Skip to content

Archive for

GOOD READ – Marketing in a Recession, 10 things to remember

I found this article and thought it was an interesting read.  Enjoy!

These are frightening times for any CMO. Financial markets are in chaos and now the real economy seems to be taking a nosedive. How should you be prepared to react? What’s the optimum marketing strategy in a recession? Here are 10 important rules for dealing with the downturn:

Don’t panic: Most marketers assume that consumers cut their spending when recession bites. In fact, total consumer spending rarely falls in nominal terms — it just grows more slowly and so fails to keep up with inflation. And some categories, such as packaged goods, tend to do well in a recession. So don’t panic — your sales may be healthier than you expect.

Cut the right costs: If you do have to cut costs, make sure that you cut the right ones. An analysis by PIMS (Profit Impact of Marketing Strategy) of how over 1,000 firms have reacted to previous downturns shows that some cost-cutting strategies are more profitable than others. Firms that cut manufacturing and administrative costs tend to do well, as do firms that cut spare capacity. But firms that reduce product quality or cut budgets for marketing and NPD tend to underperform.

Cutting ad spending will reduce your income: Cutting the ad budget is a quick way to cut costs, but beware there is a penalty to be paid. Research shows that firms that cut ad spending during a recession typically see sales and income fall by 20-30 percent over the next two years as a result. So any boost to the bottom line is usually small and short term.

Cutting ad spending causes long-term damage: Research shows that advertising has long-term effects on sales — up to five years after the ads are shown. So cutting advertising does long-term damage to one’s business. In particular, analysis by PIMS shows that firms that cut advertising take much longer to recover when the economy begins to improve.

Cutting ad spending puts your brand and company at risk: Cutting ad expenditures doesn’t just depress sales and market share. Without advertising support, distribution becomes harder to maintain and the pressure to cut prices becomes harder to resist. With lower sales and lower margins, non-advertised brands often find profits spiraling down, sometimes with fatal consequences. Financial markets know all this and tend to punish the share prices of companies that cut advertising.

A recession is both a threat and an opportunity: The worst-case scenario is a marketer lowers an ad budget while a competitor increases his. The literature is full of examples of brands that have perished this way. But the flip side is that a recession can be a marvelous opportunity to deal competitors a killer blow. Because media prices tend to fall much faster than sales for most firms, the ROI from advertising often increases in a recession. The combination of low media prices and weak competition gives companies a unique opportunity to buy market share on the cheap.

Promotions are not the solution: When times are tough and consumers are looking for bargains, promotions may seem like the obvious solution. But beware promotions that are really just price cuts in disguise. Research shows that, for most brands, trade promotions are a mixed blessing at best. They may help to keep the retailers happy, but the extra sales they generate are purely short term and the net effect on profits is often negative. Heavy reliance on promotions tends to erode brand values and destroys profit margins.

Emotions are the key to brand strength: The key to maintaining a profitable brand is not to offer discounts or buy one, get one free promos, but to build and maintain a strong emotional bond with customers. An analysis of nearly 880 case studies published by the World Advertising Research Centre shows that ad campaigns that focus on emotional engagement tend to be more profitable than ad campaigns that focus on rational messages (such as low prices or special offers), even when times are tough.

Aim for fame: The same study showed that the most profitable ad campaigns of all are those that get consumers talking about the brand — and its marketing. Word of mouth is a powerful amplifier. To get your consumers talking, you need to do something remarkable. Unfashionable as it may seem, big broadcast media still have an important role to play here. Remember that research shows that TV is still one of the most important topics of conversation there is — second only to talking about family and friends.

Harness the power of integration: Stimulating word of mouth is one way to make a budget go further. Another is to harness synergies between different marketing channels. Our research shows that the most effective campaigns mix emotionally rich, publicly consumed media like TV, direct response media like online. Getting the mix right can more than double your payback.

Google Voice

I will discuss this in much greater detail later, but I just wanted to mention the subject of Google Voice.  I think that this new service is absolutely incredible and can really help you boost your business – and the best part is the service only costs between $2 and $10 for the LIFE of the service.  One of my good friends in AZ turned me on this and I am so glad he did.

Now for you bigger fabricators who already have dedicated T1 phone systems this may not be of any interest to you.  However, I am starting to use my Google Voice number as my primary number and it is absolutely incredible what you can do – so you may want to consider using it in conjunction with your existing cell.  I think for the “owner operator” this service offered by Google will be invaluable once you begin using it.

Check it out here:

Check out Google Voice

I will tell you in greater detail how the service has helped me and what I think is so incredible about it when I get a little more time.  In the meantime just check it out for yourself!