It wouldn’t be inappropriate to pop the words ‘Don’t panic’ in large friendly letters on the cover of a guide book to marketing in 2023. Marketing plans feel insanely complicated to operate this year, but a freeze response would be a disaster.
And, while it’s absolutely not a moment to be flippant about the suffering people are going through, there is tentative good news in what economists and analysts are saying.
The vast majority of forecasts point to a recession that will be mild by historic standards. It won’t be anywhere near as bad as the disastrous one that started in 2008 with the global financial crisis, and it may not even be as bad as the mildest recession in the post-war period, the one that took place in the 1990s.
This isn’t to say marketers don’t need to change anything. Messaging needs to evolve to support higher prices and keep the tone right for a polarised nation.
And, for all the reassurance in the forecasts, the future is uncertain. It’s important to get research in order and use it in scenario planning.Ritson’s recession playbook: 9 steps marketers should take to survive the dark times ahead
Economists and analysts broadly agree
It’s not wise to rely on any one economist or analyst for a forecast of something as complex as a recession. But where clever analysts from a range of different backgrounds agree, it’s usually a conclusion you can rely on.
And right now, the UK government, international financial institutions, and investment banks are all saying the same thing: the coming recession in the UK will be mild by historic standards.
The chart above shows trajectories for UK GDP, benchmarking 2022 to 100. The grey zone has been constructed by supposing that the coming recession will be like previous post war recessions, and all the colourful lines are forecasts.
The IMF – in dark pink – think there won’t be a recession at all, the economy will just grow a little slower. And, at the other end, the Bank of England thinks things might be as bad as the recession in the 1980s.
But, in the middle, the majority have come to broadly the same conclusion.
There will be a recession, but it won’t be too bad.
Perceptions don’t change overnight, but they do move, and communicating your quality or value claim is more important than ever.
These analysts are factoring in all the downsides: energy and food prices going up, central banks raising interest rates and affecting what we pay on our mortgages, and the health hangovers from Covid-19.
- But they are also weighing up sources of resilience:
People who were forced to stay home a lot over the last few years and so spent less and saved more. They have a cushion and can still afford some luxuries.
- A global financial system which is in a good state because banks and governments learned the lessons of the global financial crisis.
- Businesses that survived Covid-19, perhaps because their model is strong, or they were agile and able to evolve. These are firms that will likely survive again.
Taking both positives and negatives into consideration, most net out at a recession that won’t be too painful.
Risks and opportunities in campaign planning
This is not to say marketers can relax. There are some important moves to make.
First and most important, is to get messaging right. While there’s an opportunity to help the CFO with his or her biggest problem, there is also a risk of saying the wrong thing.
With salaries for employees and the cost of materials going up, CFOs are wondering to what extent they can charge more. Remaining profitable means increasing price but how many customers will leave? A high profit margin on a lost sale still means zero profits.
Marketing and advertising can help. Customers will continue to buy even at a higher price if they believe the product is worth the money. Perceptions don’t change overnight, but they do move, and communicating your quality or value claim is more important than ever.
CMOs and senior marketers should be using numbers, research and spreadsheets to work out the likely outcome of different marketing plans in different futures.
It’s important to do this in a way that recognises how polarising the pandemic was financially. Some people came out of it in a really very precarious position and are now choosing between heating and eating. But others actually came out better off.
Targeting media buys to different groups so you can use different messaging is one option. Another is to craft a tone of voice and message that works for everyone.P&G and Coke’s pandemic performances prove it: You don’t cut ad spend in a crisis
Futurists very rarely talk about one forecast, one future. Instead, they look at a range of ways relevant things might evolve and identify routes forward that work in all possible futures.
When the world is as uncertain as it currently is, this is a sage way for businesses to operate too. CMOs and senior marketers should be using numbers, research and spreadsheets to work out the likely outcome of different marketing plans in different futures.
It’s possible to adapt share of voice, share of market frameworks to recession planning by looking at different marketing plans and different scenarios for what competitors will do. The resulting market share trajectory can be combined with forecasts of how big your category will be, to get a figure for the value of that extra or lost market share.
Even better, a solid econometric analysis will not only give you a read on advertising effectiveness, but also an estimate of what will happen if and when you put your price up. Good providers build forward-looking tools that embed forecasts for economic variables that matter to your specific business and allow you to tweak all elements of the marketing mix.
The resulting set of scenarios then forms a road map for the changing world, a route out of the endless cycle of planning and replanning we all went through during Covid. Because when situations shift, it’s to a version you’ve already considered or can easily evaluate using the framework.
A crystal ball is too much to hope for, but it is possible to write yourself a manual, or better still, a friendly guide book.
Dr Grace Kite is founder and managing director of magic numbers.