A recession acts as a full-stop in the consumer’s psyche. Simon Silvester, author of AAAGH!: A Deep Recession Changes Everything, talks to Herman Manson about how brands should approach consumers during a recession.
Recessions are brooms sweeping away the old and making space for new ideas. And it just swept Simon Silvester, Head of Planning at ad agency Y&R, into the foreground with the publication of his book, AAAGH!: A Deep Recession Changes Everything, about how brands should approach the world-wide economic crisis.
A recession acts as a full-stop in the consumers’ psyche, says Silvester, and consumers suddenly become more conservative in their buying decisions, preferring to play it safe. That means you should tone down, and stay inside the box, right? Wrong. Silvester believes that because that is what everybody else is doing, taking calculated risks makes your brand much more visible than it would have before. Now is not a time to cut ad budgets – it’s time to spend on innovation.
Companies become frozen during recessions; in fact, they become dysfunctional, says Silvester, as the bean counters step in to take control of every aspect of the business. Suddenly, innovation, budgets, job openings – everything – are frozen. At the same time as media costs drop, your competitors go into similar hibernation, and consumers lose all confidence in the market, brands become boring and undynamic. This is exactly the time brands need to step up and show confidence and innovation (and not just in pricing). The firms that already know what they are about, and are pretty lean to start off with, will grab this opportunity to redefine their market with both hands.
The crisis is global. Silvester notes the housing market in London is particularly weak now that all those rich Russians aren’t that rich anymore, and Spain’s property market falling, at least in part because the market for holiday rentals has collapsed as the Brits are staying home in their negative-equity homes. South Africa is also feeling the impact.
Silvester takes quite a bit of time to talk to financial institutions, partly because they have been the catalyst of the financial crisis and the subsequent recession, and because this is where consumers have most to lose (savings, retirement funds, homes and cars through repossessions).
When losing large sums of money, investors grieve in stages, says Silvester, starting with denial. Losses remain on paper, unreal, something yet to be faced. Next comes anger. Silvester believes much of the world is still in this phase, as indicated by the aggression shown financial institutions in Europe and the US, with politicians and the media piling in on corporate excess.
In any case, anger fits standard consumer mentality, and we don’t accept any part of the blame (even though it takes two to tango). Silvester says consumers have gone passive-aggressive – business can’t put a foot wrong or they’ll meet a backlash.
Bargaining is the next phase of the recession when investors and consumers will attempt to salvage what they can and look for alternatives. Anybody noticed that Financial Mail marked no-frills bank Capitec’s shares as ‘buy’? Step four is the big sulk, when consumers prefer staying at home, and the party people pack away their dancing shoes. Finally, there’s acceptance, when investors look at their financial position without reference to past losses, indicating the worst is over. Rather depressingly, he notes that during the 1929 meltdown the acceptance phase didn’t happen until the 1940s!
Silvester sees a number of key changes occurring during the current crisis. Digital technology offers opportunities to gain an edge in the market and becomes more important as analogue media starts to fade. Your media department would have noticed titles dropping out of publication – you’ll need to rethink your media planning in the year ahead. Brands, aware of costs, will sharpen targeting. The Internet offers opportunity in demassification of consumer tastes and products offering opportunities for smaller enterprises.
Black is back, writes Silvester in AAAGH!, as it was during the recessions of the early 80s and 90s. “Expect unrealistic dreams of wealth to gain social currency,” writes Silvester, as people like a bit of glitz in recessions. The recession will drive many people to seek out discounts, resulting in entire product categories becoming commoditized.
Financial service providers now need to rebuild trust with their consumers from a base of zero.
In his book Silvester provides some guidelines to financial services that are also relevant to the other industries. He says accept it’s not business as usual – it won’t ever quite be again. Go back to explaining the basics, as people are re-educating themselves from scratch. Reduce complexity, keep innovating, offer greater education to customers on the products you sell, and don’t demand too much numeracy. “It comes as a surprise to most people that if a stock rises by one hundred percent and then falls by fifty, they have not made any money.”
Finally, Silvester offers business one key piece of advice. “In recessions, consumerres are above all anxious, confused and unhappy. Brands that recognize this can prosper.”
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