When a Crisis Hits, Does Your Market Shrink, or Rotate?

My business partner asked me a simple question recently. If spending power drops, will the spa lose foot traffic? Yes, I invested in a spa. 🙂

My first answer was yes.

The second answer I blurted out was more interesting, and it’s the reason I’m writing this.

The common read on downturns is that crises accelerate existing behaviors. People drifting toward the cheaper option commit to it. People halfway to online groceries go all the way. The crisis doesn’t invent behavior, it speeds up what was already coming.

That’s true, but the problem is, it’s where most of the thinking stops. Usually the next move is to turn it into an instruction. Like, spend more advertising. Or: Move your budget to where the behavior went. Chase the moving target.

Wait. As marketers, we have more interesting questions to answer.

Like: In a crisis, who just became available to us who never considered us before?

Borrowing from Jeff Bezos

Bezos has this fascinating contrarian line. People keep asking him what’s going to change in the next ten years, and he says the better question is what’s going to stay the same, because you can build on the things that don’t move.

Run that against a crisis that hits spending power, especially for lower income consumers, and it gets simple. The need doesn’t go away. The money to meet it the old way does.

Someone who used to buy the branded version buys the generic. Someone who ate out now cooks the same craving at home. The need held. The vehicle changed. The need is permanent. The vehicle is the variable.

So when money tightens, people don’t stop. They substitute. They trade down, they trade sideways, they find a cheaper way to meet the same need. And that means there’s only one question worth asking about your own brand or business.

Are you the thing being substituted away, or are you the cheaper thing people are substituting toward?

That question is uncomfortable, and most marketers and businessmen skip it. They’d rather ask how to stay relevant to the buyer they already have. But the substitution is happening whether you look at it or not.

Back to the spa

So. Will the spa lose foot traffic?

From the current clientele, yes. The people who came as a routine little luxury will trim it early, because the routine luxury is exactly the kind of thing that gets cut first.

That’s the answer that ends the conversation if you let it. But it’s only one door.

Look at the other door. Think about the person who would have taken a weekend trip this season and just decided they can’t justify it. The trip is gone. The need behind the trip is not. They still want to feel like they stepped out of their life for a few hours. For that person, you are suddenly the affordable version of the thing they can no longer afford. You weren’t in their consideration set before. Now you are. You’re the spa break that stands in for the holiday.

So the real question was never “will I lose customers.” It was “who just walked into my category from above, now that the thing they used to buy is out of reach?”

You didn’t lose a market. You traded one. You lost the routine-luxury buyer off the top, and you gained the traveler who decided not to travel. Your market didn’t shrink. It rotated.

Most brands only feel half of it

A crisis doesn’t necessarily drain your market evenly. It rotates it. You lose people off the top, the ones whose money genuinely left, and at the same time you gain access to people falling into your category from above.

Most brands only see the first half. They watch their usual buyers pull back, decide the market is shrinking, and go straight into defense. They burn their energy trying to win back people whose circumstances actually changed, which is the hardest and least rewarding fight there is. And the whole time they never turn around to see who just came in through the other door.

But hey, a caveat.

Of course, not every category or business works this way. Some really do just get cut, and no new segment comes in to replace the old one. But before you conclude your market is shrinking, it’s worth checking whether the demand actually disappeared or simply migrated somewhere you weren’t looking.

One fence, so this doesn’t turn into “chase everyone”

Okay, I have to put a fence around this, because “widen your customer base” is dangerous advice on its own. In a crisis it usually means casting wide, losing your center, and confusing everyone about what you are. That is not what I’m saying.

You don’t widen randomly. You widen toward the one specific group that is downgrading into your category for a reason that will last. The spa wins the lapsed traveler because “I need a reset and can’t afford the trip” is a permanent need looking for a cheaper vehicle, and the spa is one of the the obvious vehicles. That’s the only expansion worth chasing: the substitution you’re the natural beneficiary of.

So the discipline is built in. Go after the rotation you’re positioned to win. Leave the rest.

None of it is “spend more on ads.”

Or maybe yes, just with a different target.

Name the permanent need. Take your product away and say out loud what your customer was really hiring you for. The product is the vehicle. The need is what survives.

Put yourself on the substitution map. Are you what’s being traded away, or what’s being traded toward? The answer changes everything after it.

Find who’s falling into your category from above. Who used to buy something pricier they can’t justify now, and for whom you’re the natural step down? That’s your rotation. That’s the door your competitors aren’t watching.

Then talk to the need, not the old positioning. The traveler who stayed home doesn’t want to hear about your spa the way your routine client did. They want to know they can still get the reset, for a fraction of the trip.

Parating na tayo sa exciting part. If you serve the new customer well, and you give them a reason to choose you that outlasts the price, you don’t only survive the downturn. When spending power comes back, your original buyers return, and some of the ones who found you during the crisis stay. You don’t end up where you started. You end up with a wider base than you walked in with. Yay!

The catch is in that one condition. If the new customer only came for the price and you were never really a fit, they leave the moment they can afford the old thing again. So the work isn’t just to attract them. It’s to be good enough that the relationship survives the recovery.

The brands that come through a downturn aren’t the ones that defended hardest. They’re the ones that noticed the market had turned, faced the new door while everyone else pulled on the locked one, and were still standing in it when the rest of the market came back.

xoxo