Purchases depend on consumers’ having disposable income, feeling confident about their future, trusting in business and the economy, and embracing lifestyles and values that encourage consumption. What happens then when those feelings of confidence wane due to an economic downturn? Understanding that behavior can be a vital component in creating a strategy to endure and thrive during any recessionary period. 

During a downturn, customers simply behave differently. According to a study by Harvard Business Review, these are the four types of groups customers fall into during a recessionary period.

The first step in developing your strategy must be to understand the new customer segments that emerge in a recession. Rather than focusing on demographics and lifestyles, we can use psychological segmentation that takes into consideration customers’ emotional reactions to the economic environment.

Slam on the brakes

Feel most vulnerable
Reduces all types of spending
Mostly lower income
Some anxious higher income

Pained but patient

Tend to be resilient
Optimistic about the long term
Less confident about near-term
Largest segment, many income levels
Worse news will slam-on-brakes

Comfortably-well-off

Feel secure about ability to ride out challenges
Continue to consume
Primarily top 5% income bracket
Some are comfortably retired

Live-for-today

Carry on as usual
Typically urban or younger
More likely to rent than own
Spend on experiences
May extend timetables

Understanding which segment your customers belong to will help you identify strategic opportunities on how to market your products or services during the downturn. 

Get more insight and tools that will help you understand your customers and thrive in 2020 and beyond. If you still have questions, look at this...