How to Market in a Recession
There are eight factors a company should consider when making marketing plans for 2008 and 2009
by John Quelch
Posted on Marketing KnowHow: February 19, 2008 9:16 AM
The signs of an imminent recession are all around us. The spillover from the subprime mortgage crisis is weakening the pair consumer confidence and the consumer spending—much of it adhering credit—that has been buoying the US management.
Companies should bear eight factors in mind when making their marketing plans for 2008 and 2009:
1. Research the customer. Instead of cutting the market research store, you need to know more than ever to what degree consumers are redefining value and responding to the recession. Price elasticity curves are changing. Consumers seize more time searching for durable goods and negotiate harder at the point of sale. They are greater amount of willing to postpone purchases, occupation down, or buy less amount. Must-have features of yesterday are today’s can-live-withouts. Trusted brands are especially valued and they can still enlarge new products successfully but interest in new brands and new categories fades. Conspicuous extinction becomes less prevalent.
2. Focus on family values. When housekeeping distressfully times loom, we tend to retreat to our village. Look for cozy hearth-and-home family scenes in advertising to replace images of extreme sports, adventure and rugged individualism. Zany humor and appeals on the basis of fear are not at home. Greeting card sales, telephone appliance and discretionary spending on home furnishings and home entertainment will hold up well, as changeableness prompts us to stay at family circle but likewise arrest connected with family and friends.
3. Maintain marketing spending. This is not the time to cut advertising. It is well documented that brands that increase advertising because the period of 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 brands ? and more consumers at home watching television can deliver higher than expected audiences at lower cost-per-thousand impressions. Brands with down-reaching pockets may subsist apt to negotiate favourable advertising rates and lock them in for several years. If you have to cut marketing spending, try to maintain the common occurrence of advertisements by shifting from 30-to-15 second advertisements, substituting radio for television advertising, or increasing the use of direct marketing, which gives other proximate sales impact.
4. Adjust product portfolios. Marketers must reforecast demand for each item in their product lines like consumers trade from a high to a low position to models that stress good value, such as cars with fewer options. Tough times favour multi-purpose goods over specialised products and weaker items in product lines should be pruned. In grocery-products categories, good-quality own-brands get at the outlay of national brands. Industrial customers prefer to see products and services unbundled and priced separately. Gimmicks are not at home; reliability, durability, safety and performance are in. New products, especially those that address the new consumer substantiality and thereby compel impression attached competitors, should still have being introduced but advertising should stress superior price performance, not corporate image.
5. Support distributors. In uncertain times, no one wants to tie up working capital in excess inventories. Early-buy allowances, extended financing and generous go policies motivate distributors to stock your well stocked crops line. This is particularly true with unproven new products. Be careful about expanding distribution to lower-priced channels; doing so can jeopardise existing relationships and your brand image. However, now may be the time to drop your weaker distributors and upgrade your sales force by recruiting those sacked by other companies.
6. Adjust pricing management. Customers will have being shopping around for the best deals. You do not necessarily have to cut inventory prices but you may need to offer more temporary price promotions, attenuate thresholds for quantity discounts, extend credit to long-standing customers and price smaller pack sizes more aggressively. In tough times, price cuts attract more consumer support than promotions in the same manner as sweepstakes and mail-in offers.
7. Stress market share. In all but a few technology categories where growth prospects are sound, companies are in a battle for market share and, in some cases, survival. Knowing your cost structure can ensure that any cuts or consolidation initiatives will husband the utmost money with minimum customer impact. Companies such as Wal-Mart and Southwest Airlines, with strong positions and the most productive cost structures in their industries, can expect to gain market share. Other companies with healthy balance sheets can achieve so by dint of. acquiring weak competitors.
8. Emphasise core values. Although most companies are making employees redundant, chief executives can cement the loyalty of those who endure through 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. CEOs must spend else time with customers and employees. Economic recession can refine the importance of the finance director’s balance sheet over the marketing manager’s income statement. Managing working capital can easily predominate managing customer relationships. CEOs must counter this. Successful companies do not abandon their marketing strategies in a recession; they adapt them.
This post is based on an article by John Quelch that appeared in The Financial Times of London onward February 19, 2008. Reproduced by permission.
From: How to Market in a Recession
