Is your business recession proof?
Despite a resolution to the political uncertainty of 2019,
there is still a concern that we will see sluggish growth across the UK market
and that a recession could still happen in 2020. Why is this?
- According to Office of National Statistics between 2017 and the first quarter of 2019 consumers spent more than their income for the first time in 30 years. This pattern has only been seen twice before; both before the recessions of the early 90s and the late 00s. (1)
- We still have Brexit to
contend with. This uncertainty has played havoc with economies and will
continue to do so until Brexit happens.
- The ongoing trade war between
US and China could result in a global downturn.
- Finally, the rising
geo-political tensions in the Middle East will impact global markets
Consumer habits change when a recession hits.
We have identified three key consumer behaviours that
changed during the last recession, that advertisers should consider. These are:
- Consumers spent more time at home, less out socially.
- Cinema visits fell whilst TV/rentals/box set viewing increased.
- Takeaways and home cooking increased with consumers focussed on entertaining at home more than eating out at restaurants.
- Time spent shopping online increased vs shopping physically in retail stores.
- Consumers spent more time seeking out value when they shopped.
- They spent time looking for deals on price comparison and vouchers sites to save money.
- In the last recession, budget supermarkets Aldi and Lidl moved into the top 6 major supermarkets in the UK by sales. And, according to the latest figures, Aldi saw sales increase by 7.9% whilst the expectation from the City is that Tesco, Sainsbury’s and Morrisons will see a decline in sales. (2)
- Consumers buy in bulk and shop less frequently to save money.
- Consumer Savings Increase
- In a recession, consumers cut back on spending and focus on saving money
We are already seeing some of these changes occurring, with consumer
spending down in Q3 of 2019, confidence is lower than it was in 2018 and the
focus on value is increasing in the consumer mindset. (3)
What does this mean for marketers?
Even though a recession is not guaranteed, the signs are
that 2020 could still be a turbulent year and we could well enter a recession
based on the points outlined above.
During a recession, consumers become more cautious and focus
on savings rather than spending. They avoid going out as much, and when they
shop they seek out value.
This has implications for advertisers – for example, they
need to target consumers in their home. To do this effectively TV advertising
will become key, backed up with a strong online presence to ensure they are
connecting with the consumer at the right time with the right messaging.
We understand that marketing budgets are one of the first elements of a P&L to be slashed during a recession (see our previous blog “Marketing in a Recession”). With reductions in budget, advertisers need to really focus where and when to deploy their marketing budget for maximum effect.
If you want to know more, why not pick up the phone or drop Patrick Woods
an email on firstname.lastname@example.org
or call him on 020 7257 2600 to find out how we could help your business.
- (1) ONS – Quarterly Sector Accounts, UK: January to March 2019; 28 June 2019
- (2) The Times – Christmas fails to light up supermarkets; 5 January 2020
- (3) Deloitte – The Deloitte Consumer Tracker Q3 2019 – The end of Consumers’ resilience?; Q3 2019.