Marketing during Recession

marketing during recession

Every one speak about recession these days, Day to day we hear news regarding the retrenchment of employees by firms, reducing their expenses, bankruptcy  etc etc. Yesterday when I was chatting with my former employer and the director of a holding company, his mind set seemed totally different. He said he wanted to get out from the recession and to try something new.  He did not want to admit failure of firms by just sticking into recession talks. He said people fail because they make mistakes. Yes I must say that  it was a very true statement.

So what firms can do during recession. When ever I speak to people they say cutting cost would be the final solution. But this morning I went through many articles and presentations in the web written and done by many marketing experts. All they say to spend more if you have enough cash.

 First question as marketers we can raise is that  during recession do we need to spend more or not? However all the evidence suggests that it is not good to reduce the marketing spend during the recession times. By doing this it might leave the companies and brands in a less competitive position when the economy recovers. Based on an analysis of the Profit Impact of Marketing Strategies (PIMS) database when brands spend more on recession time and During the recovery, the “spenders” achieved significantly higher return on capital employed and gained an additional 1.3 percentage points of market share.  This can be explained with three factors

1 – The relationship between share of market and share of voice- If the share of voice is high when compared to the actual market share, the brand will grow significantly in the forthcoming years.

2 – The relationship between brand size and profit margins – A brand that increases its share during the recession period stands the benefits from the multiplier once the economy get recovers.

3- Reduced “noise” during recession provides opportunities- A new product launch may actually give the firms a greater impact during the recession. There are several reasons for this. A new product that is unique or better than the others can rule the higher price. During the recession when the competitors are scared to  do the same,  may be late come up with a “me too” products.

John Quelch, Professor, Harvard Business School also stated the same in an interview which is shown below

But again the big brands those who have the cash flow can spend more, so what about firms those do not have extra money to spend. Here some survival tactics mentioned by Nigel Hollis Chief Global Analyst Millward Brown

1 – Focus on Competition

Analyze company and brand health- Keep finger on the competitive pulse

  • track their annual reports, media data, feedback from customers and consumers
  • Try to know the companies with better financial position
  • What the record tell about their recession strategy

Anticipate their actions – Recessions are generally times for change. More than ever, firms need to foresee what the competition might do and plan. If everyone else cuts spending, firm can gain an edge simply by maintaining you the level of investment.

2- Focus on Your Brand

  • Concentrate on core brands and products- Concentrate marketing Muscle behind the brands that are most likely to survive, and leave the others to sink or swim.
  • Support core proposition and emphasize its value
  • Don’t price promote unless can cut costs or live with lower margins
  • Don’t cut quality
  • Think internal branding and morale
  • Focus on Customers
  • Review consumer segmentation
  • Focus on Communication

I think that every brand will not cut spending, but firms those who do so will find a disadvantage when the recession comes to an end. Marketers need to make the best from every single point of their brands if they hope to maintain a very strong relationship with the consumers. Marketers need to make the most of every spent in support of their brands if they hope to maintain strong consumer relationships. Those that do well should then be well placed to take advantage of weaker competition when the good times return.

How to beat the downturn…

In case you haven’t heard, here’s the bad news: there’s a recession on. But this is no time for blind panic; marketers need a cool head now more than ever

It’s a time-honoured tradition. When the good times are rolling marketers lead charmed lives, lavished with budget to spend on experimental whims, fashionable promotions and campaigns that some would say are more likely to win awards than new sales.

And then suddenly there’s a credit crunch, a terrorist attack, a dotcom bust or a crisis in a faraway stock exchange, and the economy goes into a spin. Now marketing departments look like a decadent luxury, wasteful and vain – a good place to cut back.

So the battle lines are drawn: the frosty, dispassionate finance teams with their forecasts, bar graphs and flowcharts, versus the creatives, who could find themselves armed only with hot tempers and fragile egos.
In a recession, cold, hard facts win every time. So it is that marketing budgets undulate in seven-year cycles, with marketers apparently powerless to resist. But this need not, and should not, be such a painfully predictable feature of a downturn.

It happens time and again because, let’s face it, the majority of marketers are dreadful at justifying themselves in practical terms. Now is the time to think like a finance guru. Instead of fighting to retain last year’s budget, plan, strategise and, above all, lose the ego.

Think like Obama

In February, President Barack Obama outlined a stimulus package to jump-start America’s recession-mired economy. He said: “No part of my budget will be free from scrutiny or untouched by reform.”

That’s a man holding the strings of a purse worth £2.5trn. For him, “scrutiny” means a piecemeal cost‑benefit analysis involving thousands of quangos, support teams and tax breaks – for you, the job should be a bit easier.

Few chief executives are enjoying board meetings right now. They are under pressure to produce results yesterday, so the temptation to make sweeping cuts is overwhelming. Do not let it come to this; anticipate the action and offer your own recession-busting plan.

First off, accept that you are in a similar predicament to Obama: there’s less money available than before. Your mission is to uncover areas where pennies can be pinched without ruining your carefully crafted brands.

In the same speech President Obama promised to not “sacrifice investments that will make America stronger, more competitive and more prosperous in the 21st century”.
And neither should you when it comes to your organisation. The veteran consultant and author of Marketing Payback, Dr Robert Shaw, suggests that in some cases it will be prudent to increase spend in areas that demonstrate the best results.

“Marketers like to keep everyone happy with a little bit of budget, but targeting what works is far more important. People say they target future customers, but it’s just as useful to look at efficient means of reaching them.

“You should isolate products that respond best to certain marketing mediums and not flog products that don’t provide a demonstrable return. Gather evidence on where money should be spent and where it should be taken away.”

Shaw cites the example of a company that spent a fortune on television advertising and saw a substantial, measureable uplift in sales after the adverts aired. “But they could have increased sales by 200 per cent and still not have achieved a profit,” he chuckles.

Act like Delboy

According to Michael Constantine, director of global marketing at Prime Focus, marketers are in a huge buyer’s market, with the supply of media vastly outstripping demand from brands. So grab a bargain while you can.

“There’s never been a better time to go to media owners for a drop-dead deal,” he says. “But look for deals based on longer-term media relationships. You help me and then I’ll help you. The rape-and-pillage approach rarely pays off in the long run.”

Michael Moszynski, founder of creative agency London, agrees that negotiation with media is a critical part of setting up a campaign – there doesn’t even have to be a recession.

“In 2005 we managed the campaign for the Conservative election. You can’t advertise on TV, so outdoor advertising was central. The trouble was, media owners tightened up and stopped offering discounts because they knew we had a strict schedule.

“Despite having a three-month window, we waited. Soon the media owners panicked and started offering discounts of up to 80 per cent. In the end we got 16,000 posters up for the price of 8,000.

Keep your eyes on the prize

Rightly or wrongly, marketers have a reputation for skimming the details. Why worry about the bland minutiae of profit and loss when you have created an outdoor campaign of such undisputable beauty?

If you fit this stereotype, it’s time to change. You collect data on the market response to your endeavours, right? So why not use it properly? Listen to advisers, read your figures and let them help you to predict market reaction in future.
Keep in mind that the goal of marketing is (in most cases) to increase revenue for your organisation. If you’re winning awards but your employer is on its knees financially, it’s time you had a rethink.

“The 118 adverts with the two moustachioed chaps have won countless awards but the company behind them is losing money every year,” says Shaw. “The team behind the ads have great CVs, but by definition they have failed.”
It’s tempting, especially if you are an agency, to push for more budget to satisfy your creative urges through regular brand “refreshers”. New and exciting creative is far more eyecatching than rehashing the same old stuff.

But, as senior fellow at the London Business School Tim Ambler points out, there is no real evidence that a regular change of image creates more interest in a brand. If it doesn’t bring a financial return then it is a waste of money.

Go back to school

Understanding your sector’s buying trends is the best way to ensure a return on your marketing spend. That means measuring the performance of campaigns and studying the results in detail.

“Marketers are very uncomfortable with any form of performance measurement,” claims Ambler. “But marketing is a two-stage process: you build demand and you turn that demand into sales.

“If you can’t demonstrate the latter, or predict it as an outcome, then you shouldn’t be doing the marketing in the first place. Marketers should pay more attention to research and not allow themselves to be drawn into fashionable trends that are not proven.”

“There’s still a haphazard approach to marketing,” agrees Shaw, “so there’s plenty of waste. You often turn up conspicuously large amounts of budget sloshing around for reasons no one seems particularly clear about.”

In recessions, consumers change their behaviour and lose their loyalty to brands; a fact that creates subtle changes in spending patterns. A well-targeted campaign today could therefore yield better results than in the best of boom times.
Learn buying trends, take advice, cut out waste and target people who will respond. You can only achieve the best results by understanding your market, and you can only do that by studying.

And if the market doesn’t respond to your facts-and-figures approach, don’t be afraid to experiment, says Moszynski. “Marketers have to find new cost-effective mediums rather than defending old budgets. You can set some test marketing activity. If you have to reduce spend by 30 per cent, drop budget in one area and increase it in another, then evaluate the results. Then take the results back to the finance department and show them where you made a profit.”

But don’t obsess

“Research is sometimes misguided,” adds Moszynski. “It can reinforce a view or cover a multitude of sins. In this environment of recession, research has to be real-time and actionable, not long term, and it must target behaviour, not market attitudes – they are very different things.”

Shaw points to the example of a large company in which two full-time staff members produced marketing reports for the board. “The packs were politically important for the business,” he says, “but no one analysed the data or found out what it meant in practical terms.”

While facts and figures are essential to the evolution of your marketing plan, it’s important to commission the right kind of research – that which provides a real insight into who is buying what and why.

When beer brand John Smith’s was considering the idea of using the comedian Jack Dee along with some computer-generated penguins to sell its product, it commissioned research. The results came back overwhelmingly negative. Of course they did; the researchers asked irrelevant questions focusing on the link between penguins and beer. Luckily, John Smith’s ignored the figures and the adverts turned into a stellar success.

Free, honest and caring?

In a downturn, two things happen to consumers. They become more prepared to switch brands and are more sceptical of big business. By adopting a dependable, honest and even boring guise, you can win back their trust.
Alex Tibbenham, senior brand researcher at Fitch Design, investigates a world of resources to track consumer trends. She has identified a big shift away from gimmicky advertising to straightforward messages and marketing campaigns delivering fun things free of charge.

“Consumers don’t react well to gimmicks in a recession, especially because this one was caused by people not paying attention to the details,” she says. “They are looking for honest brands delivering messages to reassure them.”
“We are seeing a growing emphasis on homely themes and more local targeting. Carling, for example, has just started promoting local community pubs, while Visa recently did a swap‑shop in London, which is a quaint idea but was very successful.”

The trend is most obvious in the way banks have started to advertise. During the boom years they positioned themselves as “sexy”, but have since realised this is the wrong message. Now the message is “dependable, reliable and dull – but we won’t lose your money”.

But fun hasn’t been completely dispensed with. Cadbury’s “Glass and a half full” productions, Skittles’ social networking mash-up website and Burger King’s “Kill your friends” initiative on Facebook shows that people still want to have a good time.

As Tibbenham points out, “your campaign can be honest and deliver a reassuring message, but people also need a lift in times like these”.