Trading down – opportunity in a recession

I’m willing to bet you’ve participated in “trading down” already. You may just not have been consciously aware of it.  The term I’ve coined as trading down happens during recessionary times when people make cost saving choices in some categories outside their normal purchasing behaviour. If you normally shop at a specialty shoe store, you might check out the warehouse or rack store first. If you normally buy kids clothes at a department store, you might now be checking out Walmart or a big box store. If you normally buy coffee at Starbucks, you might now be frequenting McDonalds. Well, this might be a push for some, but check out this billboard from Washington State, the heartland of Starbucks on the West Coast. They’ve bought 140 billboards – many located near Starbucks locations.

This campaign is aimed at the heart of trading down. And their timing is brilliant. Starbucks has been commoditizing their experience through fast expansion and venturing into lunch and breakfast menu items. McDonalds has been upgrading their restaurant decor and venturing into espresso coffee. To think the two could actually collide in a quest for customer base just a couple years ago would have been unthinkable. (Admittedly for many – it still is!) However, with the arrival of a recession, the game is now on. At least for the cost conscious coffee consumer. Trading down can be fun for the consumer. They save money. They discover a new experience. And during recessionary times, they do it without apology – and that is the key. They’ve been given permission to venture outside regular patterns to save money.

Trading down can happen across all demographic categories and all products and services.  Expect value driven attitudes and a shift down in consumer demographics as people adjust to new economic realities. This spells HUGE OPPORTUNITY if you can play it right. Your recession marketing strategy should emphasize two objectives: (1) Keeping happy the customers you’ve got, and (2) Appealing to a new group, previously viewed as demographically above your base, who may view you as a viable alternative during a recession. The beauty of this approach is that if done right, you will likely keep some of these new customers when things turn around (and they always do!).

So how to take advantage of these trends? Here’s just a few ideas:

1. Performing arts groups: Offer new packages that would appeal to arts supporters who usually buy more expensive items and target it specifically at this new group. Think tempting Opera ticket holders with 4 nights out at live theatre for $99.

2. Recreation Centres: Package gym memberships and fitness testing to private gym members. Emphasize the similar benefits and the cost savings.

3. Warehouse and big box stores: Show quality product that can be purchased elsewhere for a lot more. Emphasis here is on quality product, and make sure the message goes to a higher income area.

4. Automotive maintenance: Have a quick oil change company like Mr Lube offer a package for ‘luxury brands’ where  employees in a specific bay are trained on BMW, Mercedes, Volvo, Lexus, Jaguar etc, and offer original parts at a discount price.

5. Grocery stores: Package a family microwave dinner, a movie, popcorn and drinks as a ‘night in’ for $25. Bonus – you get to keep the movie.