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Sales and profits can be maintained and increased in recession years and in the years immediately following by those who are willing to maintain an aggressive marketing posture, while others adopt the philosophy of cutting back on promotional efforts when sales appear to be harder to get. |
Marketing As An Anti-Recession Tool
By Mary E. Weafer
Communications Manager
Graham Communications
With the economy in a tailspin, businesses looking to slash budgets and marketing is no exception. Yet, in some businesses marketing budgets are showing resilience. Our recent FastFacts survey produced similar results to a survey by the Association of National Advertisers (ANA). Over 40% of businesses indicate that their marketing budget will remain the same, and another 12% to 25% indicate that they plan to boost budgets.
As marketers, it may seem self-serving to say that businesses should increase or maintain spending on marketing during a recession. In truth, there are opportunities to increase marketing share; however, it requires a careful allocation of marketing resources and the execution of a coherent plan. Times are lean and there is little room for error.
By investing in a well-defined marketing plan, businesses courageous enough to stay in the fight when everyone else is playing safe can increase marketing share, increase sales, and enhance brand recognition both during and after a recession. For historic data supporting this statement, see copy below, Recession Data on the Value of Marketing Through an Economic Downturn.
There’s a common sports analogy used to explain the importance of marketing during a recession. The best distance runners attack at the toughest times on a hill – they speed up. What’s critical, along with the capacity, is that the runner has the strategy and the nerve to do it.
Here are six principles for marketing during a recession:
1. Know Your Customers And Your Markets
During a recession, marketing research and analytics are seen as one of the first things that can be cut. Why bother with all this “fancy” stuff? Yet this data is exactly what’s needed to weather the storm – charting the way for companies to allocate their resources appropriately and efficiently. Properly used, marketing metrics make your business stronger by strategically guiding the investment of limited resources.
2. Mine Your Customer Base
Now is the time to be focused on your core customers and retaining your existing customers. You’ve heard it before – acquiring new customers can cost six to seven times as much as retaining existing customers.
Look for, and focus on, the areas where you can help them during these tough times. Learn as much as you possibly can about their business needs and buying preferences. Make sure every customer is aware of every product you offer.
Strengthen your customer lists – both mail and email. Personalize the message and reach customers with content they care about.
3. Plan Your Marketing And Work Your Plan
One of the most daunting challenges faced by marketers – in good and bad times – is getting businesses to stick to a plan. In our recent FastFacts survey, 52% of the respondents said that their marketing is project-based marketing, it is tactical rather than strategic.
A marketing strategy is a cumulative process of creating a buying environment so that people want to do business with your company. A variety of tools are used so that the whole is greater than the sum of its parts.
The buying cycle is long and many are putting off buying decisions. But that will change. And, when it does … you want to be top of mind. This is the time to build your brand identity and increase awareness with a consistent plan.
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4. Use A Mix Of Tools
While marketing embraces a number of disciplines – public relations, advertising, direct marketing, e-marketing, branding, social networking, sales promotion, POS, packaging, and so on – it always begins and ends with customers.
In this down economy, e-marketing is replacing more traditional media such as print advertising, direct mail and TV. Although it’s less expensive and faster – email messages’ average cost is about $7 per customer response compared to $48 for direct mail – its limitations should not be overlooked.
The proliferation of email has led to email fatigue. It can easily be ignored, or worse yet, bothersome so that the customer chooses to “opt-out” of your messages or even report them as spam. Moreover, as more people open email on mobile devices, you have little time – under 2.5 seconds – to capture their interest. According to the Direct Marketing Association, the ROI on email declined 6.7% in 2008 and is projected to decline another 3.4% in 2009.
Those who are successful understand their customers and carefully craft their messages to connect with them and integrate e-marketing with other tools. They understood the importance of Magnet Marketing – drawing the customer to them.
5. Develop An Economical Option
If your business is such that you can offer a more economical option, do so. Your existing customers will appreciate it and you’re letting your prospects know that you understand their pain and you’re responding to it.
6. Embrace Transparency
While experimental Web 2.0 marketing activities have slowed during the economic meltdown, transparency is still at the forefront of customer relationships and should be an integral part of the marketing plan. The focus needs to be on the information the customer wants. Being able to track orders and receive communications that are relevant to them and in a manner they prefer, obtain accurate price information, and honest definitions of “green” or “eco-friendly” are just a few of the areas where customers want transparency. Openness, communication and accountability will be key drivers to obtaining business in 2010.
Your business should function as one entity, whether it’s through the Web site, telephone, direct mail or email. Customer feedback is essential and integrating the processes so that the customer is served efficiently and completely will solidify relationships and build trust.
Recession Data On The Value Of Marketing Through An Economic Downturn • 1974-1975 recession years: ABP/Meldrum & Fewsmith 1979 study covering 1974-1975 and its post-recession years found that “Companies which did not cut marketing expenditures experienced higher sales and net income during those two years and the two years following than those companies which cut in either or both recession years.”
• 1981-1982 recession years: McGraw-Hill Research’s Laboratory of Advertising Performance has studied recessions in the United States. Following the 1981-1982 recession, it analyzed the performance of some 600 industrial companies during that economic downturn. It found that “business-to-business firms that maintained or increased their marketing expenditures during the 1981-1982 recession averaged significantly higher sales growth, both during the recession and for the following three years, than those which eliminated or decreased marketing.”
Cahners and Strategic Planning Institute (SPI) produced its report, “Media Advertising When Your Market Is In A Recession.” It disclosed that “During a recessionary period, average businesses do experience a slightly lower rate of return relative to normal times. However, expansion times do not generate a higher level of profits than normal periods as might be expected.” This phenomenon was explained by an analysis of changes in market share. “During recessionary periods,” said the Cahners/SPI report, “these businesses tended to gain a greater share of market. The underlying reason is that competitors, especially smaller marginal ones, are less willing or able to defend against the aggressive firms.” The study then pointed out that businesses that increased media advertising expenditures during the recessionary period “gained an average of 1.5 points of market share.”
• 1990-1991 recession years: Management Review asked American Management Association member firms about spending during the 1990-1991 recession. “Fortune follows the brave,” it announced, noting that the data showed that most firms that raised their marketing budgets enjoyed gains in market share. Among the magazine’s sample, 15% reported “greatly decreased” ad budgets. Advertising was “somewhat cut” by 29%. “The keys to gaining market share in a recession,” concluded Management Review “seem to be spending money and adding to staff. Firms that increased their budgets and took on new people were twice as likely to pick up market share.”
(from Go-to-Market Strategies)
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Need more information?
Mary E. Weafer
Communications Manager
Graham Communications
40 Oval Road, Suite 2
Quincy, MA 02170-3813
617-328-0069
Fax: 617-471-1504