Sep26
The Great Toilet Paper Panic of 2020 demonstrated how fragile our supply chains are and how vulnerable we are to disruptions. The biggest takeaway from global crises and inflation is that how brands respond to customer behavior determines who survives after the dust settles.
Inflation generally makes customers spend less, buy cheaper, and postpone non-essential purchases. The longer the inflation lasts, the more these habits are amplified. That said, consumers don’t have a blanket response to inflation.
While many consumers cut back, some make exceptions for discretionary purchases they consider affordable and morale-raising—think luxury perfume or staycations. Others, especially top earners, simply continue spending as usual.
Presented with this mixed bag of customers, how can marketers adapt their messaging and marketing strategies to meet the customers where they are?
It seems counterintuitive to maintain marketing and advertising during an economic downturn. In fact, many businesses deliberately slash marketing budgets first while funneling resources into production costs and short-term, measurable activations, such as digital and point-of-sale ads.
After all, aren't consumers spending less? Yes, but they also weigh their purchases more keenly and scrutinize brands.
The key to effective marketing during a recession is to lean more towards a long-term brand-building strategy rather than short-term activations. Since demand is lower during inflation, there’s more value in building brand awareness long-term than in pushing current sales.
What does a long-term brand-building strategy look like?
Create empathetic, reassuring messages around your brand that bolster your customer’s trust in your brand. One way to do this is to partner with or spotlight charities and causes that benefit the community. Show humanity, generosity and warmth.
For example, Coca-Cola spotlighted the contribution of frontline responders at the height of the Covid-19 pandemic in 2020. Their brand placement is subtle but reminds the consumer of the company’s commitment to the community.
Adidas tackled a global issue that the fashion industry contributes to—plastic waste. In May 2022, the sportswear giant launched the #RunForTheOceans campaign in partnership with a nonprofit environmental organization. The initiative targeted cleaning up the oceans one plastic bottle at a time for every 10 minutes run by individuals.
The brand aligned itself with a long-term message around sustainability, pulling customers into participating in the positive movement.
Spending on brand awareness protects your share of voice within the market. In some cases, it may be cheaper to advertise during inflation since many brands advertise less.
Tailor your marketing strategies to appeal to each customer segment your business serves.
You might serve conservative non-spenders and customers who are comfortably well-off and hardly change their spending habits in response to inflation. Your marketing strategy should address these differences.
The table below compares the different marketing strategies you would employ if you were marketing essential and discretionary products to various customer segments.
| Type Of Customer | Essential Product Marketing | Discretionary Product (Treats) Marketing |
| Conservative Non-spender | Emphasize lower prices in smaller packs, fighter brands and value products | Promote as a small indulgence that is well-earned |
| Resilient Cautious Spender | Promote bonus packs to encourage stockpiling | Promote the product as an affordable, morale-raising alternative to luxury |
| Comfortable Well-off Spender | Brand awareness advertising | Emphasize the quality of the product as an aspirational marker of success |
For example, Louis Vuitton's thousand-dollar bags are a discretionary item that the comfortably well-off would buy with no qualms. However, Louis Vuitton launched their keyring in 2009 to expand into the cautious buyer segment, which retailed at $300.
It was a signal to the customers with reduced purchasing power that there was a luxury option for their smaller budgets. When purchasing power was again on the uptick post-crisis, these customers bought bigger luxury items, increasing Louis Vuitton’s sales.
We’ve all experienced the freemium pricing model and how it nurtures us as consumers down the funnel to eventually purchase more product features. Spotify, Evernote, and Dropbox are a few companies offering this payment model.
As a marketer, you don’t want to lose market share while your consumers postpone their purchases. You want your product to be front and center in their minds, preferably in active use in their lives. This is where value bundles and the freemium model come in.
A freemium model allows you to give your customer a taste of the product while lowering the bar to entry for new users. The free tier opens your product to new consumers, while the paid tiers offer value to loyal and invested customers.
Once you’ve got your foot in the door, you can focus on highlighting the value of your product to these already interested customers. This is much more effective than spending that precious marketing budget on paid marketing campaigns and sales processes to gain leads.
Value packs or bundles offer the same benefit for products that can’t be offered in tiers. They lower the barrier to entry for your customers, making it easier for them to purchase a 2-for-1 bundle rather than a one-off.
A great example of leveraging price during an inflation period is Mailchimp. After the 2008 economic crash, when consumer spending was low, Mailchimp introduced the freemium model. After having been in business for nearly a decade, they had less than 100,000 paying subscribers. They also didn’t initially offer a free trial.
Introducing a free tier in 2009, with limited email accounts and a cap on daily emails, skyrocketed their users to 290,000 in seven months. Even though users started on the free tier, getting on the paid tier was an achievement showing the growth of their own businesses. Mailchimp has continued this model, growing its annual subscription revenue to $800 million in 2023.
Ensure the free tier is enticing enough to get customers on board but basic enough that they’ll eventually need to level up to paid tiers.
Secondly, work with the customers' needs in mind. Mailchimp responded to the needs of their small-business-owner clientele, who badly needed the email subscription service but could not support the cost because of the recession. The service-oriented offering paid off.
The bigger the product portfolio, the more it will cost to market these products successfully. Focus on promoting products with a higher perceived value to your customer base.
Consumers often cut back on household spending by buying less or cheaper options for their staple products.
Paradoxically, the uncertainty of inflation also makes consumers feel entitled to small, affordable treats that are emotionally uplifting—otherwise known as “the lipstick effect.”
As a marketer, you want to tap into this and strengthen the customer’s loyalty to the brand.
As a marketer, you can’t afford to take a back seat during inflation. You need to be proactive in tackling your consumer’s purchasing behavior.
The bare minimum is to protect your share of voice through long-term, brand-building marketing. Additionally, market various price points to the various customer segments to give them easy access to your products.
Lastly, stay ahead of the curve by curating a strong product mix that meets your customers wherever they are during these challenging times.
Keywords: Business Strategy, Customer Experience, Marketing
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