Marketing in a Recession: How to Brace Your Digital Ad Campaigns for an Economic Downturn
You can’t scroll through your news feed anymore without being bombarded with headlines telling you that inflation is at 40-year highs, consumer confidence is at an all-time low, interest rates are rising, and the US is under constant threat of recession. While the US is not technically in a recession yet (experts are predicting a high likelihood that we will experience one in 2023), consumers are definitely already being impacted, and as a result, adjusting their spending habits. As seen in the poll below from CivicScience, US adults are already pulling back spending across a swath of both discretionary and compulsory categories, with clothing, toys/gifts, and household goods being the three retail categories most severely impacted.
Forecasts from Mastercard do have retail sales through summer growing 7.5% YoY, however, this doesn’t account for inflation. Assuming that inflation stays around current record levels of 9.1%, this would actually represent a decrease in real spending and goods sold during the critical summer and back-to-school time periods.
So, with all of the headwinds we’re currently experiencing and no real end in sight for the near term, how do you adjust your digital ad campaigns to successfully endure inflation, declining consumer sentiment, and recessionary behavior? Below, we will outline a few strategies that will be critical to ensure you are maximizing your opportunities for conversion when consumers are likely to be more reserved with their buying behavior.
Showcase Your Best Deals to Consumers
As spending is reined in and consumer dollars are harder to come by, advertisers must recognize what still drives potential customers to purchase, especially when it comes to discretionary spending. According to Salesforce’s May 2022 State of the Connected Customer, 66% of shoppers report being willing to switch brands to get a better deal, the highest proportion for any cause. Take advantage of this by showcasing your strongest promotions and product deals. Utilize ad formats that feature discounts like merchant promotions for Shopping ads, promotion extensions on text ads, and price drops across Google Shopping and feed-based display ads. These visual cues let shoppers know that you’re offering competitive pricing and a good deal on your products. Don’t forget to feature your promotions in text callouts for your search and paid social ads as well.
This could also be a good time to align your promotions with any excess inventory you might have built up as you try to offload goods and free up warehouse space for the holiday season. Major brands such as Target, Walmart, Gap, Costco, and many others have all gone on record as having accumulated additional inventory this year as supply chains caught back up and customer buying patterns shifted and were hard to predict. These retailers will be looking to deepen discounts in order to move product; if you are in a position to do the same, you should ensure your shopping campaigns are structured to more prominently feature categories or SKUs where you are offering the best deals.
However, a word of caution here – make sure you’re not engaging in or creating a race to the bottom and slashing your margins to capture one-time buyers. Although it’s critical to offload excess inventory and increase topline revenue, it’s equally important to recognize that the buyers you’re acquiring likely won’t match your current customer profile and will not have the same predicted lifetime value (pLTV). Many of those new customers that you snagged on a good deal are just as likely to jump ship for the next deal. Knowing that, it’s important to set return on ad spend (ROAS) & acquisition targets to reflect this different pLTV, and/or invest in and prioritize strategies to aid in customer retention. In order to help our partners do this in real-time, using the full power of automation, Adlucent has developed proprietary technology called Adlucent Index™ that customizes your bidding algorithm to adjust for these variations and fluctuations in customer value.
Offer Consumers Payment Flexibility
The use of flexible payment plans, commonly known as Buy Now Pay Later (BNPL), have risen dramatically in the last 5 years. eMarketer forecasts that as many as 79M US consumers will use BNPL services in 2022, with over $75 Billion in transactions occurring through the various platforms. As the Fed takes corrective action to combat inflation and interest rates rise, consumers are even more likely to turn to BNPL platforms to help defer the immediate cost of larger purchases, particularly on platforms that offer no-fee or no-interest payment plans. It is worth noting that while their has been a lot of fluctuation in the public valuation of these companies as of late, this is a reflection of their revenue models and not necessarily their inherent value for consumers or retailers.
Adding fuel to the already building fire, Apple is releasing their own version of BNPL through Apple Pay, called Apple Pay Later, launching with iOS 16. Given the proliferation of the iPhone and Apple Pay, this will immediately make Apple one of the biggest players in the space, although adoption rates are yet to be seen. Given that Apply Pay Later will not charge interest on its payment plans, it is well poised to be popular with consumers as wallets tighten and credit card interest rates rise.
If you’re not already offering BNPL services on your website, it’s worth considering providing the option to your consumers, especially as market conditions worsen. If and when you do have these services, it’s critical you call them out in ad creative and extensions so that shoppers know they will have this flexibility before they even get to your site. Callout extensions for your Google and Microsoft text ads are a perfect place to highlight consumer benefits such as BNPL that could make the difference on a crowded SERP.
Personalize Your Creative to the Right Audience
As we discussed above, price is an ever-important factor in a buyer’s decision-making process, but it’s not the only one. Quality, convenience, brand values, and customer service are all factors that customers consider, especially if price is a tie between you and another advertiser. Understanding the audience segments within your customer base for which each of these points will resonate, and then creating compelling messaging to engage with them, is critical in winning and retaining customers.
Through the use of automation, it’s possible to generate creative that speaks to each of these value props and then hope that the various platform algorithms can align the right message with the right audience. However, even for the best systems, this requires extensive trial and error, testing, and wasted spend. Brands that can leverage their own first-party data to segment customer sets and understand what truly matters to each cohort are much better positioned to align the messaging and strategy to ensure that their ad creative and storytelling are relevant to the individual. This in turn will generate significantly better ROI. The better the inputs you can meaningfully incorporate into the system, the better the results you can expect on the other end.
In the same vein, the products you choose to showcase to these audience segments in shopping ads can also have an outsized impact on clickthrough rate (CTR) and conversion rate (CVR). By seamlessly integrating your shopping campaigns and merchant center feeds to advertise the products that best align with audience values, you will be able to direct customers to the products that will resonate most with their buying decisions. Are your shoppers seeing your best value products? Highest quality? Ready to ship and convenient? How are you testing CVR and ROAS across these differentiators for each audience? Tools like Adlucent’s Deep Search™ and Model-Driven Planning™ enable this type of integration and testing as a scalable and effective part of campaign optimization.
Regardless of whether or not we’re in a true recession, adjusting your marketing campaigns to reflect current consumer behavior is critical. While this list is by no means exhaustive, it should be a good starting point to ensure you are honed in on what matters most to your customer and are getting the right kind of attention in a crowded and expensive landscape. In order to win and retain customers in challenging economic conditions, make sure your marketing team has an integrated approach across your campaigns to showcase what matters to consumers, can optimize towards and prioritize those values in an automated and agile way, can evolve and grow your 1P audience segmentation and messaging, and is ahead of the latest trends and innovations like BNPL that will help you stay ahead of your competition.
Brad is a Senior Director of Strategy at Adlucent. He is a strategic, data-driven, solutions-focused marketing leader with 10+ years of experience in omni-channel digital marketing and customer acquisition. He has a passion for turning insights into actionable strategies that improve real world outcomes for advertisers and customers. He believes that success comes from finding and striking the sweet spot where customer's needs intersect with a brand's value and goals.
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