𝘈𝘱𝘱𝘳𝘰𝘹 𝘳𝘦𝘢𝘥 𝘵𝘪𝘮𝘦: 8 𝘮𝘪𝘯𝘴🕒
The 00s have not been easy on businesses. The 2009 and 2020 recessions left some of the largest (and seemingly stablest) companies in the dust. And those downturns were so destructive that they made the dot-com bubble and Brexit seem like blips on the radar.
And the fun isn’t over yet. Over 90% of CEOs are convinced that the next recession is looming, and fears of a downturn are already sparking mass layoffs.
If there’s anything good that’s come from the current millennium’s economic roller coaster, it’s that we’ve gained valuable data on how companies prepare for and respond to recessions.
Research on 2009’s Great Recession revealed that, predictably, about 1 in 7 public companies bites the dust during a recession (by going bankrupt, going private, or being acquired). However, about 1 in 10 companies actually flourish.
Fresh data from the 2020 downturn has painted an even clearer picture of how some companies grab recessions by the horns and thrive in times of instability.
We took a deep dive into three major brands’ success stories to better understand how to navigate a recession. We’ve highlighted their recession-proofing tactics for you below along with advice on how your business can weather the coming storm.
Case Studies: How Starbucks, P&G, and Toyota turn economic storms into lightning in a bottle
Starbucks, Procter & Gamble, and Toyota came out of the past two recessions better off than before.
We now know that these brands employed some of the same recession-proofing strategies despite being in very different industries.
Please note, we are not endorsing any of these brands, just simply exploring their strategies.
Starbucks
Despite the closure of nearly 900 locations at the beginning of the 2009 financial crisis, the world-renowned coffee chain bounced back and thrived during both major recessions.
There are several key factors that contributed to this success.
- Starbucks focused on innovation and diversification. For example, during the 2009 financial crisis, Starbucks introduced new loyalty programs and mobile payment options, which helped to drive customer engagement and sales.
- Instead of laying off baristas, Starbucks invested in its employees during both recessions. The company continued to provide generous benefits and perks, such as healthcare coverage and stock options, which helped to retain top talent and maintain a strong company culture.
- Starbucks took advantage of the recession to expand its market share. It continued to open new locations abroad (especially in China) at an astonishing rate of about 1 new location per day. This step in particular took precise localisation and international marketing efforts.
Procter & Gamble
Procter & Gamble's ability to prosper during two major recessions can be attributed to a combination of innovation, marketing investment, operational efficiency and market expansion.
Lucky for P&G, its many cleaning products helped sales soar during the pandemic. But in 2009, the company’s future was less than rosy. By the end of the year, sales had declined by 3%.
P&G decided to implement an aggressive innovation strategy, and by 2010, it had recovered its losses and set the stage for even greater growth.
- P&G focused on innovation and product diversification. The company introduced new products during the 2009 financial crisis such as the Tide Pods laundry detergent, which helped drive sales and revenue growth.
- P&G invested in marketing and advertising. During both recessions, the company continued to invest in brand-building and advertising campaigns to maintain its market position and drive customer loyalty.
- P&G invested heavily in expanding into emerging markets such as Brazil and India. Coupled with innovative product offerings like its line of “basico” (basic) products in Brazil, demand for P&G’s brands soon outpaced supply internationally. Again, much like Starbucks, this step required an efficient localisation and international marketing strategy.
Toyota
Toyota is known for being one of the most resilient companies in the world, and a master of recession-proofing.
It managed to weather the Great Recession without laying off a single US manufacturing team member, and it has reported record profits during the pandemic despite supply chain issues that had crippled automobile manufacturing.
- During the 2009 crisis, Toyota successfully anticipated demand for smaller, more fuel-efficient vehicles. It invested in research and development and continued to innovate with hybrid and fuel-efficient vehicles like the Prius, Etios and Yaris brands.
- Toyota expanded its global reach into Latin America, Asia and the Middle East during both recessions. This expansion helped to mitigate the impact of economic downturns in any one region and diversify revenue streams.
- Toyota reimagined its operating efficiency during the Great Recession by implementing “just-in-time” inventory management and optimising shipping routes. These lean production methods continued to benefit the company during the pandemic recession by reducing the cost of nearly all operations.
Lessons learned: How to recession-proof your company
The brands above are among the largest companies in the world, but their recession-proofing strategies can be applied to businesses of any size.
The following are the most important steps you can take to prepare your business ahead of potential recessions:
Don’t drop global marketing
Many businesses cut marketing efforts during a recession as they seek to trim operating expenses.
During the recession in 2009, ad spending in America dropped by 13%. While cutting marketing costs may seem like a smart move to shore up cash, it’s almost always a bad idea.
A reduction in marketing reduces brand recognition and awareness, which will only further erode sales as a recession drags on. This can result in a snowball effect of slowdown and decline.
Businesses with agile marketing departments are able to increase their impact at a lower cost during a recession. Due to declines in ad spending across the board, it’s often cheaper to advertise during a recession. And, there is less competition for consumer attention. This means that businesses that continue to market themselves effectively have a greater chance of standing out and being remembered when the economy eventually recovers.
This is exactly what P&G did in both 2009 and 2020. The company understood that a recession presented opportunities to gain market share from weaker competitors who may have reduced their advertising spend.
By increasing its ad spend, P&G was able to gain a larger share of voice in the marketplace, and eventually, won a larger market share.
The key, is to produce marketing materials that cut through the crowd and resonate with diverse internal audiences on a deeper level.
Look internationally
All of the businesses we researched continued to invest heavily in emerging markets such as China, Latin America and India even as their core markets suffered.
While entering new markets is not without risk, it also mitigates risk by reducing reliance on any one market. By expanding into new geographic regions, businesses can tap into new customer bases and spread their risk across multiple markets.
At Wolfestone, we have direct experience in this and have seen that it works. Our HQ is in the UK, we have invested in operational staff and offices across the globe, including acquiring a translation company in Texas.
In today’s business world, expanding internationally during a recession is much simpler than most business owners imagine. For businesses offering products and services online, expansion may be as simple as investing in localisation services and marketing translation and updating your payment gateway for international transactions.
Invest in new technology and products
Customer needs change quickly during a recession. Agile companies can meet those needs by developing new products and technology. For example, P&G’s “basics” line allowed customers to engage with a trusted brand (Tide) at a lower price.
And Toyota began to produce more fuel-efficient vehicles as customers became more frugal.
R&D shouldn’t be limited to just product development, though. New tech can also help companies improve their operational efficiency, reduce costs and boost productivity.
During production lulls, employees at individual Toyota plants made minor upgrades to their technology such as improving certain manufacturing techniques and switching to energy-efficient lighting. In the end, these changes helped save one plant over $1 million per year.
Invest in your employees
Brands like Starbucks and Toyota maintained most of their staff during both major recessions. Employee satisfaction and well-being are a big part of the company culture at both brands, and maintaining company culture is critical during a recession.
Starbucks continued to provide stock options and healthcare coverage to employees during each recession. This had an ancillary effect of improving the brand’s image as a company that cares. Toyota continued to pay its employees even when there were no cars to manufacture. Instead, it invested in training, improving problem-solving skills, and refining standardised work. It even offered employees paid time off to volunteer in their communities. This resulted in improved productivity in the long term.
Investing in your staff also builds loyalty and improves retention, which can help you bounce back quickly after a recession.
Key takeaway: Don't "wait and see"
The economic downturns of the past two decades have taught us many lessons on how to recession-proof a company with a moderate degree of confidence.
But if there’s one overarching lesson, it’s this: companies that adapt quickly to change and take risks are much more likely to succeed during a recession than brands that take a more conservative approach.
Agility is necessary when customer behaviour and market conditions are in constant flux. This doesn’t mean you should take massive risks, like betting your entire marketing budget on influencer marketing (for example). What it means is keeping numerous avenues open for expansion, international marketing, R&D, optimising operational efficiency, and managing employee relations.
With a bit of planning and creativity, you’ll be prepared to pivot when a recession rears its head (or if we are already in one).
Where language solutions can play their part
As a translation company, it would benefit us to tell people to always invest in language services. However, our advice is similar to above, in that you should research language services, make smart decisions, and don't take overly massive risks.
At Wolfestone, we specialise in language solutions for businesses. From localisation strategies to international marketing campaigns, our role is to enhance your communications so you can diversify your operations and succeed during a recession, if you wanted to take this approach.
Regarding international marketing, the importance of reaching and engaging with audiences in their native language cannot be overstated. In fact, 72.1% of consumers say that they are more likely to buy a product with information in their own language.
By utilising language services like translation and localisation, businesses can create content that is tailored to the specific cultural and linguistic nuances of their target markets. This can help to improve engagement rates, build trust, and ultimately lead to increased brand awareness and sales.
For businesses looking to expand and diversify in new or emerging markets, building trust and credibility with local consumers is crucial. By investing in high-quality language solutions, brands can ensure that their messaging is clear and culturally appropriate, helping to establish themselves as trustworthy and credible sources within their target markets.
Providing an exceptional customer experience is essential to staying competitive. Language services can play a key role in enhancing the customer experience by ensuring that products, services and communications are tailored to the specific needs and preferences of local audiences.
When it comes to marketing and growth, especially during a recession, maximising ROI is also always top of mind. As it should be.
By utilising language solutions to create targeted and culturally relevant content, businesses can increase their chances of success in new markets while minimising the risk of costly miscommunications or cultural missteps. This can help to maximise ROI and ensure that organisations are able to achieve their growth goals in a sustainable and profitable way.
