In early 2020 the world went into lockdown over Covid and it was a steep learning curve for many businesses about the importance of digital marketing and online tools. The global economy also suffered with supply issues which were exacerbated in the UK by Brexit measures and other issues.
In April 2022 energy prices increased by 54% in the UK for 22 million customers reaching
a 30 year high. Due to oil and gas price rises worldwide, with many households facing a £700 annual increase, these are worrying times. Energy prices are
predicted to rise as much as 50% across the whole world.
The war in Ukraine has been a main cause of the energy price rises with Russia as a major gas and oil provider. Also, the war has caused grain shortages which is driving food prices upwards and contributing to the economic downturn.
Inflation reached a 40 year high of 9.1% in May 2022 in the UK and is predicted to rise as high as 11% in 2023. Energy prices and inflation are rising around the globe partly due to a decrease in global consumption during the Covid lockdowns.
Recent reports in the UK media have revealed that house buyers will need a 37% pay rise on average to get a mortgage, which means a salary rise of approximately £15,000 or £29,000 in London. This could put a mortgage beyond the reach of most people. Also, the Bank of England is warning of a recession and further rises in interest rates, so the future is bleak for home buyers.
In tough times, the tendency for many businesses is to tighten their belts, spend less and weather the storm. However, entrepreneurs often innovate and invest more in times of crisis to gain a larger market share. See this McKinsey 2009 example:
“In past crises, companies that invested in innovation delivered superior growth and performance postcrisis. Organisations that maintained their innovation focus through the 2009 financial crisis, for example, emerged stronger, outperforming the market average by more than 30 percent and continuing to deliver accelerated growth over the subsequent three to five years.”
We saw a similar trend during the Covid crisis where many businesses who embraced digital technology saw a sales boom. In the USA e-commerce grew massively:
”E-commerce sales increased by $244.2 billion or 43% in 2020, the first year of the pandemic, rising from $571.2 billion in 2019 to $815.4 billion in 2020.”
Also, in the USA in 2021 there was the highest number of new starts up in one year since 2005. This was despite many people losing their jobs or being furloughed.
“Last year, 4.3 million new businesses started all across the United States. Nationally, [there was] a 24.6% increase in the number of new businesses started.”
Source: US Chamber.com, October 21, 2021
It was a period of exceptional growth for small businesses where the number of new businesses actually outnumbered the number that shutdown.
Being aware of how your customers are segmented in terms of demographics and spending habits is very important during an economic downturn.
Danny Shepherd’s insightful article, explains how to ‘identify’ customers’ reaction to economic crises and examine their spending habits on ‘essentials, treats, postponables, and expendables.’
“In an economic crisis, consumer behavior should, in many cases, be leveraged to drive your decisions.”
Sheppherd advises businesses to avoid:
Source: Shepherd, April 9, 2020
In times of economic downturn, those businesses who invest more will certainly gain more of the market share, as we saw in 2009 and 2020/2021.
Investing in digital marketing (SEO, Social Media etc) and digital tools like A.I. websites and apps can help your business grow stronger in the long-term to give your brand the edge.
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