How to do marketing in a recession

When gloomy times arrive, it has always been the marketing budgets that are the first to take a hit. It is understandable, given the marketing industry’s poor efforts at being taken seriously at a financial level.

Fortunately the arrival of the digital age has meant that measurement of marketing is no longer the black art it once was. Some of the best brand marketing people I know are financial people at heart. They get it because they can measure it.

But back to the downturn problem. Obviously when the topline is under pressure, the easiest way to save the bottom line is to cut costs. And generally the best costs to cut are hidden away within your organisation – in the form of inefficiencies and potentially even poor performing staff. But – especially in large organisations – the EASIEST way to save the bottom line fast is to slash and burn brand investment.

And each time this happens, marketers try to limit the damage by appealing to “long term” – although all of the remuneration and shareholder pressure seems to be focused on “right now.”

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Well, maybe this time around things are a little different. The cause of the financial bubble and its explosion was the continued short-term profit focus of pretty much all of the markets around the world, with very little consideration of the underlying structure and health of businesses and dependence on consumer debt levels. Easily said of course with hindsight.

A simple argument for maintaining a marketing presence during a downturn is that you are often able to increase your share of voice without having to increase your spendlevels. Share of voice is usually used to express the percentage of your spend versus that of all your competitors.

Share of voice is said to be a crude leading-edge indicator of market performance. Usually (but not always) firms that have a higher share of voice (SOV) than their share of market (SOM) will tend to be able to grow their market share ahead of the game. And in my experience this is often the case, except where there is some problem – such as unbelievably poor advertising or a bigger brand or business problem in the way.

The theory in a recession is that when competitors inevitably reduce their spend, YOUR spend – even if just held constant – will end up creating a greater share of voice (as the pie shrinks and your slice stays the same). Magnifying this effect is the fact that in recession times, media are willing to bend over backwards to get their hands on your spend, so often you will be able to increase the impact you have on your customers through good buying as well.

In addition, with marketing spend so accountable, you can change your mix of marketing to guarantee you’re spending well. For example, many firms will undoubtedly divert traditional TV advertising (efficient but difficult to measure without expensive tracking) into digital and direct (less efficient but possibly more effective and definitely easier to link to sales or consumer behaviour changes).

That’s the theory, and there has been a piece of research quoted a lot lately – proving the wisdom of spending on marketing during recessions. This is the McGraw-Hill study with 600 companies tracked during the 1980s recession. The story is that the firms that continued to advertise emerged from the recession far stronger than the ones that cut advertising. Funny thing is, when I googled to track this down, there are an AWFUL lot of references to the study but not even McGraw Hill have actually got the study available. So I’m a bit concerned about that one to say the least, but there are others here supporting the proposition that spending through a recession is smart. Another journal article looks at the 1990s recession and comes up with the same conclusion.

Which is all lovely – until it is YOUR company, YOUR budget and even more importantly, YOUR money at risk!

Unless your firm mirrors the firms in these studies, you can almost guarantee that the studies are indicative at best and won’t point accurately to YOUR firm’s actual growth-rate-to-marketing-spend relationship. So many variables will affect your business that won’t have been included or controlled for in any study: – industry, product, client and all sorts of other factors are standing between the academic utopia and your business reality.

So what do you do then?

My recommendation is not to believe a word the academics are saying… rather, DO invest time and effort in proving it yourself. Measure your marketing. Test first, then scale up. That’s the best approach.

The Australian Marketing Institite has developed a good range of marketing metrics tools, which any firm could easily deploy to learn how much of their marketing budget is well spent. Or email me for some freebies.

It is highly likely that your best response to a profit squeeze lies somewhere between “slash and burn” and “spend away.”

So move carefully, measure everything and most-importantly don’t forget to keep communicating with your customers – advertise, use email, the phone, send smoke signals if that’s what it takes. But keep communicating. It’s so important because in a time of turmoil you can pretty much guarantee your customers are feeling jitters. People will be welcoming of brands that stick to consistent communication and as a result symbolise stability – a lighthouse in a storm.

Of course, if your business is one which has been built on a foundation of financial quicksand, then please don’t spend up on marketing before you fix the basics. Marketing and branding doesn’t fix broken business models.

One thought on “How to do marketing in a recession

  1. I found your blog on google and read a few of your other posts. I just added you to my Google News Reader. Keep up the good work. Look forward to reading more from you in the future.

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