Friday, 6 March 2009

Marketing during Recession

The global economy has already moved into recession. Businesses are tightening their budgets and many of them are cutting their marketing budget. These are tough times and companies are laying off employees. Predictions about job losses and credit crunch make one nervous about the near future. It is important to understand that cutting marketing budget can often cause more harm to the growth of the business.

“For well-positioned companies, an economic recession should not prompt marketing cutbacks, but rather an aggressive increase in marketing spending to achieve superior business performance” according to research authored by Gary Lilien and Arvind Rangaswamy of Penn State's Smeal College of Business. It's not time to cut the marketing budget, it's time to re-evaluate your marketing and analyze what is working and what's not. Take time to explore new options of marketing that cost less, but can still deliver the results you are looking for.

Much of the problems are happening in the financial sectors but analysts are predicting that consumer markets are going to face the music in the near future.

So what should a marketer do in times of recession?

Cut cost: Cut costs and not investments. Invest in your brand, put lot of advertisements but cut cost in media, raw materials etc. You may have to spend less on marketing, not because marketing should be cut first or most (it most certainly should not), but because your company may cut budgets across the board. In fact, by showing how you intend to spend smarter, you will make it easier to fight for your resources. It’s more risky to invest in new products during recession times, if you cannot, then cut your cost. If your company is the lowest cost producer then you have a better chance of survival.

Invest smartly: In every downturn there are market segments that grow faster than others. It's your job as a marketer to help your company see and understand these market segments, and determine whether you can quickly win business in those fast-growing market segments. Usually the initial reaction by marketers in respond to recession is to cut marketing cost. On the contrary, its time to invest in brands. You will be heard when all others are shutting their marketing mouths. Bargain with the media for the rates and invest in building your brand.

Double-down on your current customers: Sure it's more fun to get new customers, but it's more practical in a downturn to provide more value (and get more in return) from your current customers. Listen and understand your customers. When customers make decisions in a downturn, they're more likely to go with a more trusted source. If they're more likely to go with you, then you want to make it easier and more obvious to them to go with you. Market to them. Enable your sales teams to be more effective with them. So when customers start tightening their purse, you can do that too. Also they will tell you how much they can pay you. Listen to that and do it.

Care for them, and they will be even more likely to stick with you if the going gets tough.

Diversify for Development: If your business depends primarily on one industry that is being hit hard, look for other sales avenues within it. Identify new channels, product applications and partnerships that compliment your business. These may be segments you're already selling to, but not particularly focused on; or they may represent new segments—and new opportunities for your company. The result will be increased visibility and awareness in the marketplace, prospecting opportunities and broader market appeal.

Time to introspect: Recession is a good period for marketers to take an objective look at their brand portfolio. This is the time to see which brand in your portfolio offers more value to the consumer. If your sales are going down like hell, it’s the time to re-engineer the brand's value proposition. Remember Wal-Mart makes more money during the recession than during good-times.

Only those brands will survive who is prepared for a recession even during the sunny days. Companies that ‘bury their heads in the sand’ by cutting back on prospecting while waiting for the economy to improve are leaving the window wide open for competitors to gobble up sales.

  • Procter and Gamble - During the Great Depression they pushed Ivory soap.
  • Intel - In 1990-1991 during economic difficulty they pushed out the campaign "Intel Inside".
  • Wal-mart - Walmart launched their "Every Day Low Prices" campaign in 2000-2001.

“When everything seems to be going against you, remember that the airplane takes off against the wind, not with it.” Henry Ford

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