Recession? Time to Start Spending.
As marketers, we are all aware that marketing budgets are a prime target for trimming – or even butchering – during recessionary times. It often seems that we are our own worst enemies, feeding the recessionary monster without just cause. One large CPG or automotive giant pulls back spending and a trend emerges that rapidly begins to permeate across industries, both on the B2C and B2B sides. Even some companies that are hitting or exceeding their financial expectations begin to get tentative.
It seems that the negative industry news about ad spending is flooding my inbox on a daily basis. The headlines read: Online Retail Growth is Slowing, Upfront Questionable, Expected to Slip, U.S. Ad Spend Forecast for 2008 Lowered. Despite these reports and industry-wide cuts in spending, much has been written and validated about the benefits of maintaining or increasing marketing budgets during tough times. Studies have shown that you can not only gain competitive advantages while your competitors begin to pull back, but that those rewards can be reaped over the long-term.
Harvard Business School professor John Quelch wrote a great article about this topic in March. In his article, Marketing Your Way Through a Recession, published in the HBS Working Knowledge, Quelch suggests several key tactics for powering your way through an economic downturn. I have commented on three of the key points below.
Research the Customer - Quelch argues that instead of cutting your market research budgets that you need to invest more to understand how your customers’ attitudes have shifted during tough times. According to a recent CMO Council study, only 6.8% of marketers said they have excellent knowledge of the customer when it comes to demographic, behavioral and psychographic data, while 51.9% said they have fair to little knowledge of the customer.
Understanding your customers' attitudes, preferences and behaviors is critical during both boom and bust periods, so while your competitors are pulling back, increase your investment. You'll be in a better position to develop programs that better retain your customers and you may begin to start attracting your competitors’ customers as well.
Maintain Marketing Spending - The point Quelch makes here is simple: marketers that increase spending when competitors are cutting back generate better ROIs than during good economic times. By taking advantage of more favorable advertising rates and locking in where possible, those willing to spend may be well positioned to benefit over the longer term. As a long-time direct marketer with a heavy current focus on B2B, I would also argue that an economic downturn is also when you may need to defend your spending more fervently to senior management.
Don't be afraid to shift your spending into more accountable direct marketing programs where you can quantify your returns. Maybe this is why online online ad spending forecasts, despite some discrepancies, have remained positive. Be willing to do more testing than before – conduct more tests with smaller test cells. The learning you gain will pay major dividends and when your competitors return to normal spend levels, your understanding of market and customer responses will be a step ahead.
Focus on Family Values - This is a bit of a softer recommendation, but it makes sense. Quelch says, "When economic hard times loom, we tend to retreat to our village. Look for cozy hearth-and-home family scenes in advertising to replace images of extreme sports, adventure, and rugged individualism. Zany humor and appeals on the basis of fear are out."
While this recommendation may seem more geared towards B2C marketers, it applies on the B2B front as well. Just because you are appealing to a decision maker making a purchasing decision on his/her company’s behalf, that individual or group of individuals is still feeling the same pinch of the economy as the typical consumer. S/he will be turned off by aggressive tactics, so keep it simple and play it safe.
For other great insights and data on increasing your ad spending during a bust period, check out this research on the importance and value of B2B advertising during times of economic uncertainty put out by American Business Media.
