What sells during a recession?
Everywhere you look businesses are struggling or even going under and the media is full of doom and gloom stories about the credit crunch and the recession that the country is seeing the beginning of. But just because the economy is not as strong as it could be, this doesn’t mean that there aren’t opportunities out there to start up new businesses and make money and in some cases, lots of it.
What is a recession?
Technically speaking, a recession is when the country sees an economic decline, or “negative growth” over two quarters of a year. There are different stages of a recession though, sometimes economies can recover and could even see growth for the rest of the year. This is known as a mild recession. Others however, labelled full-blown or severe recessions, see an economic decline year-on-year. There have been five full-blown post-war recessions in 1974, 1975, 1980, 1981 and 1991.
What sells during a recession, and what doesn’t?
Historically, it was sales of “luxury” goods that suffered during the recessions and this is to be expected as the country sits on the verge of another one. Companies that specialise in expensive consumer electronics or executive cars are already experiencing a slump in their sales because customers simply don’t have the money to spend on such goods, or they can’t justify spending any surplus cash they have on them.
On the other hand, the sales of basic goods will remain steady and online sales may even rise during times of economic crisis or recession. People have to eat, most have to drive their cars, they have to get dressed so the sales of basic foods, clothes and petrol may all continue to stay at a steady level. Any goods that are marketed as a means of saving money should see increased demand. Whether fuel efficiency devices for the car or home, call control systems to stop the teenagers spending a king’s ransom on phone calls; internet video conferencing technology to reduce corporate flight costs, there are a wealth of possible examples to promote. Obviously luxury food items and designer clothes may not see the same equilibrium but there have been examples in history where people, to treat themselves, may steer away from the luxury hardware instead buying better quality food.
On the subject of luxury, some ultra premium brands target a demographic that is all but immune from the ravages of a recession: the super rich. If you sell private jets, Buggatti Veyrons, Fairline yachts or immense properties in offshore tax havens you are probably sleeping rather better than your poor brothers selling radio controlled planes, Mondeos, 8ft dinghys or semis in Birmingham.
When considering services and non-physical products, the financial sector is gearing itself up for a wave of consumer debt restructuring, debt advice, debt factoring for businesses and the like. Although intensely competitive, affiliates that target this sector accurately and affectively may experience growth in market share and perhaps revenues (subject of course to lending policies).
Legal services are also in demand during troubled times. From mergers and acquisitions, corporate restructures down to domestic divorce, debt recovery and other areas of litigation, lawyers are likely to be as busy as ever.
Whilst there is no such thing as an entirely recession proof sector, affiliates with knowledge of and traffic for the adult sector, dating and gaming may well see a degree of growth. Many people feel a loss of control during a recession, particularly if they suddenly find that their trophy partner has cashed in the equity (i.e. filed for divorce) just before it drops in value and — worse — that they are now ‘between jobs’. Stabilising their personal lives and making fresh choices allows them to regain a sense of control. Others simply want some distraction from the woes of everyday life.
Last but not least, the life coaching industry which has seen relatively high growth over the last few years may well experience elevated demand as people take stock and seek guidance as to potential changes in personal and professional direction.
What does this mean for online businesses and the future of affiliate marketing?
This is the first major economic downturn and recession since the Internet, and Internet sales, really took off so it’s hard to predict exactly how it will affect online sales and businesses. The good news, however, is that online sales as a whole have been increasing over the past few years with people moving away from high street shopping anyway and there are many benefits for cash strapped customers for shopping over the World Wide Web.
Firstly, without driving to shopping centres or catching the bus they save money on petrol costs or transport costs. Secondly, they have a much wider selection of companies offering what they need and they can really search for the best deals on the items they’re looking for. Price comparison sites, both in generic retail and specialist niches may even see a resultant increase in traffic. Thirdly, and most importantly, because of this wide range of stores online, prices are competitive and consumers can sometimes pay a pittance for things over the Web, compared to buying them on the high street.
From an affiliate perspective the recession-based future then still looks rosy, especially if people continue to buy online. One of the best things you can do is to find a way to tap into this new wave of online customers, if you haven’t already. They are seeking good products, good service and good deals. However, this doesn’t mean that if you build it they will come - certainly not immediately or in their droves. You still need to put some hard graft in to attract them and keep them coming back, even more so at a time like this.
What do I need to do?
You must speculate to accumulate - running a good PPC campaign may cost you more than you initially planned at first but it will be worth it to see those clicks coming in (assuming you’re still seeing a positive ROI). The same thing goes for investment in natural search rankings. The partner of a search firm we work with commented recently that they have seen greatly increased take-up of natural search services as talk of a recession has intensified. Merchants and affiliates alike have recognised that this is the time to renew and strengthen their marketing efforts.
However you get them there, once you have visitors on your site make sure you’re selling good quality products and services that they absolutely MUST buy. You shouldn’t be offering anything that you either don’t believe in or don’t know anything about.
They will want bargains and offers so give them an incentive to buy from you, rather than heading for your competition. Voucher codes and offers accurately and properly promoted in accordance with the latest IAB guidelines should prove popular in all sectors. This can be money off certain items, or if they buy in bulk. It could even be as little as free delivery or simply offering an extended guarantee or warranty for a certain period of time. At times like this not only do consumers want bargains they also want to feel a sense of security with their purchases. This is where the guarantees come in. Similarly, by promoting these incentives you can build up trust with your customers. In the online market, building trust is even more pivotal than on the high street.
As price becomes a factor for almost every shopper, why not add Price Comparison Content Units to all of your pages - If shoppers can see (on your site) where it’s cheapest, then they are far less likely to go looking elsewhere.
It may also pay to add more of the ‘major brand’ merchants in your target sectors than you may normally consider, no matter low lousy the headline commission rates. In times of uncertainty, unknown brands and smaller firms are consider by many to be too risky for anything other than low value or consumable purchases. On this basis, expect to see favourable shifts in the EPM / EPC stats of some of the household name brands. Equally, watch the press and — even if completely out of your comfort zone — make an effort to read the financial news. Not all of the major retailers may make it through the recession: the narrative in the financial press and online financial resources may give some degree of advanced warning if major players are looking unstable.
As someone once said, when the going gets tough, the tough get richer. Affiliate marketing provides equal opportunity to all. Very few successful or committed affiliates are depressed with the current recession.
They’re far too busy.
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Related Posts:Affiliate Marketing: A recession proof business?
It’s the end of the world as we know it
Why don’t you just chuffin’ pay me?
“Technically speaking, a recession is when the country sees an economic decline, or “negative growth” over two [consecutive] quarters of a year.”
I’ve added consecutive in there. you could have Q1 and Q3 as negative and you wouldn’t be in a recession.
Companies like MDS and Morgan Computers (both on AF) are doing well out of it:
see here
Good overview BTW!
I missed this when you first posted it John, what a great article and overview. Its a topic that has been on my mind recently, and oddly enough I’ve just decided to invest some money on a bit of work to strengthen my natural search presence.
Nice to know I’m predicable!
Hi John. How do you think sectors will fare that straddle the line between basic and luxury services. I’m thinking of things like Sky TV, Broadband, & Mobile Phones.
If the recession really starts to bite, will these be affected?, or are they now considered essentials? Obviously, if people are out of work, then all non-vital living expenses are usually slashed, but what about those people merely “tightening their belts”?
I’m guessing people will keep the service but drop down to the lowest value packages.
Lee - Aye, I meant to have “consecutive” in there, but got carried away with trying not to rant too much as happened here. Glad to hear MDS and Morgan are doing well - Buying habits are changing, and everyone needs to change with them to survive.
Kirsty - Aye, it was very quickly buried when I first posted it so has been missed by many - Still at least we have an enlightened few
I think SEO companies are going to do very well in the coming year as people’s PPC budgets get squeezed ever more - Merchants going bust won’t hurt quite as much when you haven’t paid out of your own pocket to send traffic to them!
David - Yup, I think you’ve hit the nail there - People are looking to downgrade their lifestyle toys, so instead of highlighting the latest handset, you might want to focus on the lowest tariffs - PAYG could become ever more popular. People who were happy to blindly hand over their monthly payments for Broadband, Sky, etc will be more likely to look at cheaper competitors now. Again, consumer habits are changing, and we need to adapt with them.
Finally, thanks to Lee, who posted this on facebook the other day:
Great blog Lammo. Interesting point on SEO services being in demand, makes sense with increased competition and PPC costs. We (DGM) are offering free SEO audits to all of our affiliates at the moment so well worth taking us up on this offer to see where improvements could be made for next year. I think we are lucky to be in an industry where potentially some sectors could thrive but as you say its about being clever and understanding where the success will be. I saw on the news a few weeks ago that a local cobbler had seen a huge increase in business as customers were opting to mend shoes rather than buy new ones - interesting how customer habits can change so quickly!
I read that haagen dazs ice cream did well in the last recesssion.. a feeling of luxury, escapism even happiness - but not overly priced
so maybe there are products like that to promote
jules.tv