MARKETING DURING A DOWNTURN
During an economic downturn, the first line item that corporate decision-makers lay down on the chopping block is the marketing budget: 60 percent of large companies reported that a cut has been made to their marketing budgets or is expected to be made. Another 29 percent of medium-sized companies and 13 percent of small companies echoed this projection.
It’s often the worst thinking. Although the temptation is to panic, now is not the time to cut marketing budgets. This type of thinking is akin to not buying gasoline because the price is too high and continuing to drive anyway. Eventually, high price or not, the car is going to run out of gas and leave the driver stranded. At the very least, you need to increase the value for each dollar you spend, and you should seriously consider also increasing the across-the-board budget. This is the time to take advantage of the chance to get your message out front of the competition as they decide to cut back. If your marketing programs are justifiable—you can, for example, show the number of click-throughs on a banner campaign and how much revenue they generated—your budget will be bulletproof.
THE ABILITY TO ADAPT IS THE ABILITY TO SURVIVE
The business-to-consumer market is being hurt worse than business-to-business. That’s because retail and financial services—the biggest feeders for this sector—always get hit the hardest in a downturn because consumers are less likely to spend money on purchases that are not necessities. Marketers are considering shifting from traditional media to online tactics, which are less expensive to launch and maintain and have a wider reach and frequency; they are spending more on direct marketing and less on branding; they are making sure that their marketing investment will have a measurable or proven return on investment (ROI). Marketers just learn how to be smarter with their money. Here are some considerations that should be weighed heavily if you are considering cutting marketing expenses.
Tips for getting more value from your marketing budget, for business-to-business and business-to-customer:
- Fine-tune messaging to emphasize value and cost savings.
- Rework website content to better communicate value.
- Be specific about what clients expect from their investment
- Emphasize premiums, free trials, and discounts.
- Emphasize testimonials centered on increased revenue.
- Keep communicating with your customers even if they are spending less: direct mail, email, advertising—it’s less costly to market to current customers than past ones.
- Don’t be surprised if you see sales cycles lengthening—that means you need to increase the volume of what you’re putting in your pipeline now. And be aware of the historical performance of the pipeline: if you needed 10 leads to make your revenue target last year, you’re going to want to have 20 opportunities identified this year.
- Test your messaging and media: it’s the best way to improve results without spending money.
- Events and trade shows are expensive and typically have a low ROI. Shift these dollars to trackable, online tactics such as paid search, natural search, and email marketing.
- Although the highest constant spending category is still print advertising, it remains—along with TV and radio—one of the most expensive.
- The present list of tips that ranges from spending marketing dollars on actual media buys that result in impressions—email marketing, advertising, direct mail, for example—and cut wasteful, expensive overhead expenses.
- Rethink spending priorities if you are working with a full-service agency. You need current results not long-term results.
- Think direct marketing—it is more measurable, more trackable, and at the same time gets the brand and the message in front of as many eyes as possible.
- If the budget is truly zero, then marketing activities that are free need to be implemented: Craig’s List, eBay, in-store referral programs, blogs, website promotions, press releases, and networking groups. There are always other routes to take to get to the sales destination. Once sales recover, more familiar marketing vehicles can be invested in.
- An economic downturn does not mean zero sales for all businesses, it only means fewer dollars are in the marketplace.
MYTHS IN THE MIDST OF MAYHEM
Marketing activities are driven by several factors and forces, and during an economic downturn the perceptions of these by marketing executives are often flawed to begin with, skewed, marred by history and personal experiences of senior management, though most have no historical precedent or foundation. Here are some marketing myths to reject when considering whether to cut your marketing budget to “save” money:
Myth #1 – “Our brand is strong enough not to need support for the duration of the downturn.”
Fact: Few brands are strong enough to survive without advertising, product promotion and customer service support. Brands will wither and shrivel to a shadow of their former selves without attention. This is not a position for a brand to be in when the growth engine for the economy revs back up. Customers won’t buy from companies they have never heard about; they will buy from the ones they are familiar with.
Myth #2 – “If we cut back on marketing spending, we can use the money for other things internally, and increase the budget when things get better.”
Fact: Studies have shown that once that budget gets cut, it takes a Herculean effort and a strong internal champion to boost it back to its former levels, and even if it does increase, there are much stronger conditions of ROI attached to its implementation. Once those funds are allocated elsewhere, they tend to stay there because that other department doesn’t want to give them up either.
Myth #3 – “Nobody’s buying anything, advertising and promotions are a waste of money.”
Fact: Those that reduce their presence in their key service markets are in a far worse position in terms of profitability, market share and market competitive presence when the downturn eases and profitability growth returns than those that maintain their marketing activity levels. Those companies that are bold enough to increase marketing activity stand a great chance of taking market share from their less aggressive competitors and can rule the category if the downturn lasts long enough.
Myth #4 – “We can cut back on marketing now, and then ramp up quickly when things get better.”
Fact: This strategy has proven disastrous time and again, especially for companies that have inefficiencies inherent in their design or product delivery channel. That inefficiency won’t allow them to “ramp up quickly”, since by that very inefficiency they will effectively always be “late” when timing the market: they are not market leaders but laggards, and the ramp-up activity gets started late in the buying cycle, and their more nimble competitors have already beaten them to the punch.
Myth #5 – “We should examine what’s working and cut out everything else.”
Fact: This is not really a myth, but a knee-jerk reaction to a short-term slump in sales gross. Good marketing departments should be doing exactly that on a perpetual basis, not just when times are tougher. Why would any marketer continue programs that didn’t work, dragging down performance across the board and wasting money?
Myth #6 – “Marketing spends more money than any other department, they have the most room to cut their budget.”
Fact: Return is really what counts when its budget review time. Marketing is one of the few departments that actually points to contributions they make directly to the bottom line. Cutting the marketing budget only reduces the opportunities available to build market share, boost product awareness and memorability in the mind of the consumer, and dampens profitability in the long run.
Myth #7 – “All of our competitors are pulling back advertising and media expenditures to save money, so we should, too.”
Fact: Mom knew better than this when you used the excuse “All the other kids are going, why can’t I?” Her response? “If the other kids jump off the bridge, are you going to jump, too?” Despite being competitors, their financials likely look a bit different from yours, and it’s foolish to think that you can mirror their moves and be successful. The smart money here is being used to take market share from your more timid competitors, by increasing presence and exposure, and cutting other less-than-mission-critical expenditures for a short period to accomplish it.
Myth #8 – “We should downgrade the quality of our marketing materials, use a cheaper creative agency, and mail out less frequently to save money.”
Fact: This set of moves will actually cost you both in the short- and long term. You might save a very small incremental amount on cheaper paper, shorter, smaller brochures, cheaper handouts, and smaller tradeshow giveaways, but the damage to the brand and the resulting poor reflection on the company as a whole does more damage than can ever be repaired by spending those few dollars later to try and fix it. this kind of thinking also shakes the confidence of your customers by giving them a visual representation of how poorly your company is performing! “They must be in trouble. Maybe I’d better take my business to the other company that’s likely to be around to support their products down the line,” is the thought being promoted by reducing quality in publicly released materials.
Good design often costs less than bad design, due to fewer creative iterations, fewer miscues, greater effectiveness, and higher return. Jumping ship from the agency you’re with if they are delivering on dollars spent just to save a little money is foolhardy. The ramp-up time for a new agency to learn your needs, your products, your style, and your brand will just about be exhausted by the time the average recession is over, and it will have cost you more to get the same level of productivity in that time, just in time to reposition for the new economic conditions.
By: JT Winters
