for this activity and ringfence it for the long term, there is nothing worse than pulling more spending later, only to discover that if you had continued for another couple of months you would have seen the return.

Tips for creating a direct marketing campaign that works

Now that you have a direct marketing budget, it is time to make sure that your campaigns generate a positive return on investment.

Carefully consider the following:

Who is your target market?
What are their needs?
What are their buying triggers?
How will you reach them?
What channels will you use?
What type of message will resonate?
What offer will you make?
What call to action will you include?
How will you measure success?

Once you have answers to all of these questions, you can start to develop your tactical direct marketing campaigns.

Remember to test, measure, and iterate as you go. And direct marketing can be a great way to reach consumers during a recession.

Conclusion

Committing to marketing spend in a recession can feel like a daunting if not foolhardy prospect, but the research is there to show that it works. Direct marketing might not be the first thing that comes to mind when you think about how to weather a recession, it can be a powerful tool in your arsenal.

By targeting the right consumers and cutting out intermediaries, businesses can save money on marketing costs, build better products and pass some savings along to the consumer.

So if you are looking for a business strategy during recession, or would like case studies of how direct marketing can help, please drop us a line.

Direct marketing in a recession – The key benefits to your business

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