Marketing in the recession
A common practice in business when a recession hits is to cut the marketing budget.
But is that really such a good idea?

Many articles over the years, usually backed up by some form of statistical analysis, have shown that those companies that maintain or grow their marketing spend in the right way during a recession come out of it in a stronger market position.
THIS PLACES THEM AHEAD OF THEIR COMPETITORS who took the more traditional view that marketing as a soft cost could be cut without materially damaging their business.

For example the PIMS (Profit Impact of Market Strategy) statistical body of work studied nearly 1000 businesses across a broad range of business sectors and found that as the economic recovery phase began, companies that increased marketing spend during a recession gained market share three times faster than those who had cut budgets.

PIMS distinguished between "good costs" and "bad costs" during a recession.
Good Costs - were found to be those associated with marketing, R&D / product innovation and product quality.
Bad Costs - included fixed assets acquired to improve competitiveness and productivity.

Here are the options:

SPEND SMARTER - Focus on the right customers.
Focus on the right customers as you can't afford to be using scarce marketing or sales resources on customers that have no value to the organisation.
With careful analysis you could have a real understanding and focus on your profitable customers. This will drive difficult decisions but should lead to a switch in sales, marketing and organisational effort.
Customers offering marginal return may be retained for scale economy reasons or as they offer good future prospects, but a significant proportion of your customer base should not necessarily be the focus of future sales or marketing effort.
This is true whether your customer base is end users, vendors, brokers or dealers.

CUSTOMER BEHAVIOURS ARE CHANGING - You can't stay the same.
As your customers' businesses come under pressure, so their buying behaviour will change.
Asset buying processes are likely to lengthen and replacement cycles will extend.
Price pressures on the asset and any related financing are likely to grow.
Manufacturers will be desperate to achieve equipment volumes, pushing for high vendor finance acceptance rates.
Focus is likely to shift from "acquire for growth" to a survival mentality, with emphasis on risk minimisation, maintaining cashflow, reducing ownership costs and so on.

TRUST + CROSS-SELL = LIFETIME PROFIT
Even in good times, trust is a key requirement of any institution.
With high levels of customer uncertainty there's a real need for you to stay true to brand values, ensuring customers feel comfortable doing business with you and that you'll always support them.
Cutting account administration or driving shortened customer service call times may be counter-productive.
The approach should inform the way you sell and the people you employ (or if you're including sales copywriting and imagery). Importantly, linked with appropriate customer contact strategies it should reduce customer defections and increase the likelihood of successful cross-sales of other products.

DEVELOP YOUR EXISTING CUSTOMER BASE
Your primary focus should be on retaining and expanding existing customer relationships not acquiring new ones.
New customers have no track record with you so can't trust you in the way a satisfied customer can. Existing customers should be cheaper to sell to. Customer insight metrics can help you focus targeted communications that drive cross-sell, upsell and referrals.

Make sure you know your customer demographic and buying patterns and find ways to market them effectively.
This can include an event-based marketing approach (ie: end of lease, end of month offer, seasonal buying programmes etc).
Also look at how you can extend repayment periods (protecting customers' cashflow, while increasing interest income where relevant).

PRODUCTS AND PROMOTIONS
Price emphasis is likely to be strong with more emphasis on "must-have" rather than "nice-to-have" products and features.
Bundled products will come under greater scrutiny, contract hire and other asset management companies should consider that some customers will welcome an unbundled, menu-driven offering with separated pricing.

BE SMARTER THAN YOUR COMPETITORS
Your competitors will be under pressure just like you.
By understanding their strengths and weaknesses and making sure that market feedback is rapid and well structured you'll be able to increase new business volumes through the customers of poorly performing competitors or those exiting the market.

HAVE A POWERFUL BUSINESS CASE
Link marketing to key business imperatives. High marketing spend in the current economic climate represents a bold move for a CEO of CFO to sanction and all the money in the world won't matter if you don't have a sound customer proposition. But as the driver of future profitable growth and if judiciously spent, it could be the best investment you make.

SUMMARY
In summary - it makes no sense to cut your marketing budget and more sense to continue to promote your business but to take more time over your promotion and be more specific in your approach to your businesses promotion.

Look out for my next installment coming soon!

Philip Ainley, Creative Director - 11/06/2009
To comment please feel free to email me via email at info@flockofpigs.co.uk

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