Recession normally equals fear, dread and risk aversion for brand leaders.
But fear not… We believe that strong brands can successfully navigate the myriad of challenges in phases of economic recession. Brand leaders need the confidence provided by actionable data in order to react to what consumers truly need; from an increased emphasis on value or building the brand proposition to new audiences.
Setting The UK Economic Scene
In October 2023, the UK economy contracted more than anticipated, this can be attributed to a variety of factors, but a few major ones are the increased interest rates impacting consumer spending and a host of adverse weather conditions across the country. Following a small 0.2% growth in September, we saw the economy experience a 0.3% decline in October.. Beyond political influence, we even saw natural events, such as that of Storm Babet, cause economical disruption, particularly in the retail and tourism sector.
The tangible reality painted a very different story, with widespread declines across all major sectors, including but not limited to manufacturing and construction.The UK's economic growth remains sluggish, prompting Prime Minister Rishi Sunak to pledge acceleration, although a substantial recovery is not anticipated until January 2025, coinciding with the next general election. Whilst there is an overbearing feeling that a change in Government is needed, this alone fuels further uncertainty for both brands and consumers alike. The lingering question - what policies will we see revoked, introduced and what will the cost vs benefit be?
Financial analysts in the city noted that the deteriorating economic outlook in the UK might prompt the Bank to deviate from its plan to maintain current high interest rates, with market pricing indicating a potential five-rate cut by the end of 2024, reaching 4%.
Lessons from 2022’s Economic Recession: Navigating Market Changes
As brand leaders, we have all been here before, and so here are a few strategies that helped our clients during the last recession…
Some definitive strategies include:
- Focus on value to the consumer
- Focus on brand building
- Leveraging insights and research as much as possible
Prudency is not always the best policy. As slow realisation dawns that the market has changed for the foreseeable future, market share has been eroded, customer sentiment diminished and marketing that has not moved with the times.
Paralysis could be caused by a number of factors, from the paradox of choice, contradictory data, a lengthy command structure etc. The list goes on.
Sometimes you have to mix up the formula to unearth innovation.
This brings opportunity.
‘Well, you are going to say that?’ I hear you cry. ‘A biassed marketer, protecting their business’, I anticipate being the thought process.
However, one brand’s crisis is another opportunity, even within the same vertical or business line.
The UK Economy To Recover Or Contraction To Continue? Q4 2023 Overview
Government data revealed a 0.3% contraction in GDP for October, surpassing economist predictions by 0.2%.
Economic Contraction, the evidence:
- 47% of adults said their overall cost of living had increased compared with a month ago
- Whilst this can be attributed to a huge array of factors, a major one is energy prices. The price of gas in October 2023 was around 60% higher than two years previously, while the price of electricity was 40% higher. (ONS, Dec 2023)
- 6 in 10 adults are spending less on non-essentials because of cost of living increases
- What industries are most impacted by this? Department store and household goods sales fell by 1.6% and 2.3% respectively month on month from September to October as consumers cut back on big-ticket purchases (ONS Nov, 2023).
- Sales volumes dropped by 0.3% in October 2023 following a 1.1% fall the previous month, falling to their lowest levels in more than two years
The evidence is clear, non-essential purchases are the first behavioural change to go in an economic recession…
The Impact on Consumer Spending and the Role of Assurance
Discretionary spending is the most impacted facet of the economy when it faces periods of downturn. We know that individuals tend to take a more conservative and risk-averse approach to their spending.
If you add to this, the highly publicised energy crisis/cost of essential services, we see a much greater emphasis on consumer spending solely on essential costs like heating and water bills. Non-essential expenses, such as beauty and luxury healthcare items, are often the first to be cut from the budget.
But as a leader or marketer operating in these industries, you need robust strategies in place to negotiate these challenges.
We have some tools that may help…
Explore how Assurance, grounded in a dynamic OODA loop framework, ensures strategic fluidity. Backed by data, it empowers decision-making in a rapidly changing environment.
Assurance is not a term that you see coined often in reference to marketing. It has connotations with insurance and is linked to risk-mitigation within business.
There remains risk within marketing. Are we missing out on key opportunities? Are competitors stealing a march on us? How can we stop ourselves from becoming obsolete? This is where assurance comes to the fore.
Now for the theoretical bit. Assurance is based on strategic fluidity. It is all well and good having 5 year plans, however, it’s wishful to think that the environment will sit still and let you implement without challenge. A challenge like an economic recession. A challenge like a supply chain crisis. A challenge like…you get the picture.
Assurance is based on a 4 stage framework called the OODA loop:
Observe — what is happening
Orient — ensure the business or brand stakeholder are aware
Decide — collaboration to determine the best course of action
Act — deliver the response to the situation
It is delivered by monitoring trends and changes in the environment using a range of tools and bespoke techniques, harnessed by our consultants. Science meets art. Everything is backed up by data, so we can quantify the level of trend, change and opportunity and the impact it could have for the business.
Be on the pulse
Assurance is ever evolving and we are doing our best to keep up the pace of change and the data available to us.
The ability to connect multiple data points and pieces of insight to create meaningful decision making at speed, is key to its success.
Curated’s insight-lead framework provides brands with multiple data touch points and ammunition to continually deliver a brand point of difference, with agility and at speed. If you want to deliver increased value and at speed, get in touch, we’re ready to be your transformative change agent.
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This is just the tip of the iceberg and there is so much more to be uncovered…
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