How to Build a Marketing Strategy to Respond to a Market Downturn

Published: 16/05/2025
25 minutes read

How to Build a Marketing Strategy to Respond to a Market Downturn

Published: 16/05/2025
25 minutes read

People’s purchasing behaviors change whenever the economy experiences a downturn. Although the downturn’s impact was generally confined to a country or a region in the past, with the emergence of a global economy and international exchange of goods and services, the downturns have also become international.

Furthermore, marketing strategies that work in a booming economy rarely, if ever, work during a downturn, in which many people start to budget, have less or no disposable income, or their fear levels skyrocket. While the downturn sentiment is spreading, marketing messages may feel inadequate and can even make the brand appear tone-deaf.

So, how do you navigate the complexities behind a global economy that occurs in one part of the world and impacts purchasing decisions around the globe? One marketing strategy doesn’t fit all, so here is how to build a marketing strategy to respond to a market downturn.

"Economics is a living thing - and to live implies both imperfection and change"

Ludwig von Mises

The downturn marketing strategy building blocks

There are three main aspects a company needs to be aware of when starting the marketing strategy creation process in response to an economic downturn. These are:

Human psychology during downturns and recessions
Types of goods or services during a recession
Types of company positioning in recessions

Once enough data is available to cover these three aspects, the company can realign everything to fit the new narrative – creative, copy, and brand messaging.

Human psychology during downturns and recessions

When an economic downturn is looming, people shift their priorities; therefore, most customer persona aspects can become irrelevant. The demographic data (e.g., age, gender, or lifestyle) quickly shifts into psychological segmentation based on consumers’ emotional reactions to changed economic circumstances.

According to HBR¹, there are four major groups that customers fall into when a downturn starts:

The slam-on-the-brakes segment experiences the greatest financial vulnerability and impact. Members of this group cut back on all forms of spending by removing, delaying, reducing, or replacing purchases. While this segment generally includes lower-income individuals, it can also encompass worried higher-income consumers, especially if their health or financial situations deteriorate.
Pained-but-patient consumers generally remain resilient and optimistic about the long-term outlook. Still, they are less confident about near-term recovery and their ability to maintain their standard of living. Although they tend to cut back on spending, their approach is less aggressive than that of “slam-on-the-brakes” consumers. This group represents the largest segment and includes most households not affected by unemployment, spanning a wide range of income levels. As negative news continues to surface, many cautious consumers increasingly move into the “slam-on-the-brakes” category.
Comfortably well-off consumers feel confident in handling current and future economic challenges. They spend at levels comparable to before the recession, though they tend to be more selective and less conspicuous in their purchases. This consumer segment primarily comprises individuals in the top 5% income bracket. It also includes those who may not be as wealthy but have confidence in their financial stability, such as comfortably retired individuals or investors who exited the market early or kept their money in low-risk investments.
The live-for-today segment continues to operate normally and generally doesn’t worry much about savings. Consumers in this group respond to economic downturns mainly by postponing significant purchases. Typically, they are urban and younger, more inclined to rent than to own, and tend to spend money on experiences rather than physical goods, except consumer electronics. They are unlikely to change their spending habits unless they face unemployment.

During an economic downturn, most consumers, except those in the live-for-today category, typically reassess their spending priorities. Historical data from previous recessions shows consumers often shift their perceptions of products and services. Essentials like dining out, travel, and entertainment can quickly become luxuries or non-essential expenditures. As priorities change, spending on categories like household services may be reduced, while consumers might choose home-cooked meals over dining out. During recessions, people become more price-sensitive and less brand-loyal, opting for lower-priced alternatives, such as private labels or non-organic food options.

"During an economic downturn, most consumers typically reassess their spending priorities."

As emotional responses to downturns settle in, consumers start to look at products or services differently. Many purchases come under scrutiny, and people consider where they might be able to cut costs. This behavior translates to delayed or cancelled purchases, extending the purchase cycle, or expecting payment plan options.

Regardless of which group consumers belong to, they prioritize consumption by sorting products and services into four categories:

Essentials are necessary for survival or perceived as central to well-being.

Treats are indulgences whose immediate purchase is considered justifiable.

Postponables are needed or desired items whose purchase can be reasonably put off.

Expendables are perceived as unnecessary or unjustifiable.

If we combine both consumer behavior and consumption perceptions into a matrix, we can easily identify where customers are most prone to cut costs and why.

How do your customers see your product or service?

Having a reference point matrix above allows you to discover how your ideal customer persona saw your product or service before, and how they see it during a market downturn. At Aeternus, we always emphasize how essential it is to have in-person interviews with your customers to gather all the paralinguistic features – tone, pitch, and the underlying emotion.

Companies need to have customer interviews periodically to uncover changes in customer sentiment, which is essential to understanding their current situation and perception. These interviews provide a valuable insight into how customers perceive the company’s products or services, serving as a starting point for creating a robust marketing strategy that can withstand a market downturn.

Understanding how the company is positioned before a downturn is vital to devising an approach to a market downturn. This understanding provides a clear starting point for the company to assess its current situation and plan a strategic response to the impending downturn.

Company positioning in a downturn

Many companies are caught off guard when a recession appears, because in 2025, almost all marketing relies on short-term strategy. Although profitable when consumer trust is consistently high and spending is not heavily controlled, short-term marketing strategies fall apart immediately once a downturn occurs.

Considering we are moving away from marketing strategy into financial fundamentals, it’s important to note that once a downturn occurs, not only marketing but the company as a whole is very likely to be affected. So, understanding how companies operate during a downturn is essential to creating a solid marketing strategy to overcome these challenges.

When analysing company behavior during a recession, HBR² paid attention to these factors: number of employees; cost of goods sold normalized by sales (COGS); research and development (R&D) expenditures; sales, general, and administrative (SG&A) expenditures; capital expenditures (CAPX); and plant, property, and equipment (PP&E) stock. Depending on their pre-recession standing, all companies behaved differently from one another when the downturn happened.

Based on historical data and specific combinations of changes in their resource allocation, we can group companies into:

Prevention-focused companies, which had cut back further, relative to their competitors, on one or more of the six items, and hadn’t increased expenditures on any of them more than their competitors had. They make primarily defensive moves and are more concerned with avoiding losses and minimizing downside risks compared to their rivals.
Promotion-focused companies had increased expenditure on at least one of the six and also did not decrease spending on any of them by more than their rivals had. They invest more in offensive moves that provide upside benefits than their peers do.
Pragmatic companies, which had adopted both a prevention focus, by reducing COGS or employees more than their peers had, and a promotion focus, by increasing SG&A, R&D, CAPX, or PP&E more than their peers had.
Progressive companies, which had reduced COGS but hadn’t cut employees more than their peers and had also allocated more resources, relative to their competitors, to market-related items such as SG&A and R&D and asset-related items such as CAPX and PP&E. These companies deploy the optimal combination of defense and offense.

According to HBR’s analysis, 17% of the analysed companies didn’t survive a recession. Those that did were painfully slow to recover. Approximately 80% of companies had not regained their pre-recession sales and profit growth rates three years after the recession, with 40% not returning to their pre-recession levels. Only 9% thrived post-slowdown, outperforming their industry rivals by at least 10% in sales and profit growth.

Companies that cut costs faster than their competitors often struggle, with only a 21% chance of gaining ground when conditions improve. Those who invest more during a recession have a 26% chance of becoming leaders afterward. Additionally, about 85% of companies that were leaders before a recession lose their momentum during tough times.

The winners are those companies that balance cutting costs to survive today and investing to grow in the future – the progressive companies. By focusing more on operational efficiency than their rivals do, even as they invest relatively comprehensively in the future by spending on marketing, R&D, and new assets, these companies have survived recessions more easily than their competitors.

How to prepare for a downturn
- the playbook -

Identify customer pain points and their sentiment for your brand

When the economy is going well, it’s time to test how your customers would react to some marketing messaging that implies pain points. This is long-term thinking, contrary to the current short-term actionables in a booming economy; if the copy you prepare is well-suited for when a market experiences a downturn, you don’t have to wait, but can instead prepare ahead.

Consequently, during a period of stable economic growth, marketers use various demographic parameters. However, as the shift in perception changes, people’s purchasing behavior follows. Demographics isn’t the primary data anymore, but where they are in this matrix.

Market and customer research is paramount – only by talking with your customers can you uncover their purchasing decisions. Customer interviews also allow you to gauge how your customers feel about your brand, that is, whether they see it as an essential, a treat, a postponable, or an expendable. Based on this information, you can create a strong marketing strategy to withstand a downturn.

Triage on your brand’s products or services.

Strategic opportunities during a market downturn depend on which of the four segments its customers belong to. That is, how your customers see your product when their financial standing is affected by market movements. For instance, there are favorable prospects for value-brand essentials aimed at consumers who are inclined to cut back on spending, opting for lower prices instead of premium brands. Value brands can also effectively target pained-but-patient consumers who used to purchase higher-end products, a tactic that Walmart successfully implemented with its “everyday low prices” strategy during the recession of 2001.

Additionally, value brands have potential with products that can be postponed, as repair services can appeal to the pained-but-patient demographic, who may choose to extend the lifespan of a refrigerator rather than invest in a new one.

On the other hand, you can try to persuade the customers that they “deserve” your brand and shouldn’t mind paying a premium. This can be done via targeted ads and clever copy – something L’Oreal did in 1973 during a market crash.

Triage on your brand’s products or services.

Stick to your brand’s fundamentals

When sales start to decline, companies shouldn’t panic and alter a brand’s fundamental proposition or positioning. If they do, they risk far greater losses – brand image can dissolve, existing customers can get confused, and potential customers will need more time to understand it.

This happened to McDonald’s during the 1991 market crisis, when the company decided to reduce ad spending. During the same year, Pizza Hut came out with more ad spending, a solid creative, and a limited-time offering, gaining significant market share.

For example, marketers targeting middle- or upper-income consumers within the pained-but-patient segment might be tempted to shift their focus to lower-income markets. This strategy could confuse and alienate their loyal customer base; it might also incite strong pushback from competitors who operate with a low-cost model and deeply understand budget-conscious consumers.

Companies that stray from their existing customer persona may gain some new customers in the short term, but could find themselves in a weaker position once the recession ends. Their best strategy is to stabilize the brand. Even companies with limited cash flow should prioritize a significant portion of their marketing budget to reinforce the core brand message. Reminding consumers of the brand’s importance can enhance the protection afforded by past investments in brand development and customer satisfaction.

Companies should leverage their advantages in stable or uncertain markets by maintaining or increasing advertising spending. Historically, consumer goods firms that did so during downturns gained market share from weaker competitors, often at a lower cost. Increases in marketing during recessions have been linked to improved financial performance in the following year, though it’s vital to target resources wisely, especially in severe downturns.

Stick to your brand’s fundamentals

Revise your creative

Once you determine how your customers will behave during a downturn and how they perceive your products, you can revise your creative. According to Nielsen³ and the B2B Institute⁴, creative is the most critical aspect of all advertising and is responsible for 47% of all sales.

During a market boom, the most used copywriting formula is AIDA (Attention-Interest-Decision-Action). This formula, combined with an attention-grabbing visual or other creative, makes the customer consider your product or service. This type of creative often plays on positive emotions – delight, amusement, joy. Instead, you can test a PAS copywriting formula (Problem-Agitation-Solution) and the correlating creative, which can impact customers’ negative emotions – fear, guilt, anxiety – to gauge the reaction.

This is the method Toyota used during the 1973 oil crisis to advertise its Celica model.

We suggest testing visuals that carry both positive and negative emotions to see what your potential customers react to best.

Revise your creative

This is the method Toyota used during the 1973 oil crisis to advertise its Celica model.

We suggest testing visuals that carry both positive and negative emotions to see what your potential customers react to best.

Building a marketing strategy to withstand the downturn

By now, you have done the following:

Market research – created assumptions on how your competitors will behave
Customer research – understood how your customers see your product
Customer persona revision – figured out how the majority of your customers will behave in a downturn
Creative revision – A/B tested different creative and copy

Having done all the above, you can develop specific approaches to the customer base. Keep in mind how they see your product or service, and how they feel about their purchasing power. If your assumptions and research are correct, you can implement the tactics that fit your customers best.

Don’t be too focused on cost-cutting

During a recession, many CEOs enter crisis mode, focusing on preventing significant harm or failure to the company. They quickly implement cost-cutting measures, reduce discretionary spending, streamline operations, and conserve cash, while postponing investments in R&D and new ventures. Typically, these prevention-focused leaders cut costs more than their competitors in at least one area.

However, a relentless focus on cost-cutting leads to several issues. Executives and employees adopt a loss-minimizing approach, resulting in lower targets and limited innovation. Instead of enhancing efficiency, the organization attempts to do more with less, often leading to decreased quality and customer satisfaction. Centralized cost-cutting decisions overlook initiatives that could drive growth after the recession. Ultimately, a culture of pessimism takes hold, fostering disempowerment and shifting the focus to survival for both individuals and the organization.

Few prevention-focused corporations thrive after a recession. According to HBR, they see just 6% growth in sales and 4% in profits, compared to 13% and 12% for progressive companies. After the 2000 recession, the largest companies had average sales growth of $12 billion, while prevention-focused firms grew by only $5 billion. Moreover, cost-cutting did not lead to above-average earnings, with prevention-focused profits rising by only $600 million, compared to $6.6 billion for progressive companies.

Don’t be too aggressive

Some business leaders pursue opportunities even amid challenges. They use a recession as a chance to implement changes, strengthen customer relationships, and strategically acquire resources, aiming for long-term gains.

Organizations that focus solely on promotion develop an optimistic culture that can lead to overlooking the severity of crises. They often ignore early warning signs, like budget cuts, and believe innovation alone will sustain sales. When customers seek lower prices, these companies add unnecessary features instead of adjusting to the shrinking market. This culture marginalizes dissenting views, resulting in organizations being caught off guard by poor financial outcomes.

When faced with bloated costs, promotion-focused companies typically make insufficient adjustments. Each business unit believes it plays a vital role, leading to blame-shifting and sluggish decision-making.

In contrast, prevention-oriented firms manage to reduce their cost-to-sales ratio during recessions, while promotion-focused companies struggle. CEOs may increase spending, believing it will drive growth. These companies can face significant issues when investments take longer than expected to yield returns.

Despite their growth focus, promotion-focused businesses see only modest post-recession increases in sales and earnings – 8% and 6%, respectively – while progressive firms rise by 13% and 12%. Among the 200 largest companies during the 2000 recession, promotion-focused firms averaged $15 billion in sales growth compared to $28 billion for progressive companies. (Source: HBR)

Strive for balance

Companies most likely to succeed after a recession are pragmatic. Their CEOs understand that while cost-cutting is essential for survival, investment is also necessary for growth, and both need to be managed together to emerge as leaders.

Developing a combination strategy may seem simple, but it’s not. Companies usually combine three defensive approaches – laying off employees, improving efficiency, or both – with three offensive ones: pursuing new markets, investing in new assets, or both, resulting in nine possible combinations, some more effective than others.

The most effective approach for post-recession success is the strategy of progressive companies, which focus on selective defensive measures. Instead of major layoffs, they cut costs by enhancing operational efficiency. Their offensive strategies are expansive, involving higher investments in R&D and marketing than their competitors, along with capital in assets like factories and equipment. As a result, they see the highest growth in sales and earnings post-recession. It’s essential to grasp why these companies excel with this strategy after an economic downturn.

Pursue operational efficiency

Many businesses adopt strict cost-cutting measures to weather a recession, but those that enhance operational efficiency tend to perform better than those that focus on layoffs. Only 23% of forward-thinking firms reduce staff compared to 56% of prevention-focused ones; the latter typically fire more employees. (Source: HBR)

Companies that depend solely on workforce reductions have just an 11% chance of achieving exceptional performance post-downturn. Higher employee morale is often found in those emphasizing efficiency, as workers appreciate management’s commitment and focus on cost-saving creativity instead of job security. While layoffs might provide short-term savings, they can hinder recovery. Firms risk scaling up too late if hiring is more challenging than anticipated, as employees may be reluctant to join companies known for cutting staff. Additionally, rehiring can lead to increased costs.

Invest in both existing and new businesses

During recessions, progressive companies develop new markets and invest to enlarge their asset bases. They use depressed prices to buy property, plants, and equipment. This helps them both during the recession and afterward, when they can respond faster than rivals to a rise in demand. Because their asset costs are lower than those of their noninvesting competitors, their earnings can be relatively higher.

These companies also judiciously increase spending on R&D and marketing, which may produce only modest benefits during the recession but substantially increase sales and profits afterward. The resources freed up by improving operational efficiency finance much of this expenditure. In turbulent times, it’s tough for companies to know where to place their bets for both the immediate and long run. Progressive companies stay closely connected to customer needs—a powerful filter through which to make investment decisions.

How to approach a recession or a downturn - the learnings

Few forward-thinking business leaders have a detailed strategy when facing a recession. They motivate their teams to identify what works and integrate those insights into various initiatives that enhance efficiency along with market and asset growth. This flexibility benefits organizations during a recession, even while leaders remain focused on long-term growth and profitability. An examination of the stock market performance of companies that adopt advanced strategies shows they can also benefit from the momentum after a recession concludes. Their method not only helps address a downturn but can also establish a strong foundation for ongoing success once the downturn has passed.

In addition to the strategies already outlined, it’s critical for businesses to adopt a long-term perspective when navigating economic downturns. While immediate cost-cutting is often necessary, one area that should remain protected is brand building. History has shown that companies which continue to invest in maintaining brand visibility and consumer trust during recessions tend to outperform their competitors in the recovery phase. This doesn’t mean maintaining the same level of ad spend across all channels, but rather focusing on the consistency of your brand message and presence. Recessions are the time to double down on content that reinforces your brand’s values, purpose, and emotional relevance. Telling authentic stories, showcasing resilience, and reinforcing your unique value proposition can help customers remember and trust your brand, especially when many competitors may go silent.

Equally important is the strategic shift toward maximizing the value of cost-effective marketing channels and nurturing existing relationships. Paid advertising can be rebalanced in favor of organic strategies such as search engine optimization, email marketing, and social media engagement. These channels not only offer a lower cost of acquisition but also build sustainable marketing momentum. For example, educational blog content or behind-the-scenes Instagram stories can drive meaningful engagement without significant spend.

At the same time, your existing customers become an invaluable asset. Retaining and delighting them should be a top priority. Consider personalized follow-ups, loyalty programs, or exclusive offers that show appreciation and deepen the relationship. Happy customers are not only more likely to return; they can also become brand advocates, bringing in new business through word of mouth at a time when every lead matters. By balancing short-term responsiveness with long-term brand thinking and customer care, businesses can emerge from a downturn more resilient, more memorable, and more trusted than before.

When determining which marketing strategies to implement, it’s crucial to monitor how customers reevaluate their priorities, adjust budgets, switch brands and product categories, and redefine what constitutes value. Consequently, it is vital to keep investing in market research. As the recession comes to an end, consumers will regain their purchasing power, but they might not revert to their previous buying habits. Market research should investigate whether consumers will return to familiar brands and products, continue with alternatives, or embrace innovations.

Learnings for CMOs:

Be experts on your customers. Update the buyer personas with new findings from R&D teams. Know how your customers see your product or service during a downturn.
Optimize for efficiency. Cutting budget spending doesn’t need to translate to letting people go. Find processes that are not optimized (e.g., Google Ads spending is significant because you’re targeting broad keywords. The best approach would be to reduce Google Ads spending and re-evaluate how resources can have the most impact).
Build for the long term. During recessions, many customers tighten their expenses and think through each purchase. By preparing for the upturn and building for the long term, you’ll position your products or services on the market to overtake those who either overextend or play it safe.
Also, many customers aren’t in the market to buy in a recession. So, you have to prepare for when they are ready to buy. (B2B Institute)
Invest in the creative. “Creative advertising is a strategic asset that can be leveraged with great effect by any brand, in any category, in any market, if deployed correctly.” (The B2B Institute)
Solve a problem. Find a way to give value to your customers during a recession. It can be in the form of entertainment, discount coupons, or a new product at a lower price. If profit margins allow it, use them to retain customer loyalty.
Use layoffs as a last resort. Reducing headcount can be a viable decision if the teams have grown to disproportionate size. However, the losses can outweigh the savings which layoffs introduce. Team functionality, innate customer, market, and brand knowledge, and overall morale can suffer.

References: