As economic headwinds increase, we outline how the strategic use of market research can support your business to navigate through the turbulence and stay ahead of the pack.
Warning: downturn in progress
It’s no secret that major markets around the world are facing tough economic conditions over the next 24 months, if not full-blown recessions.
Reuters just reported on the double threat of inflation surge and the risk of recession in the UK and whilst the story is a little rosier in Australia, the media are amping up on the threat of a US recession dragging in other markets.
Irrespective of this news, consumer confidence measures are already pitching UK and Australian markets at ‘recessionary’ levels and the economic forecasts for the next 24 months are unequivocally grim, to say the least.
What does this mean for businesses? The implications are that belt straps will begin to tighten moving forward, affecting all parts of the economy. As a result, companies will be forced to control costs more stringently across all areas of their business.
Consumer research: The baby or the bathwater?
Before you cut your research budgets along with other ‘discretionary’ marketing investments for the sake of cost saving, take a moment to reflect. Below are 5 considerations to help you assess how research should fit into your strategy to address the challenges ahead.
1. Battle for your brand
Marketers now have the benefit of a robust volume of business data that validates that companies who spend through major downturns or recessions ultimately reap the benefits of accelerated growth on the other side.
Essentially, the businesses that invest in brand-building for the long term throughout recession are the ones that reap disproportionate benefits when the recession ends. There are several reasons for this (all of which are neatly summarized here), but the implications are crystal clear; you should be fighting hard to maintain your brand marketing budget during the downturn.
How can research help? By measuring the short term impacts of your continued brand investments, you’ll be able to prove to the naysayers that you need to stay the course. The requirement? Affordable, regular brand health dips or continuous brand tracking to monitor consumer attitudes and behavior.
2. Not all costs are created equal
In recessions, it’s often the case that businesses unilaterally cut costs across the board in some kind of egalitarian pain-sharing exercise, but this is proven to be folly. An intensive meta-study of multiple recessions demonstrated that the small group of businesses which were able to ‘roar out of a recession’ did so through a mix of selective cost-cutting and strategic investment.
As the author of this study, Nitin Nohria concluded, “These companies reduce costs selectively by focusing more on operational efficiency than their rivals do, even as they invest relatively comprehensively in the future by spending on marketing, R&D, and new assets”.
How can research help here, you ask? Whilst these businesses spent less on marketing and R&D overall, their bets were even more important. When you go from launching tens of products to just a few, you need to be confident those bets will succeed. Research provides the confidence to ensure those products are the right ones to bet on, and the data to justify so upstream.
3. Customers (still) rule
Nothing changes consumer behavior faster than having your confidence shaken. Financially-challenged consumers tend to buy less, look for better deals, or switch to different brands, product categories and/or stores. Some are even changing long-held attitudes toward consumption.
In this context, there’s nothing more important than focussing on your key customer segments to ensure the shifting sands haven’t suddenly made your offering irrelevant and your profitability perilous.
This is where market research can help navigate the best way forward.
Focus on staying close to your most valuable segments. Ditch the peripheral insights work and concentrate on staying close to the needs of your core audience.
Brand tracking, or focussed consumer profiling projects, can be an invaluable tool for keeping your finger on the pulse of what your key customers want, what they need, and how they’re responding to a rapidly changing environment.
Relevant syndicated data that provides a view of the broader market (such as Glow’s ESG brand tracker) can also be powerful here, as a way to keep an eye on ‘emerging’ consumers, because no one, with certainty, can predict future behavior.
Will the new consumers of your brand revert to previous consumption patterns when the recession ends? Or will their recessionary coping mechanisms become the norm? And what new products and services will consumers be open to embracing when things get easier? Smart marketers keep some research budget in the tank to ensure they can answer these questions.
4. Dealing with ‘stagflation’
While recession and inflation are usually seen as opposites, markets such as the UK and Australia are currently experiencing strong inflation at the same time as we see an economic downturn. This is called stagflation, and it signals a particular pressure on prices as businesses try to manage profitability pressures driven by inflation against the downward price pressures of cash-strapped consumers.
There’s no shortage of marketing impact studies that have clearly shown that price promotions during a downturn are a bad move unless you intend to maintain prices at those levels afterwards. Why? Because as soon as you raise prices again, consumers will take offence and leave in droves.
On the flipside, how do you deal with the need to increase prices to maintain profits caused by inflationary pressures? The answer lies more in how you communicate a price increase, rather than the magnitude of the increase itself – it’s all in the delivery.
As Marketing Professor Mark Ritson calls out so eloquently, “Aim for fewer price increases, but signal the ones that are coming by explicitly explaining why and what the price increase will consist of. And don’t be tempted to euphemistically refer to price ‘reviews’ or ‘alterations’. You are increasing prices, play it straight. Call it what it is. Explain why it is happening. Be clear on when the change will happen”.
How can research help with pricing decisions? The obvious answer is through research in areas like price elasticity testing for key products to model the profitability of pricing decisions.
But there are also opportunities to think laterally about your product fit with consumer groups who have demonstrated a willingness to pay higher prices – think luxury buyers trading down and values driven consumers who are re-aligning their product choices with their desired impact on people and the planet.
Audience profiling research can help identify whether there are opportunities that can be tapped here using your current products, through specific targeting or messaging customisation.
To borrow another pearl of wisdom from Professor Mark Ritson, “Research isn’t something you do as an extraordinary expedition up the customer congo to find, ultimately, The Answer. Every good market-oriented organization has three cadences of research”. By his definition, one of these is the need to assess market or segment behavior changes, another is the requirement to address ‘micro issues’ as they arise. Economic downturns create both these scenarios – generally driving significant behavior change and creating a myriad of short term problems requiring robust data inputs. The outtake – don’t cut your research unilaterally without assessing where the risks and opportunities exist.
How Glow can help
If you still need to conduct market research, Glow’s nimble, value-driven research-tech is perfectly suited to supporting brands in a tough economic climate. Here are three reasons why:
Speed to insight
Glow’s research tech streamlines the research process, enabling you to get results in days, not weeks. This makes it exponentially easier to stay abreast of changing consumer attitudes and behavior.
By automating much of the process and substituting hundred-page reports for interactive data visualizations, Glow enables research to be conducted more cost effectively. Client interaction with the data in-platform also encourages deeper understanding of the data.
By cutting research budgets, many brands also consolidate research vendors, leaving the majority of work in the hands of one agency – this creates a new type of risk. Glow’s tech enables businesses to consolidate their knowledge and IP in one place and, if desired, allow their agencies to all work using the same platform. This ensures that research knowledge is securely centralized irrespective of what vendors you use.
If you don’t know it, Glow it.
Glow has helped a range of brands conduct brand tracking, market assessment, audience profiling, concept testing and much more including Telstra, Yellow Pages, Puma and Mondelez – to name just a few.
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