Posts Tagged 'advertising in a recession'

If the economy has a double-dip recession, what happens to marketing?

The economic forecasts for the remainder of 2010 and into 2011 are not very promising for many parts of the world.  They range from modest expectations of a recovery in 2011(Ben Bernanke) to deflation/stagnation (Paul Krugman).  Today’s New York Times week in review has a couple of articles that cover the range of options, including an op-ed by Laura Tyson.

In fact, some economists say we’ve never had a real recovery, that we’ve never woken up from The Great Recession.

So what does this mean for marketing?

I am predicting that marketing will not see the same kind budget slash and burn as we saw in 2008 and 2009.  Cutting marketing goes right to the bottom line.  Nearly impossible to resist that kind of pressure in a tumbling economy.  In 2009 it was irresistible.  But this time around it will be different.

This time around a lot of companies have learned the hard lesson that even in a declining economy there are winners and losers.  It was a prediction that I made in 2008 and 2009. The evidence is in:  Look what happened in the restaurant industry where McDonald’s surged ahead.  Look at the electronics industry where Samsung surged ahead.  Look at the automotive industry where Hyundai, Subaru and Kia all surged ahead.  Ed Lebar at Brand Asset Valuator has confirmed this on a global basis, and reported it in a March presentation to the NYAMA.

This time around there are companies who will take advantage of a downturn by holding steady their marketing or even increasing it.

These are strong reasons to believe that the free-fall in marketing will not repeat itself.

In the plunge or free fall that started in 2008, marketing for virtually all companies was slashed.  Budgets were drastically cut or, in the worse cases, simply frozen and spending eliminated for all but the most critical projects and programs.  At the time we conducted a survey with Forrester on the state of marketing among CMOs and Marketing Directors.  The results were dramatic.

The findings of our study were published  in the magazine of the ANA (Association of National Advertisers), AdWeek, BrandWeek, Marketing News and other industry magazines and online.


Ringer BrandWeek_Dec2008

Ringer in Adweek

In our follow-up, which we conducted this year, we are clearly seeing winners and losers have emerged.  At the same time, the pressure on marketing has hardly eased.  In 2008, 89% of CMOs said marketing was under greater executive scrutiny that ever.  That number only dropped to 80% in 2010!

My next post will examine the effects of The Great Recession on consumer attitudes.  When the economy returns, will consumers resume old habits?  Or is this a fundamental turning point, a sea-change in attitudes that will last a decade or longer?

Chaotics: the case for marketing in a downturn

Here’s today’s interesting quote from “Chaotics” written by Philip Kotler and John Caslione.  This is from the chapter “Management’s Wrong Responses to Turbulence”:

Reducing Marketing, Brand, and New Product Development Expenses

When it comes time to make cuts, marketing always seems to get the first swipe, and new product development the second.  This is always a mistake because it destroys market share and innovation.

The knee-jerk reaction from most companies is to cut marketing.  When you cut marketing, you are leaving room for your competitors to get their message out in the forefront and to gain greater market share as yours slips away. (pages 55-56)

That was written in late 2008 or early 2009.  Here we are nearly a year later.  Marketing has been cut dramatically.  Advertising expenditures are plummeting — more for some media than others — and media prices are falling.  Consumer demand is down.  The only real pick-up in the economy has come from the government stimulus package.

It is still too early to see if those companies who made the biggest cuts suffered more than their competitors.  We know this has been true in past recessions.  I’ve seen some data in some categories that supports the hypothesis.

This does not mean that marketing should not be cut at all — just that the degree and strategy of the cuts need to be well planned.

It is the relative difference in the cuts that is most important.  If everyone cuts spending by 10%, then there is no comparative advantage.  If one company cuts marketing in half and a competitor stops entirely, then the comparative advantage is great.

Cutting marketing that is effective (and not all marketing is effective) becomes a self-fulfilling prophecy because it leads to declines in sales.  Declines in sales then become the justification for further cuts in marketing.  It becomes part of the “Downward Spiral of Doom” as James Kilts calls it.

Kotler and Caslione say, “Marketing is muscle, not fat.”

In the current economy, we all want a little more muscle…

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