Why companies should continue marketing during an economic decline
Most commentators would agree that the economy is at best slowing down, and at worst heading for a mild recession over the next two years. After such a sustained period of growth, this is inevitably a cause for concern. When budgets are cut, marketing is often first in line, but many in the industry question this knee jerk reaction. In his classic book, Ogilvy on Advertising, David Ogilvy makes the point that cutting back on marketing can be a false economy—especially in a recession.
"If you stop advertising a brand which is still in its introductory phase," says Ogilvy, "you will probably kill it—forever. Studies of the last six recessions have demonstrated that companies that do not cut back their advertising budgets achieve greater increases in profit than companies that do cut back."
Ogilvy supports this assertion by citing a MORI survey of 40,000 people who bought 23 industrial products over a five-year period. The survey found that the market share increased in times of economic decline—but only when advertising was maintained. Ogilvy also gives an example from the American Business Press who compared sales of companies that cut back their advertising expenditure during the 1974-75 recessions with companies that didn't. While the former had more than doubled its sales two years later, the latter had barely increased by 50 per cent.
So, the message is, maintain your marketing, but make sure you are using the right strategies and focusing on the right areas. These would be my five priority areas for marketing activity during a downturn:
1. Use your existing customers. These are the people most likely to spend money with you. Keep them informed about what you can do for them and treat them well by rewarding loyalty with discounted services and products.
2. Making headlines. If you want to get your company in the news, you need to actively pursue publicity by regularly contacting editors and reporters with press releases and stories that might be of interest and specifically relevant to their titles. Make it topical if possible, but avoid copy that is a thinly veiled advert: it will go straight in the bin.
3. Give and you will receive. We all like the idea of something for nothing, so use the law of reciprocity to your advantage. Give your customer something: a free report, a seminar, a tips booklet; and they will have the urge to give you something in return—hopefully their business.
4. Create your niche. Appealing to a wide market won't necessarily generate more sales—it may even have the opposite effect. Instead, develop a niche market and become the best in that particular sector. Tailor brochures, direct mail, flyers and presentations for each specific sector of your market.
5. Follow the trail. You need to know which marketing activities have actually brought in custom. Ask clients how they heard of your company and put a reference code on every type of marketing that you produce; this way you can trace how customers found you—and calculate their lifetime value.
So cut marketing expenditure if you must, but don't cut marketing activity. Keep active in your markets and seek out more cost effective ways to keep your name at the forefront of your customers' minds. If you market your company proactively, healthy growth is possible—even in an economic slowdown—when you can steal the market share from your competitors who cut budgets without thinking.
Alastair Campbell is MD of The Ideal Marketing Company www.idealmarketingcompany.com
Posted 11 June 2008 : Director.co.uk
