Dan Arens

In early October, The Conference Board indicated there is a ninety-six percent chance the United States will experience a recession within the next twelve months. By taking the proper approach, your business can strive to thrive during and after any recession.

As difficult as it is for any business to experience a recession, most businesses have done just that. Not just once, but quite probably, many times. Authors John Quelch and Katherine Jost have studied recessions since the 1970s. In an article published for the Harvard Business Review, they not only observed that each recession is unlike any other, they also suggested there are ways to maneuver and market your company until some level of economic normalcy is regained.           

The authors addressed the usual behavior of customers or clients during a recession.

“During recessions, of course, consumers set stricter priorities and reduce their spending. As sales start to drop, businesses typically cut costs, reduce prices, and postpone new investments. Marketing expenditures….are often slashed across the board- but such indiscriminate cost cutting is a mistake.”

Instead of making an overall major cut in your marketing expenditures, consider performing more of a surgical cut in costs that will save you some money, but do not force all of your customers into one group; try to differentiate between necessary marketing expenses and wasteful or non-productive ones.

During times of growth, business and personal expenditures are based on disposable income from a consumer standpoint and overall profitability from a business viewpoint. If confidence is present, the money is spent on purchases. If confidence is not present, expenses are trimmed.

Quelch and Jost take the unique position of categorizing customers/clients in four ways; slam on the brakes, pained but patient, comfortably well-off, and the live for today category. While most of their research is focused on the individual consumer, business to business (B2B) marketing can be easily adapted within their four categories.

As you review each of these categories, take a step back and think of specific customers that might fit in each of the segments. Hopefully, you will be surprised to see how helpful this approach could be in segmenting people or businesses that react in these ways during a downturn. While most everyone adjusts the services or products they purchase during a recession, these categories can be viewed as varying degrees of those adjustments.

Slam On The Brakes: This group or category feels the most impacted during a recession. “This group reduces all types of spending by eliminating, postponing, decreasing, or substituting purchases”.

Pained But Patient: This market segment “tend(s) to be resilient and optimistic about the long term but less confident about the prospects for recovery in the near term…..they economize in all areas, though less aggressively. They constitute the largest segment……..As news gets worse, pained but patient consumers increasingly migrate into the slam on the brakes segment.”

Comfortably Well Off: This category is much more resilient to downturns. They represent B2B customers or consumers that are more recession proof. They typically represent the top income bracket of consumers and represent the highest perfomrming businesses.

Live For Today: This segment “responds to the recession mainly by extending their timetables for making major purchases.” They are the most likely to not change their behavior unless a major event impacts them directly.

In suggesting solutions for solving these different categories, Quelch and Jost suggest the “Slam on the brakes and pained but patient customers in particular will be shopping around for the best deals. All businesses will increasingly compete on price.” They go on to suggest that “Many marketers will need to increase the frequency and depth of temporary price promotions.” Further suggestions include that “companies can improve affordability by reducing the thresholds for quantity discounts, extending credit to their customers, or having layaway plans. Reducing item or serving sizes, and then pricing them accordingly, is another effective tactic. For services businesses such as cable and mobile telephone companies, lowering consumer up front adoption costs and reducing penalty charges can help….”

In summary, think how beneficial it might be to do an analysis of some of your top customers, seeing which of these categories might fit them. If you are successful in placing them, you and your business just might be able to head off a loss of business by being pro-active, thereby helping you maintain or minimize the impact of their actions on your business during a recession.

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