When the Going Gets Tough

Business life is getting tough. The days of credit, sales growth and benign economic environment are over, at least for the time being. Now, survival of the fittest is the order of the day.
Business will have to adapt to survive or as in nature, be replaced by new businesses. People forget and some have yet to learn, that a recession is not a new phenomenon; – we have been here before. Recession is a normal part of the business and economic cycle. Some cycles are long and others short, but they all end in some type of recession as the market corrects itself.
For marketers, a recession is a particularly difficult time. Demand can be seriously reduced, to the point of appearing to have dried up altogether. But while demand may have appeared to have evaporated, in most cases, demand has merely been deferred. Customers, be they private consumers or business organizations still require the goods and services on which they depend. Uncertainties may make consumers slower to make decisions and buy, but it is only a matter of when they buy, not if. It is therefore down to the marketer to prepare for that deferred purchase.
Companies need to understand that getting and maintaining business costs money. However, the first inclination of Chief Executive Officer (CMO) and Chief Financial Officer (CFO) in a recession is to cut costs, and one of the first targets is usually the marketing budget. This is because marketing is often confused with advertising, and is often only partially accountable for its costs and investments, a position that too many Chief Marketing Officers (CMOs) still find difficult to defend satisfactorily. However, it is the responsibility of the CMO to generate sustainable profitable revenue for the business. Thus the CMO must be able to clearly explain what it is they do, and the contribution that marketing makes to the business, especially in quantifiable terms. Marketers need to remember that in a business organization, finance is king, and that numbers speak louder than words. Talking about brand and image is of no real interest to the CEO, but the financial contribution that the marketing function makes to the business most certainly is.
Marketers need to decide which is more important, the marketing department or marketing? This may seem a pointless question, but when revenue is down, cost management becomes increasingly important. Marketers must look at every aspect of the marketing budget and consider how it contributes to the overall generation of revenue. In good times, marketing organizations tend to grow, often developing into small empires that their leaders want to defend.
If costs have to be rationalized, then salami slicing across the marketing function is generally a bad policy. Much better to rationalize those processes and activities which are insufficiently productive, and use their resources to bolster successful investment elsewhere, based on a full understanding of the contribution of each separate marketing activity.
While advertising is often an easy target for cost cutting, it is still an essential aid to opening doors to the client and preparing the way for a successful sale. Hence the need for advertising to be at least in part measureable in its contribution sales development. Is the advertising program achieving its objective? If not, then how should it be changed? Is every marketing activity still relevant to the current business situation? What does it achieve? How do we know? Are there more cost effective ways of achieving the same end?
In a recession, it is essential that marketers are pro-active, and not just reactive to questions from the CEO or CFO. Marketers must prepare themselves, ensuring that they are familiar with the company business plans, objectives and strategy. They need also to have a full understanding of the business’s financial position and any financial actions that the business is required to take. Any change in the marketing objectives, resources and investment must be clearly understood. It is in the marketers own interest not to save sacred cows, but to be ruthless and decisive in removing unproductive areas of marketing activity, if they cannot be shown to make demonstrably adequate contribution to the generation of profitable revenue.
Experience shows that it generally takes more effort to produce sales and revenue during a recession, and therefore not only is a simple cut in the marketing budget counterproductive, but there may even be a necessity for the budget to be increased.
Market research may be needed to examine changing customer requirements to meet current market conditions. Product and services might require development to meet changed customer requirement. Advertising and promotion could also be changed to maintain or increase effectiveness, but certainly not stopped. The distribution systems must be cost effective, while meeting the customer needs. Pricing structures, together with credit and payment terms should be re-assessed in the light of current trading conditions and the changing requirements of both the business and the customers.
In a recession the role of the marketer is fundamental to business success and survival. Marketers must recognize that getting revenue will cost more and take longer than in better times, but while it is the CFOs responsibility to manage the necessary financial resources, it is the CMO’s responsibility to use those resources efficiently and effectively to generate sustainable revenue and to do so demonstrably.

© N.C.Watkis, Contract Marketing Service 02 Mar 09
Contract Marketing Service, (Marketing Performance Consultants)

March 10, 2009   Posted in: marketing management

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