Posts Tagged 'Marketing in a double-dip recession'

Recession Redux? And What Does This Mean For Marketing?

Now that the stock market has taken a rather ugly turn, all of the talk has gone from “deficit, deficit” to “recession, recession”

When the 2008 recession came crashing down, marketing was one of the first things corporations cut.  And they cut marketing very steeply, far more steeply than almost any other part of their operations.  At that time I did a research study with Jupiter Research, in which we found an astonishing 89% of marketing executives said that their efforts were under greater C-level scrutiny than ever before.

No doubt it seemed self-serving at the time but all of the marketing executives, agencies and consultants screamed, “don’t stop marketing” and “don’t cut the budget so much”.

Here’s the big question — where they right?  Does cutting marketing during a downturn really hurt your long-term prospects?  Or were they wrong?

That’s an important question today, now that it looks like we are again on the cusp of a recession, if not already in one.

The evidence is pretty strong that the marketers were right.  People who invested in their brands generally out-performed those who cut marketing the most.  And the companies with the strongest brands were the ones who were not hit as hard by the stock-market plunge of 2008/09.

Here’s a chart put together in early 2010 by the very smart people of BrandZ.  They looked at both consumer companies and b2b companies, using survey data that reached back before the recession, to identify the strongest brands and the weakest brands.  Then they matched stock market performance.  Nobody was immune to the downturn (except, perhaps, the astonishing McDonald’s whose brand revitalization in 2004 continues to pay dividends today).

Will we remember the recent past?  Or are we going to find ourselves in another uncontrolled experiment of slashing marketing and watching companies falter because of it?

BrandZ Analysis: Brands in times of 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?

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