News

Westchester Commerce Magazine

WHEN SIMPLE LOGIC DOESN’T PREVAIL
Marketing Opportunities in a Recession
by Mark Mitchell, President - MtichellWest

During recessionary times, anxiety rises for most business owners and managers. Most often, their first reaction is protectionist, which leads to slashing budgets, cutting staff and canceling expansion plans. After all, who would argue with "circling the wagons" and lowering expenses when sales are slumping?

An early target for reducing expenses is frequently the marketing budget. After all, the competition is probably cutting their marketing budgets (or at least they say they are), and who needs marketing when people aren’t buying?

Simple logic doesn't prevail here.

Research by the American Business Press and Meldrum & Fewsmith during and after the 1970 recession showed that "sales and profits can be maintained and increased in recession years and in the years immediately following by those companies willing to maintain an aggressive marketing posture when others adopt the philosophy of cutting back on marketing efforts when sales appear to be harder to get."

In the 1974-1975 recession years, and in the two years following, the American Business Press and Meldrum & Fewsmith found that "companies which did not cut marketing expenditures experienced higher sales and net income during the two recession years and the two years following than those companies which cut in either or both recession years."

Following the 1981-82 recessions, the McGraw-Hill Laboratory of Advertising Performance analyzed the performance of some 600 industrial companies. The study found that "business to business firms that maintained or increased their marketing expenditures average significantly higher sales growth both during the recession and for the following three years than those which eliminated or decreased marketing."

Finally, Management Review - the publication of the American Management Association - asked AMA member firms about spending during the 1990-1991 recession. "Fortune follows the brave," they announced, noting that the data showed that most firms that raised their marketing budgets enjoyed gains in market share. "The keys to gaining market share in a recession," concluded Management Review, "seem to be spending money and adding to staff. Firms that increased their budgets and took on new people were twice as likely to gain market share."

Still not convinced?

According to the Harvard Business Review article, "Advertising as an anti-recession tool… The rationale that a company can afford to cut back in advertising because everybody else is cutting back (is fallacious). Rather than wait for business to return to normal, top executives should cash in on the opportunity that rival companies are creating for them."

Marketing can increase sales during recessionary times as well as prosperous times. Remember, your customers and prospects haven't stopped buying. They may be buying less and making more careful purchases, but spending hasn't stopped.

Some of the ways marketing can play a critical role for businesses during a recession are:

• Marketing maintains or increases brand awareness so there is either no loss or a strengthening of your brand awareness and impact. Marketing can maintain a positive image during a time when it’s easier for the market to have concerns about your company.
• Marketing helps you stay connected to your customers and lets your customers and prospects know that you are still around.
• Marketing can increase your market share and attract business your competitors give up by not marketing. Competitors that cut marketing expenditures will not have as effective a voice in the market. By marketing and brand building when your competition isn’t, you have an opportunity to strengthen your brand image with your competition’s customers, increase sales and market share.

It may surprise you that the development of marketing strategies and plans are not different during a recession than at any other time. Here are some strategies that always work:

• Marketing approaches should always be in tune with market conditions and the moods and needs of your prospects.
• Always provide information about your products and services that is helpful, useful and relevant. If your product or service has specific benefits that assist with problems or issues your customers or prospects are facing, let them know.
• Emphasize the appropriate values your product or service provides. During a recession, cost or time-savings may be more important than making life easier.
• Maintain your credibility. Always be clear and honest about what you are offering.
• Communicate your company, product or service so that it has a clear and unique market position that portrays it as more desirable or beneficial than your competition.

Marketing should not be regarded as a drain on profits, but as a contributor to profits and company value. If your marketing program is simply a cost and not a significant contributor to profits, brand image and company/product awareness and value, the program needs to be revised or recreated.

Marketing success not only requires an effective marketing strategy and program that is well managed and implemented, it requires proper funding. Many companies mistakenly set marketing budgets as a percentage of sales rather than a realistic assessment of what is needed to achieve company goals. It's like funding to reach any goal. You must have a clear description of what you would like to achieve, consider what expertise and staffing is needed and the elements required to create an effective program (media, materials, T&E, etc.). Add up the costs of all of the above: If the total is more than budgets will allow, you may need to revise your strategy, goals or expectations.

Remember, in any economic time, not marketing is like not showing up for work. First you will be missed; then you will be replaced.


Mark Mitchell is president of MitchellWest, based in Westchester, NY and Austin, TX. He is an award-winning marketing and business development expert with multi-industry experience from start-ups to the Fortune 100. MitchellWest grows companies through the creation and implementation of branding, marketing and business development strategies and programs in all media.
914.478.1590 / markm@mitchellwest.com