recession proof: ramping up innovation during an economic downturn
by: Becky Mead
Doubling down on innovation might seem like a strange suggestion during tough times, but think about 2020. When Covid hit and the world stopped, which businesses flourished? The ones that adapted and navigated the crisis by thinking differently.
When shops and restaurants closed, delivery services boomed — even for items that were never delivered before. When social events stopped, products that facilitated occasions at home became family favourites. For these businesses, investing in innovation kept them afloat or even put them ahead.
The same principle can be applied to a recession. When purses are light and consumers feel cautious, spending still happens – it just shifts. The companies that thrive in recession see turbulence as an opportunity to shake things up by serving new consumer needs in clever and creative ways.
staying on-trend in troubled times
Byron Sharp famously talks about how brands grow long-term by increasing their number of buyers. This means connecting with buyers AND non-buyers, not just focusing on driving loyalty among your existing customer base. During economic downturns, brands must do this by competing to sustain mental availability and being the first to surface for new buying occasions. For example, Covid lockdowns created a new occasion for convenient single-serve drinks because people wanted something tasty and refreshing to enjoy on their daily walks. Seltzer brands exploded throughout this time, which helped drive the entire category forward.
“As leaders, we tend to hit the brakes during a recession and act defensively when it comes to communication, marketing, and innovation… brands that act defensively are more likely to lose “the pace of trends” and miss opportunities to capitalize on “period-related trends” to generate welcome “period-related income.” Furthermore, losing “the pace of trends” means missing opportunities that develop during crisis periods.” (JUNE20)
It also pays to recognise that what was once your competitive advantage may not be such a differentiator in new market realities. How can you adapt your special sauce to stay in vogue? Take confectionary, for example. Chocolate is a category that tends to thrive during a recession because people are seeking small, affordable indulgences. Other “treats” like biscuits, ice cream, coffee and alcohol tend to do well for the same reason; they serve as an antidote to reality. When lockdown life was bringing people down, brands like Cadbury and Darrell Lea developed creative flavour extensions that attracted new shoppers to the category and increased total category spend.
how to innovate during a downturn
Crises are catalysts for change where status quo goes out the window. Trends accelerate and barriers break down to deliver new sources of value. It’s an innovation playground if you choose to see it that way.
And the proof is in the pudding. Organisations that maintained or increased their focus on innovation during the 2008 recession performed better than their peers. Some even took huge strides ahead. Here’s how to do it.
1. understand the change
When you’re working with limited resources, smart allocation is key. You can’t simply throw mud at the wall and hope it sticks. Recessions change the landscape in many unpredictable ways, so ditch your assumptions and conduct research to understand shifting consumer needs. You can then confidently build a foundation for competitive growth based on an intimate connection with your consumer’s evolving reality.
2. reverb off the recession
There is no cookie-cutter recession survival guide. Each economic downturn exists within a different context. Amidst the 2008 financial crisis, Airbnb was born. The company boomed because it appealed to money-conscious millennials who craved affordable travel accommodation options. Uber is another example of how the sharing economy rose out of recession, enabling people to create income from their underutilised assets. The lesson? Lean into the flavour of today’s change. Use the shift as your springboard.
3. retune your process
The businesses that reap the rewards of innovation are those with agile processes. You must be able to jump on the train before it passes, which means streamlining your NPD process to avoid getting stuck at each stage. Nurturing an “always on” innovation culture that welcomes new ideas and facilitates fast decision-making is pivotal for success. Simply put, innovation must become a way of life rather than a tick-box exercise or a knee-jerk reaction to stormy waters.
4. make moves
Change is the only guarantee during times like these, so don’t stay stagnant due to fear of the unknown. You could switch things up by offering a simple, more affordable solution to accommodate consumers feeling the pinch. You could collaborate with another company to minimise the risk of a new venture. However you choose to move, make innovation iterative. This way, you can cull dead wood while continuously testing, learning and launching with the maximum chance of in-market success.
searching for the silver lining
While it may feel disconcerting, disruption is the foundation upon which new business models and game-changing innovations emerge. Take the climate change crisis as another example. This global issue has driven innovation in the form of more sustainable supply chains and “planet-friendly” products, such as plant-based meat substitutes.
Staying competitive amidst the chaos is all about finding meaning in the madness. Dive into the lives of your consumers. What do they need, now more than ever? Hope is on the horizon as long as you’re committed to searching for that pot of gold.
If you’re looking for a recession rainbow, our team can help. We’re experts in identifying consumer-led opportunity areas that will ensure your brand weathers any storm. Email me at email@example.com to get started.
Managing Director, PLAY Innovation
Becky has spent the last 18 years getting curious about understanding consumers so FMCG manufacturers can create products they truly want. Becky’s favourite part of the job is helping businesses leverage the consumer perspective to grow - fast! She believes in the benefits of working in partnership with her clients across the entire innovation process and focuses on consumer-first, agile approaches.