Why a 2023 Recession May Not Be Doom & Gloom for Auto Repair Shops

A 2023 recession looks likely. Auto repair shops' ability to adapt hinges on them not slashing revenue-generating functions while investigating their clientele's changing circumstances.

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Conceptual Minds | December 16, 2022

Why a 2023 Recession May Not Be Doom and Gloom for Auto Repair Shops

Recessions are a little like the weather. You can’t accurately predict exactly how it all shakes out. But—if there’s one thing you can practically set your watch to—it’s market-wide panic.

Of course, it’s natural to worry when the ground beneath begins to rumble. The trouble begins when you stop actively pursuing business goals and instead devote all your energy preventing your personal worst-case scenario. This change in goals and decision-making priorities drives business owners towards making dramatic cuts that hurt the long-term viability of their businesses.

With a 2023 recession looking likely, auto repair business owners will find their resolve tested. Successfully adapting to this environment depends on their ability to avoid the temptation to cut revenue-generating functions–while understanding their clientele’s changing circumstances.

Recessions are Opportunities for Forward-Thinking Auto Repair Shops

As you’ve probably heard, recessions offer tremendous opportunity, in addition to the risk. Ironically, this is because they’re extremely effective at scaring other businesses out of making strategic investments.

Because the competition is spending less on advertising, the cost of advertising goes down. And because fewer businesses are competing for your shared audience, advertising becomes more effective, too.

This dynamic has led to the wholesale transformation of numerous industries, as financial pressure often leads to innovative business models. So if you’ve been waiting for a clear way to cut above your competition, recessions are the most cost-effective way to go.

Shrink, Cut Or Grow Your Marketing Budget?

In times of trouble, the marketing budget is the first on the chopping block.

It makes sense—marketing can’t fix cars, do your payroll, or cover for you when you’re sick. What’s more, business owners usually plan to grow back once the coast is clear.

However, as economic observers of the 2007-2009 global recession have learned, recapturing customers after was far more difficult and costly than anticipated.

Case Study: Airbnb Slashes Ad Spend, Loses Market Ground

On top of the risk of staying small, shop owners who slash marketing activity risk losing out to competitors who don’t. Airbnb’s approach to the 2020 recession is a great illustration.

After successfully disrupting the vacation rental market, the company responded to the 2020 slowdown by cutting its ad budget. Meanwhile, VRBO, Airbnb’s biggest competitor, did the opposite.

They spent ten times more.

By the time the dust settled by June of that year, VRBO had captured a large slice of Airbnb’s market share, with their bookings recovering 61 percent (Airbnb’s sank 15 percent).

The lesson: However you respond, you can’t respond assuming the market will be right where you last left it. New business models frequently take off during this stage, forced by intense pressure to cut costs. Adaptation is the only way through.

Base Your Recession Strategy Around What's Changed in Your Target Market's Life

Recessionary environments may not be the best time to stop marketing, but you may need to make cuts regardless. Revisit your marketing channels’ cost efficiency and ROI to get started.

Take time to understand what each channel brings in terms of awareness, foot traffic, repeat visits, and new customer generation. Reduce or pause those that don’t give you direct ROI, and consider ramping up your investments in those that do.

Avoid Large, Across-the-Board Staff Cuts

Making dramatic personnel cuts can be just as damaging to your bottom line as stopping all customer generation activities(And hurts the spirits of your remaining employees, too).

Given the ongoing mechanic shortage, many repair shop owners should still be investing in making their workplace more attractive to candidates—even as layoffs occur in other industries.

Reducing hours evenly across personnel helps reduce the burden on any one person.

But, if you do, be absolutely clear about the financial reasoning for the cuts. Let them know you’re working to get things back to normal and assure them you’ll revisit this topic as conditions evolve.

Consumers Might Need Education to See the Value in Continuous Repairs

Moving from an expansion framework to preventing disaster mode limits your thinking. Deciding hastily means risking the market share you worked so hard to build. Instead, cover yourself over the long term by learning and adapting to your changing environment.

Learn About Conceptual Minds

As veterans of the automotive industry, the Conceptual Minds team are experts at growing car counts in any location and under any economic state. So, if you are unsure of your current marketing strategy and would like some guidance, contact us today at 877.524.7696.

Need help tempting recession-impacted drivers?

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