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How Winning Brands Keep Winning in a Recession

Laura Smous

Senior Director of Product Marketing @ AdRoll

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“I was asked what I thought about the recession. I thought about it and decided not to take part.” These are the famous words of Sam Walton, the founder of Walmart, who instinctively knew what every successful entrepreneur knows — booms and recessions are an inevitable part of life. 

From the Great Depression of 1929 to the post-WW2 recession, the 1980 meltdown, the 2000 dot-com bubble, and the 2008 housing bust, one thing is certain — economic crises come and go. For brands to endure, they must find the ways and means to ride the waves and come out winners on the other side.

When a company is facing an economic downturn, there is no time for despair. Rather, take a look at how other brands have succeeded in the past, and examine the tactics and strategies they used to come out stronger. Here are four examples of brands that did just that during the last major recession of 2008.

Netflix — The Perfect Product

During a recession, consumers have less disposable income and try to reduce expenses wherever they can — sometimes even drastically. As a rule, though, people also want to maintain their lifestyle and regular routines as much as possible. The solution? Finding cheaper alternatives. In the 2008 recession, that’s exactly what Netflix offered. 

In 2009, at the height of the economic crisis, Netflix shares were up 57% over the previous year, its earnings had jumped 24%, and its subscriptions numbered over 9 million. This is in stark contrast to the Blockbuster video rental chain, which saw a $374 million loss and closed hundreds of stores in that same period.

During the recession, Netflix provided the perfect product at the ideal price. These were still the days when Netflix was mainly a home delivery DVD rental company. The company’s streaming services were new and novel, enabling subscribers to access a wide range of content in their living rooms. A key to their success was that both the streaming and DVD rental services were priced far more affordably than regular video rentals and expensive cable subscriptions. 

Despite the economic downturn, consumers weren’t willing to give up on home entertainment. And in an interesting twist, the demand for streaming services is (again) increasing exponentially during the current coronavirus crisis. What began as a cheaper alternative to DVDs has evolved into a necessary comfort for survival and sanity. 

Amazon — Don’t Stop Innovating

Throughout the recession period of 2007 to 2009, Amazon’s stock declined 9%, compared to an overall average market decline of 36%. The e-commerce giant defied all expectations in 2009 with profits up 68% from the previous year

The key ingredient of Amazon’s astonishing success was innovation. In the months leading up to the start of the recession, Amazon launched a diverse range of products and services that all contributed to the health of the company in the longer term.  

The Amazon Kindle, for example, came onto the market in late 2007. It was the first e-reader to really achieve popularity among consumers, with the first edition selling out in just 5.5 hours. On Christmas Day 2009, sales of e-books outpaced sales of printed books for the first time. The release of the Kindle to the international market was a huge boost and even allowed the company to reduce the sale price, which spurred further sales. But it wasn’t just the Kindle alone that made Amazon a legendary survivor of the 2008 recession.

The launch of Amazon Prime in 2006 was also a huge contributor, providing the company with an assured monthly income based on the popular subscription-based model. In addition, Amazon Web Services (AWS), its cloud-based computing platform, was launched just a year before the onset of the recession. The entry of a new technology product to the market at that time might have backfired. However, it proved to be another weapon in Amazon’s innovation arsenal that helped it thrive in difficult market conditions. Although revenue growth from AWS was slow (under 30% in both 2008 and 2009), it was still growth — which is the coveted prize for any brand in a recession.

Starbucks — Focusing on Customers

In the 2008 recession, Starbucks could’ve been a spectacular brand fail. However, smart pivoting of its marketing strategy at a crucial time made it a brand to be remembered. During the economic downturn, Starbucks was struggling to survive, closing hundreds of stores and firing thousands of employees. Consumers were turning away from the coffee king, whose pricing was more expensive than other coffee shops and even fast-food chains like McDonald’s, who improved their coffee products in an attempt to compete for market share. 

However, in early 2008, Starbucks changed its CEO, and with it came an abrupt — and lifesaving — change of focus: “away from bureaucracy and back to customers.”

The brand started turning its stores into welcoming hubs, and launched a new campaign called “My Starbucks Idea,” an online portal where customers could create a profile and contribute ideas about what they wanted from the Starbucks experience. This gave customers a direct line of communication with the brand, helping Starbucks build a fan base and a community-centric experience that drew people in. Compounded with an active social media marketing strategy, Starbucks transformed its brand perception from “expensive and detached” to “cool, caring, and value-added.” Customer and community focus — these are the human values that will survive even the most difficult crisis.

Airbnb — Time for Disruption

During a recession or other crisis, brands that disrupt the way consumers normally behave and provide a fitting solution are the ones that perform well. Take the current novel coronavirus crisis and the web-conference platform Zoom. Demand for the product is soaring (along with the company’s share price) as millions worldwide are working from home and social distancing forces people to connect over the internet. 

Airbnb’s rags-to-riches story also started with an idea based on a need — this time the high cost of travel accommodation. The company began in San Francisco as a way to host attendees of a designers conference who were visiting the city. A few friends offered visitors a cheaper accommodation alternative — an air mattress on the floor of their loft apartment for $80 a night. The transformation from idea to massive global growth was kickstarted — incredibly — during the 2008 recession. By 2012, the company was believed to be valued at $2.5 billion.

After many stops and starts, Airbnb succeeded in disrupting the travel and hospitality industry. Now, faced with the complete slowdown of the travel industry and another potential recession in the wake of COVID-19, Airbnb hosts are adapting the brand concept with other disruptive ideas. For example, in Israel, many Airbnb hosts are renting their properties for longer periods at a reduced rate to people who need to be in isolation. A brand that’s ingenious and agile enough to disrupt a market over and over again can also succeed during periods of uncertainty and upheaval.

Recessions Bring Challenges — and Opportunities

Every recession is unique, coming in its own time, under different circumstances, and with consequences that are not fully felt for years. In the 2008 recession, for instance, luxury brands suffered, yet were quick to bounce back, mostly due to the fast recovery in Asia. The impact on the fashion industry, however, was long-lasting. 

According to Vogue, high-end fashion retailers changed from ostentatious to more democratic, streetwear designs. Low-cost clothing retailers, like Target and Walmart, also did well, while the mid-level brands were the ones most impacted by lost revenue and forced closures. The relationships between the wholesaler, retailer, and consumer changed forever. It could even be argued that the 2008 recession, combined with the rise of online shopping, paved the way for the direct-to-consumer (D2C) market — in fashion and other verticals — that is now booming. 

With economic uncertainty in the air, the next recession will once again put brands to the test and alter the face of the consumer market. The challenge for every brand is how to navigate the crisis and come out a winner. Whether it’s focusing on customers and community building, innovating new products that will stand the test of time, or adapting products to the consumer mood, get inspired by the brands that can already say “been there, done that.”

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