But is This a True Recession?
That depends on your school of thought. Generally, a recession is a period of economic decline in which the gross domestic product (GDP) of a country falls for two consecutive quarters. However, there are many other factors to consider. Check out our white paper for more detailed information on recessions and recession-proofing strategies.
Though there is much academic debate around whether we’re technically in a recession or not, consumers are wary, and once again discretionary spending is trending down. As a general guideline, the National Bureau of Economic Research states that a recession lasts around 11 months on average, but the effects can be felt long after it has officially ended. So whether this economic downturn is a recession or a harbinger of one to come, savvy business leaders are positioning their companies to adapt so they can strategically navigate this challenging market.
Proven Recession Resilience Strategies
We’ve been here before. The recession brought on by the dot-com crash negatively affected a generation of investors, and though it was shorter-lived, it left a lasting impact. Most recently, the Great Recession of 2007-09. And though many businesses faced insurmountable challenges, others thrived. Here’s a look at some strategies leveraged by a few companies that came out stronger in the end.
Invest in Empathy
At the start of the Great Recession, Starbucks was struggling. The former king of coffee closed hundreds of stores, laid off thousands of employees, and was saddled with a pretentious image that alienated it in a time of financial insecurity. In 2008, under new (returning) CEO leadership, Starbucks immediately shifted focus to reignite the emotional attachment with its customers.
Starbucks developed a social program where customers could share ideas with each other and the company, giving input on products, services, in-store music and layout, and even corporate social responsibility. And Starbucks leadership listened—they implemented over 100 of their customer’s ideas! One of the first corporations to invest in a mobile app, Starbucks met its customers where they were, reigniting the brand by reestablishing trust, building a vibrant online community, and developing a devoted following.
Double Down on Brand
On the brink of disaster in 2008, Citigroup did an about-face, pivoting from a product-centered strategy to a client-first focus. Citigroup’s vision, mission, and strategic objectives became its driving force. It invested in understanding its individual customers, focusing on segments within each generation and catering to their diverse needs. Citigroup developed technology to measure customer feedback, allowing the bank to react and improve trust. It launched and maintained a social network presence that directly enhanced its brand image. The banking giant invested in its people, training and promoting top talent. Additionally, Citigroup segmented its products and services and operationalized a similar strategy for corporate, government, and business customers.
Since its near destruction in the Great Recession, Citigroup has focused on rebuilding its reputation and its been successful. The company continues to rank very highly in customer satisfaction, according to J.D. Power, American Customer Satisfaction Index, and their steadily improving Net Promoter Score.
Facing many challenges leading up to the Great Recession, Netflix invested in research and development and strategic marketing to not only survive the recession but thrive in it. Netflix was going up against Blockbuster and Redbox in the physical DVD rental space and struggling to win market share. But when consumer spending sharply dropped, Netflix not only doubled down on its convenient mail-order model of movie rental but, having taken note of the role played by video game consoles and the all-new Smart TV, it pioneered an alternative method of media consumption: online streaming offered at a price lower than that of cable and satellite providers. Through strategic partnerships, Netflix targeted consumers with gaming platforms, streaming devices, and Smart TVs to promote a low-cost, no-late-fee, convenient, in-home entertainment option. Exactly what the budget-conscious consumer wanted.
Netflix has continued to be a leader in data- and customer-driven integrated marketing, creating a seamless, personalized experience for its users across all demographic groups. It continually optimizes the user experience based on user preferences to actively engage customers, not only enhancing their experience, but informing Netflix’s user data so it can continue to effectively personalize its customers’ experiences.
Increase Operational Efficiency
When economic crises hit, simply lowering headcount and reducing costs across your budget can help in the short term. But the most resilient and top-performing companies to emerge from the Great Recession focused their energies on improving operational efficiency. This strategy not only helped businesses survive the recession but succeed beyond the economic downturn by maintaining their momentum. After the dot-com bubble burst, devastating the tech sector, Target took a daring but well-calculated approach. During the recession, Target drastically improved productivity and supply chain operations through strategic partnerships. Additionally, it increased its marketing and sales spend, ramped up investment in credit card programs, opened more stores, and grew its internet business. And these measures paid off handsomely. Over the course of the recession, Target saw increased sales and profits that lasted well after the economy righted itself.
Target continues to invest in operational efficiency. In 2020, coming out of a record-breaking year, Target invested heavily in fulfillment services and supply chain to reduce friction points and scale capabilities. Additionally, and equally important, Target continues to invest in technology to provide customers with a more personalized and streamlined experience, increasing loyalty and driving growth.
Recession-Proofing Recommendations and Approaches
While many businesses failed in past recessions and economic downturns, the businesses featured above show that investment in resilience strategies can help companies both navigate challenging markets and carry the benefits of those investments into the future. Understanding and optimizing your customers’ experiences, strategically marketing your products and services, defining and refining your brand, and increasing operational efficiencies are solid strategies to drive customer acquisition and loyalty, increase market share, and drive growth.
Economists have predicted a 40-70% probability of a global recession in the next 18 months. While there is uncertainty regarding when, to what degree, or even if we will enter a true recession, looming economic uncertainty poses many of the same challenges.
What Other Business Leaders Are Doing to Prepare
We spoke with partners and business leaders across multiple industries to find out how they’re preparing for a potential recession—what they’re doing to protect their businesses and, where possible, gain an advantage over their competitors. Read our in-depth report Recession Proof Your Business: CX Strategies for Recession Resilience for valuable insights, expert opinions, and strategic approaches on how to prepare your business to not only survive but thrive in a challenging economic environment.
Ready to Increase Your Business’s Recession Resilience?
There are a lot of questions surrounding the current economic environment, and whether or not we are technically in a recession or one is on the horizon, investment in a strong CX strategy will help position your business to withstand challenging economic conditions. Ready to learn more? Let’s chat!