The “R” Effect: How to Adapt Your Business to a Fundamental Shift in Customer Behavior


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The “R” word has returned. Politicians may have been slow to call this crisis a recession, but business has known better for some time. Many countries in the developed world have already experienced two consecutive quarters of contraction in gross domestic product, and others will in the very near future. In economies that are dependent on consumer spending, rather than business or government spending to drive GDP, businesses need to be sensitive to changing customer behavior.

At household level, we already saw evidence of three key indicators of recession:

  1. Deferral. Households are postponing purchases of big-ticket items such as cars, property and major household appliances.
  2. Reduction. Households are reducing the amounts they spend on some categories of product or service. They are dining out less often and taking fewer vacations.
  3. Down-shift. Households are trading down to less costly options. If they have to buy a car, they are opting for used vehicles. Sales of generics are rising, at the expense of premium brands.

It is clear that consumers are worried about the future and not enjoying the present. Their behavior is changing, and it is unlikely to revert until they are confident that the economy is going to pick up and their jobs and homes are safe. One highly significant indicator of the depth of this crisis is household spending on food. Data from the United Kingdom shows that for the first time in 20 years, householders are reducing their expenditure on food. Make no mistake, this very serious. We are in deep.

So, what should you do about this?

I think you must acknowledge that this is a fundamental shift in consumer behavior. It is here to stay for a considerable period of time. Some pundits are suggesting that it will last until 2010-11. There will be a top-line revenue consequence that is unavoidable. Because these market gyrations are driven by a lack of consumer confidence (fear, if you prefer), they are beyond the control of any single business. There is simply no point in maintaining your ad spend and trying to battle your way through the downturn. These macro-environmental conditions are mightier than your advertising budget. If you continue with Business As Usual, you will struggle and you may fail.

Seven strategies

In practical terms, what can you do? Here are my “Magnificent Seven” suggestions that are necessarily more strategic than tactical:

  1. Protect your most valued customers. There has never been a better time to analyze your customer base and to ring fence those customers that contribute most to your business goals, be that revenue or profit. Those are the customers that are least likely to change their habits. They don’t defer, reduce and down-shift, or if they do, it’s to a much lesser degree.
  2. Re-invent your offering. It’s time to eliminate features that deliver little or no customer-perceived value. If customers are down-shifting, they won’t want to be paying for product features and service levels that they don’t value.
  3. Restructure your product line. If you don’t have an entry level or no-frills offering, now is the time to consider introducing one. You might be able to capture customers, as they exit your regular offerings—before they go to a competitor. You might also position yourself to capture a greater share of competitors’ customers.
  4. Cut your marketing expenditure. It pains me to say this, but you have to review your marketing expenditures and eliminate those costs that are of questionable value. Advertising that has no measurable return? Cut it. Web-site upgrade? Postpone it. Partner promotions? Slash them. Review your marketing budget and reduce where you can. It’ll be a battle, but this is a great opportunity to return to zero-base budgeting, where nothing has an inalienable right to be a budget line-item.
  5. Use the technology you’ve paid for. Do you pay a license fee for technology that you don’t use? Perhaps you have an enterprise application from SAP that offers sales, marketing and service functionality and you aren’t using it. Now is the time to find out what it can do and to experience the efficiency and effectiveness gains that well-deployed technology can deliver in the front office.
  6. Automate processes. Marketing, sales and service processes that are hand-built cost much more than automated processes. An automated campaign management process strips cost out of the campaign development and measurement process and adds measurability. Motivate customers to use low-cost transactional and service channels.
  7. Focus resources. As you cut back on unnecessary sales, marketing and service expenditures, the temptation is to spread what remains thinly across products, brands, markets or customers, each getting a share. Resist! Imagine that you are a miner. What do miners do? They invest where the yield is greatest. It’s called the high-assay method, and it’s highly appropriate to these times. If it means supporting some products but not others, that is the short-term price you have to pay.

Recognize that this crisis has forced a fundamental change in consumer behavior, and it’s time to revert to prioritizing need over want. Households are deferring, reducing and downshifting. Because you cannot resist this trend, you must adapt, and prepare yourself for a long period of tough trading conditions.

Francis Buttle
Dr. Francis Buttle founded the consultancy that bears his name back in 1979. He has over 40 years of international experience in consulting, training, researching, educating, and writing about a broad range of marketing and customer management matters. He is author of 15 books, has been a full professor of Marketing, Customer Relationship Management, Relationship Marketing, and Management.


  1. Francis,

    The issues you raise in your blog post are extremely timely and relevant. After editing an 18 author publication titled “The Importance of the Customer Experience in a Down Economy” for Ogilvy’s Customer Futures Group, I realize that there is a substantial need for discussion on this topic. While you make some good points, some are controversial. That can be a good thing if people get to raise questions and discuss various points of view.

    I would invite you and readers of this blog to download ( a free copy of the publication mentioned above. At the end of the executive summary we give a link where you can comment on the perspectives raised in the publication and add your view. This discussion is open and intended to benefit the business community at large.

    Join in and let’s help each other deal with the economic challenges


    John I. Todor, Ph.D.

  2. Whilst I agree with almost everyhing else in your article, I have to take exception to the notion that we should cut our marketing budget now. This seems supported by the assumption that companies havent been adopting best practice, which is palpably true. However we should be concentrating firstly on improving the performance of the marketing spend, which may involve cutting some areas but increasing others.

    My experience of previous recessions is that now is the wrong time to cut budgets as the cost for customer acquisition be it new or existing will rise particularly in the short term. Those businesses in serious trouble will not operate in a logical or predictable way as they struggle to survive. So there will be predetory pricing and unrealistic offerings and commitments made to obtain business.

    Once we get further into the recession and these businesses start going to the wall, the survivors will be able to take a more considered marketing,and this is the time to reduce marketing spend.


    Laurence Ainsworth
    Exigent Consulting
    Kent UK
    Business Turnaround, Profit Improvement, Mentoring


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