Navigating Economic DownturnsBy Tom Dougherty
Recession. Navigating Downturns and Winning.
Whether you call it the “credit crunch,” “market adjustment,” or what it really is a Recession, the meaning is clear – our economy has slowed.
Per the reactive business norm, businesses have begun to look for ways to “cut costs.”
Including idling plants, cutting operational expenditures, and reducing marketing budgets.
It would be foolish to say that managers should not look for ways to reduce the effects of a recession or weakening economy.
However, as with most “slowdows” they are short-term and some of the decisions managers can make can have negative effects once the economy starts to grow again. (Read how to measure market potential here.)
One of the most used ways business look to cut costs in times of economic uncertainty is in the marketing departments. For whatever reason, many managers believe that marketing can be a “luxury” that companies cannot afford when the economy slows.
The reality is that they are wrong. Cutting marketing budgets MAY help an organization in the short term, but its long-term effects could harm an organization for some time.
Companies that reduce their marketing budgets run the risk of reduction in visibility, reduction of brand meaning, and, worst of all, reduction in preference. Sure, most managers would say that, “now is the time for us to work ‘smarter.”
Formula fixes won’t get you out of a recession
But for most organizations, the marketing function has become so formulaic that even the best – and now smaller – marketing departments have a real hard time working “smarter.” By the time those that can figure out how to do it actually do it, the slowdown is practically over.
Rather than cut marketing, now is the time to increase it. Now is the time to be proactive when the rest of your industry is being reactive. Now is the time to steal market share from your competition.
While many organizations are choosing to cut out media, direct mail, and the like. The effect is that they are becoming less relevant in their customer’s minds and ultimately less preferred.
Even the best brands need to reinforce themselves to remain relevant and preferred.
Brands must care for their customers. Reminding them why they choose the brands they do and telling them they are smart for doing so. Becoming less relevant ultimately reduces the barriers that exist for a customer to switch from one company to another.
Who is most vulnerable in a recession
Weak brands are especially vulnerable. As these switching barriers begin to diminish, your organization has an opportunity to place itself. Place itself in a position to grab those customers from your competition. (Read about the changing consumer here).
The answer here is not to go out and spend a gazillion dollars. And, become the leader in your category in media spending. Check out this article to learn how to win even when you are outspent.
The key is in the understanding that the negative long-term effects of reducing what you are doing in marketing. It can outweigh the positive short-term balance sheet effects.
Focusing on capitalizing on this very miscalculation by your competitors will not only get you through. Not through a recession or an economic downturn. It may help you to emerge from a downturn in a much better market position than you were before.