Recession Marketing: Enemy, Friend or Frenemy?

By Todd Cline
Feburary 17, 2008

Most economists are in agreement that we are in a full-blown recession and companies everywhere are looking for ways to offset lost revenues by cutting discretionary expenses and overhead to ride out the storm. Traditionally marketing is considered an expense by companies and is the first budget frozen or drastically cut. Instead of automatically cutting or freezing marketing budgets, executives today should ask themselves if their company’s marketing organization adds value by stabilizing or increasing lost revenue, or if it is an unnecessary burden accelerating their company’s dwindling cash flow?

There is no clear-cut answer to this age-old question; however, it comes down to your own business philosophy and management style.  How do you respond in times of crisis, whether real or cautionary? Are you an enemy, friend or frenemy of marketing?  During a recession there are effective marketing solutions for whatever course of action you take to keep your company on the right track while keeping a close eye on the bottom line.

Enemy
Most people will not voluntarily admit to being an enemy of marketing in a recession. Externally most want to promote a strong commitment to marketing as a key driver for business success and as an important tool to help navigate through tough times. However, when faced with a slumping quarter or market recession many choose to first pull out a samurai sword and drastically cut advertising budgets or worse, entire marketing departments as a knee-jerk reaction to stabilize the bottom line.

These actions may help in the short term but could have the following negative long term consequences:

• “Out of sight, out of mind” or “conspicuous by absence” are not fear tactics made up by marketing professionals to grab more advertising dollars. Companies that pull advertising are more likely to lose customers’ attention, especially during a recession. Do not underestimate the comfort factor with brand ubiquity.  It creates a perception of stability during troubling times.  Even the most loyal customers get “itchy” when companies disappear off the radar screen. This Houdini act – now you see us, now you don’t - puts companies in a reactive position of defending their stability, liquidity and viability to customers, shareholders and industry analysts.

• Market perception may be weaker when the recession dissipates leaving the doors open to industry competitors to quickly grab market position thereby slowing an organizations recovery time and future earnings.

• Brand equity could be lost or significantly tarnished. Companies that spend millions of dollars building a household name are at risk losing their investment.

Practicing slash and burn marketing tactics may greatly hinder marketing efforts. However, it does not make it impossible for companies to maintain a market presence. Keep in mind that continuity and consistency of message during a recession are very important to maintain and will aid in preventing potential long-term consequences.
Below are a few simple commonsense solutions that can be implemented with a skeleton crew and a minimal budget:

Press Releases: They are easy to write and inexpensive to distribute.  Best of all, most PR distribution agencies provide metrics to track your efforts.  Press announcements allow an organization to control the message. It is a presence in the market place without the cost of an advertising campaign.  Companies that provide customers with solutions during a recession are better positioned to expand their sales and customer base at the time of recovery. Avoid jumping on the gloom and doom bandwagon that the mainstream media and Wall Street are focused on. Be an optimistic but tempered voice of reason in a sea of pessimism.

Email:  This is an excellent tool since it targets the message to a specific audience and tracks that audience’s behavior. Most e-mail services are web based and only cost pennies per message. E-mail is easy to draft, write and distribute.

Co-Marketing: By leveraging partnerships the costs of advertising and marketing can be shared. Team up with sales partners, retailers, vendors and associations to increase brand equity by linking your brand with other respected brands within the industry.

Sales Tools: Creating short-term sales initiatives may help organizations stabilize or increase revenue. Marketing should work in conjunction with sales to develop training tools that increase productivity.  These tools include: pricing incentives, product configurators, market segmentation, key messages, position statements, collateral, revenue projections and others needed to achieve successful results. They ensure that the sales team is following the same playbook which helps keep them focused. Most tools can be developed in-house with minimal external costs. Best of all, it strengthens the relationship between marketing and sales.

Friend
Those of you that are true friends of marketing during a recession are a rare breed. These friends truly believe that increasing the marketing budget during tough times is the best and most productive course of action. They see opportunity where others do not, and will find other ways to cut costs.

Why do these friends invest more money in marketing when faced with a recession? It may be the belief that when earnings decline, withdrawing from the public suffocates growth.  Suffocation leads to a slower recovery. By investing in marketing now, they increase marketing output so that sales do not continue to decline.  Of course, if you are the lead survivor during a recession, you are better position to maintain your lead at recovery.

Marketing executives and advertising agencies love these guys, but is it truly the best course of action? Below are some traps to avoid:

• During a recession the mainstream media loves to vilify companies as extravagant and wasteful spenders. This steady drumbeat has made the general public, customers, and shareholders hypersensitive to every action or inaction taken.  Companies branded for spending overtly on advertising, marketing, or customer events could suffer serious negative backlash against them, creating a public relations nightmare.

• Be careful to balance marketing budget vs. return on investment. There is no doubt companies are taking huge risks supporting ongoing marketing efforts while quarterly earnings continue to decline.  By knowing the market and customer base, marketing programs can reap dividends. Of course, the devil is in the details. During a recession, customer behavior changes leaving a greater degree of uncertainty in estimating purchasing habits.  If the revenue goal and the costs are not critically defined, along with the target audience behavior, the marketing campaign will cause more harm than good.

Marketing friends should expect to call an audible from outside the marketing communications playbook. Calling the same plays during a recession will not help achieve the desired results. Below are a few solutions, that if implemented may avoid some foreseeable traps:

Target Marketing: All marketing is targeted.  The key is refining your target. In a recession shooting around the bulls’ eye will not generate critical revenue.  Every sale counts and marketing must be highly focused. Most companies focus on its existing customer base to ensure the base is protected.  Why?  Simple, it costs much less to keep a customer then it does to generate a new one.

Change the tone of the campaign:  Marketing in a recession changes everything. The typical market hype or competitive campaigning does not resonate with customers. Companies that are first to market with a softer tone and offer solutions in a tough economy gain the advantage over competitors.  By building empathy and confidence the audience will listen.

Customer incentives:  Giving gifts, discounts, lower financing, trade-ins, and other programs entice customers to purchase sooner rather then later. However, these programs begin to loose their effectiveness in a recession when everyone has battened down the hatches for the upcoming storm. Hyundai, the auto manufacturer, devised an excellent solution to this very problem. It offered customers the ability to return cars within the first year in case of job loss. This marketing program turned out to be very successful. Hyundai was one of the few auto manufacturers to report positive 2009 first quarter earnings. Why did this work? It was a reasonable solution that removed the risk barrier and reinforced consumer confidence. 

Frenemy
Those that are neither a true Enemy or true Friend of marketing during a recession are considered a Frenemy.   A frenemy tends to be sensible while looking to strike a balance between cutting marketing costs and maintaining a functional team to help stabilize or generate additional revenue. Companies that are able to find this center are usually the ones that emerge from a recession stronger then their competition.

An optimal balance in my opinion is to cut 40 percent head count and 60 percent budget across the entire marketing organization. This helps achieve the necessary cost cutting measures while still maintaining a functional marketing department. These cuts will over burden the remaining marketing team and minimize resources.  Below are a few budget conscience solutions to help alleviate the pain:

External Agencies: A good percentage of resources are dedicated to premium ad agencies which bill exorbitant rates for marketing campaigns, creative work, ad placement and other miscellaneous support. During a recession how does the frenemy maintain a marketing presence, with minimal resources?

• Negotiate lower rates with the existing agencies. Some agencies will agree to lower rates in order to keep the business; however, be wary that the quality of service and level of attention does not drop.
• Refresh old campaigns. Most companies utilize this path to get by, but as I mentioned in the last section it is smarter to change the tone of the campaign to better position the company in a recession. This requires a new campaign.
• Develop programs in-house. When the marketing team is short handed they tend to not spend the quality time necessary to create a well crafted marketing campaign.

These options may work, but in my experience they have fallen far short of company, customer and management expectations. Another option is to utilize a smaller boutique ad agency that can provide the following benefits:

• Equal or better creative solutions than premium agencies.
• Lower overhead keeps costs at a very reasonable rate. Far less then premium agencies.
• Small or large projects receive the same level of quality service
• Boutique agencies are much hungrier for business. More output for your buck
• More flexible then larger agencies
• Will not nickel and dime your organization for every little change or tweak

Freelancers: When resources are slim hiring freelancers with specific skills to help with temporary projects during a recession provide additional manpower without the overhead. If key resources like graphic designers, web developers or copywriters have been terminated because of budget cuts, utilizing ex-employees provide the following benefits:

• Already know the organization and the key players in order to get the project completed on time.
• Have complete knowledge of the products and services.
• Known work ethic and behavior patterns.
• Knowledge of key resources and able quickly obtain them.
• Flexible work schedules.

Summary
Many times companies are in no win situations.  No matter what it does during a recession it may be criticized.  However, many times the actions or inactions taken are necessary for the company’s survival. All employees from the CEO to the part timer must work cohesively to support the company.  A strong unified vision is necessary and marketing is essential in presenting this unified vision.  Regardless of whether you are an enemy, friend or frenemy of marketing during a recession there are always solutions to help keep your company on the winning path. Those who are not able to adapt to these new market conditions will be unable to provide effective support when it is needed the most.

If you have feedback regarding this article or any other questions please send me an e-mail.