When I created this blog, I wanted to have some guest bloggers now and then. Well, today I am happy to present to you our first guest post by Linda Linham:
Marketing In A Recession
Dozens of scary words have been used to describe the economic outlook for the rest of the year and into 2009. The signs of a recession are all around us. The spillover from the mortgage crisis seems to be weakening both consumer confidence and the consumer spending--much of it on credit--that has been floating our economy. The proposed bailout is a temporary "band aid" to the current economic situation, or, to use jargon I’ve recently heard, it puts “lipstick on a pig”. We can expect continued pressure for Federal and State tax rate increases; consumers will feel poorer and be more conservative and cautious in their spending. This creates a great opportunity to reassure consumers and also means reassuring the consumer is a vital ingredient of successful marketing during a recession.
Business owners and marketers should fasten their seat belts for a bumpy ride in 2009, but consideration of these factors when making marketing plans for the coming year could mean a much smoother ride:
1. Maintain marketing spending. This is definitely not the time to cut your marketing budget. Experience tells us that brands that increase their marketing during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times. Uncertain consumers need the reassurance of known businesses although you may need to consider new, less expensive methods or tactics. Try to negotiate lower advertising rates and lock them in for several years. If you have to cut marketing spending, try to maintain the frequency of your advertising by shifting from 30-to-15 second spots, substituting radio for television advertising, or increasing the use of direct marketing, which gives more immediate sales impact and is usually more effective and efficient for small business owners.
2. Research customers. You will need to know more than ever how customers are redefining value and responding to the recession. Consumers take more time searching for products and services. They are more willing to postpone purchases, trade down, or buy less. Must-have features of yesterday are today's can-live-withouts. Brands, products and services that are known and trusted are highly valued. Volume buying to save money becomes more prevalent. Getting back to the basics will help here—if you have not asked your customers what they value, try simple surveys, customer profiles, experience mapping or simple personal phone calls to key customers.
3. Focus on family. In economic hard times, we tend to retreat to our comfort zones. Cozy hearth-and-home family scenes in advertising may replace images of extreme sports and adventure, as uncertainty prompts us to stay at home and also stay connected with family and friends.
4. Rationalize product/service offerings. Optimize the way your company delivers your product and service so it can be absolutely the best it can be. Reforecast demand for each item in the product/service lines since consumers may trade down to those that stress good value, with fewer options. Tough times favor multi-purpose goods over specialized products. Unprofitable and low sales product lines should be trimmed. In grocery-products categories, good-quality own-brands gain at the expense of national brands. Industrial customers prefer to see products and services unbundled and priced separately. Gimmicks are out; reliability, durability, safety and performance are in. New products, especially those that address the new consumer reality and thereby put pressure on competitors, should still be introduced but advertising should stress superior price performance, not corporate image. Now is also the time to spot trends for product development and make plans to act on them in 2010 and 2011.
5. Consider pricing tactics. Customers will be shopping around for the best deals. Avoid cutting list prices but you may need to offer more temporary price promotions, reduce minimums for quantity discounts, extend credit to long-standing key customers and price smaller sizes more aggressively. In tough times, price cuts attract more consumer response than promotions such as sweepstakes and mail-in offers.
6. Emphasize market share. Most companies are battling for survival or market share. Knowing your cost structure can ensure that any cuts or consolidation initiatives will save the most money with minimum customer impact. Taking the time to know your net margin on each product and service you offer will be time well spent. Companies, with the most productive cost structures in their industries, can expect to gain market share. Other companies with healthy balance sheets can gain market share by acquiring weak competitors.
7. Focus on core values. Although some companies will have to cut back on employees, others can cement the loyalty of those who remain by assuring employees that the company has survived difficult times before, maintaining quality rather than cutting corners and servicing existing customers rather than trying to be all things to all people. Business owners who spend more time with customers and employees will benefit.
During my corporate career, in economically challenged times—which was continual it seemed--I spent a great deal of time running interference between the heightened importance of the finance director's balance sheet over the sales and marketing management’s income statement. Managing working capital always attempts to dominate managing customer relationships. Whether large company or small company, the lesson I learned was always the same: successful companies do not abandon their marketing strategies in a recession; they adapt them.
Linda M. Linham is an entrepreneurial coach, consultant and founder of Successful Ventures LLC