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When it comes to addressing the key questions set out by Sapio for our International Business Barometer, we have looked to address 3 questions:
- Is there a recession coming?
- How could businesses prepare against a recession?
- What are the recent trends that could help marketers in the event of a recession?
What is a recession?
Let’s begin with defining a word that we all know, but perhaps don’t know its precise meaning: recession. In simple terms, a recession is a business cycle contraction when there is a general decline in economic activity. So far so good. However, there is a bit more to it than that. In more nuanced terms, a recession only occurs when the economy has had two consecutive periods of negative output. This definition adds another layer of meaning and will contextualise what we will go on to say.
Now, to answer the first question in brief, it does appear that a recession is on the horizon. All the signs are pointing towards an economic downturn, but the true question is when. Some estimates suggest that it will come as early as late 2022, whereas others are citing early 2023. What we are seeing here is the long-term impact of the Covid-19 pandemic and the recent impact of the conflict in Ukraine. Regardless, the economic outlook for the coming year is less than promising. Now, the challenge for businesses globally is to plan accordingly.
The imminent threat of a recession is already being noticed. Our barometer found that 95% (yes 95%!) are concerned about the recession, particularly those in the US. Notabley in the recent weeks, we have seen talk of a recession ramp up. Now, the consequences of this chatter have appeared. Further to this, we are already seeing people being affected by the recession. 22% of our respondents reported that they were already being impacted by the recession. This figure is expected to rise to 42% by the end of 2022.
Our findings corroborate what the OECD’s business confidence index is showing: confidence has been falling since December and that trend is showing little sign of changing. In the UK specifically, business confidence has been falling since Q3 of 2021. It therefore appears that we are barrelling towards a recession.
Recession Preparation and Drawing on the past
If you are a business owner, the prospect of a recession could be a potential death knell. However, it would be a false equivalency to say that a recession will lead to a business failing. Granted, a recession will provide all businesses with unique challenges, and some will struggle to survive. That said, there are some measures that could help to mitigate or minimise the effects of a recession.
Above all, it would be ill-advised to eradicate a marketing strategy entirely. Of course, there will be budget constraints, but eliminating marketing from the budget could do more harm than good. Instead, the marketing budget, such as it is, should be directed towards creating a solid marketing strategy that focuses on customer loyalty. To put it simply, a recession will make it harder to attract new customers, so your efforts are better served to working to retain existing customers.
Reassuringly, the barometer found that respondents were aware of the importance of marketing. 32% of respondents said that they planned to ramp up sales and marketing activities in the next 6 months as part of their recession mitigation strategy. History has shown that the businesses that have come out the other side of a recession have followed this approach. There is no reason to doubt that a similar approach can be similarly beneficial.
Speaking of using tried and tested recession survival techniques, businesses would do well to consider existing consumer trends as part of their overall strategy. One such trend was provoked by people working from home. This saw the schedule for consuming content change, namely people were consuming content on a more regular basis. This means that marketing content would be wise to account for this. If we were to distil this down, we would say that above all DO NOT neglect marketing. History has shown us this and our barometer revealed that businesses are preparing to do just this.
We have offered here just a brief insight and analysis into how the market is trending. We would not try to claim that we have the golden ticket to surviving a recession, but our market insight provides Sapio Research with a unique angle of the situation in the UK, US, Germany and Japan. Take from this what you will, but we think that it is worth your attention.
Feel free to learn more about marketing budget intentions and mitigation strategies with our downloadable report.
Or read about it in the press.