September 7, 2022
    Reding_icon 6 MINUTE READ

    BRAND DAY, Episode 11:

    Is The Economic Downturn Killing Your Sales?

    How to Turn a Recession Into a Gold Mine for Your Business

    “Our goal is more modest: we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” - Warren Buffett, in a 1986 letter to Berkshire-Hathaway shareholders. The essence of Buffet’s message to stockholders is simple: do the opposite of what everyone else is doing, in order to get results that are above and beyond what everyone else is getting. This is fitting advice given the expectation of a faltering economy in the coming months.

    When the economy dips, so do marketing budgets, under the assumption that reduced consumer spending means a business has to spend more to get fewer sales. We wrote recently about the importance of continuing to spend on marketing even during a downturn. We Wrote Recently about the importance of continuing to spend on marketing even during a downturn. (And, for reference, here is a List Of Brands who launched during a recession and are continuing to thrive.

    What is Mindshare?

    We talked about the importance of staying in front of consumers (using a low-cost media that continues to be strong for growing brand awareness, like out-of-home) so that when the market shifts back up and they start shopping again, they think of you first.

    This concept is called “mindshare.” When a consumer thinks of a given category of goods, what brands do they think of first? And in what order? The higher the brand, the more mindshare it has. The ultimate dominance in mindshare comes when the product or brand name gets used to reference the entire category: you don’t search for something, you Google it; instead of a facial tissue, you grab a Kleenex; you don’t get a rideshare to the airport, you Uber.

    Mindshare is incredibly important, but it’s also hard to measure. An easier metric to quantify, and one that is a good stand-in for mindshare, is market share.

    Why Market Share Matters

    In today’s business climate, it’s common to focus on customers and the experience you deliver to them, including through your advertising. This is a good thing, obviously. What’s not as popular any more is to spend much time thinking about the competition. While calling out competitors in ads may not be the greatest tactic, efforts to establish core positioning, branding, and messaging are inherently competitive strategies (consider the names of some of the books written by the father of positioning, Jack Trout: “Positioning: The Battle for Your Mind” and “Marketing Warfare”).

    Getting these elements correct is crucial to successfully differentiating your brand - thereby giving yourself the best chance possible of growing mindshare. This emphasis on differentiation is for consumers - so they clearly understand why they should buy from you - but it’s also against competitors.

    Market share as a metric is important to investors and shareholders from a financial perspective. It matters for attracting top talent, because of the prestige associated with being a leader in your category. And, of course, it matters for customers, because people have a psychological tendency towards following the crowd, and growing market share signals that “everyone” is choosing you.

    Market Share and Recessions

    Traditionally, market share is a sales-related metric. Investopedia defines it as your sales in a given category divided by the total sales in that category. At first, that sounds unhelpful: we’re heading into a recession, with an expected drop in sales, after all. However, there are other KPIs you can track, such as traffic if you run a significant part of your business online (think ecommerce or digital media). More important, though, is the idea of thinking long term about market share.

    During a recession, when other marketing budgets are drying up, companies are thinking in terms of survival, not in terms of putting themselves in the best position to take advantage of future opportunities.

    But here’s what a lot of people forget: recessions are short! Since 1900, the average recession has only lasted 15 months. The Great Recession in 2008-2009, which lasted for 18 months, was the longest economic decline since World War II. (In comparison, the average length of economic expansion is 48 months, although this has dramatically increased from 1980 on to almost 100 months. That’s over 8 years of growth to just over a year of recession!)

    The first and most important question you should ask yourself at the beginning of a recession is, “How do we put our brand in the best position possible one to two years out?”

    How to Grow Market Share During a Recession

    Your objective should be to be in a place to rapidly expand your market share as soon as the recession starts to wear off and consumer spend starts to reemerge. Here’s how you can do that.

    Step 1: Choose how you define your market.

    You actually have a say in defining your market share! It comes down to deciding what category you’re in. Are you competing as a small fish in a big ocean, or a big fish in a small pond? If you could choose to compete for market share in the category of automobile manufacturers or in the narrower category of electric vehicle manufacturers, which one do you think would be easier to rank well in?

    Don’t be afraid to shrink your market by geography, audience, specialty, and any other factors you can. The smaller market you choose to compete in, the easier it is to dominate. Use your strengths, your brand identity, and your best customers to help you narrow this down.

    Step 2: Determine how you are different from your competitors within your chosen niche.

    Within the new, smaller niche you’ve defined for yourself, you need to understand what each of your competitors bring to the table that sets them apart: maybe it’s speed, maybe price, maybe how they deliver their product, maybe customer service (or maybe all of your competitors are the same, which makes your job that much easier).

    Then examine your own brand identity to discover what sets you apart from the other brands in your niche. Start with looking at how your audience perceives you: when communicating your unique selling proposition, it’s easiest to begin with what your market already thinks of you.

    Step 3: Leverage this recession to build something that excites your ideal prospects.

    How you choose to define your difference within your market should provide your company with some direction. Focus on creating and deploying activities that reinforce your differentiation to the market. Areas for expenditure here include things like R&D, product development and innovation, and customer service. (For example, develop a new product that aligns with your primary area of differentiation and prepare to launch as the recession wears off.)

    Meanwhile, spend this time telling your ideal prospects about what you are working on. Without any expectation of making sales right now, focus on creating experiences and conversations with consumers that get them excited about what you’re doing. Eighteen months from now, the result will be a large number of people in your market who are no longer thinking about your competition (who they haven’t heard from in over a year) because they are so eager to do business with you.

    Wrapping it All Up

    Do this right, and you’ll build customer loyalty (which equals more sales at a lower cost later) while creating demand amongst consumers currently unfamiliar with your brand. And, when the moment is right, you’ll emerge with significantly more market share, and the prestige and profits that come from that.

    The critical piece in getting this right is your messaging - how you communicate your brand difference to your audience. Many companies get hung up at this point: clear, simple messaging is harder to craft than it sounds. If you’d like help with this, Adkom is able to offer messaging advice to brands who partner with us for their out-of-home campaigns.

    Reach out to us with what you’d like to do, and we’ll put together a proposal for you.