What do we do now?

In a recession, demand slows, and the first action of most businesses is a round of “belt tightening” involving cost cutting. This is understandable, because the priorities of the chief executive (CEO) and financial officer (CFO), are to secure the financial assets of the business and reduce the outgoings. While this may be regarded as prudent initial first aid in helping to protect the business, it does nothing to maintain it. Reducing the outflow of cash is important, but more important is to maximize the sustainable income, without which the business will die. Too often, in their concern to cut costs CEOs and CFOs effectively strangle the resources which are there to generate the necessary income on which the business is to survive. Why is this? Marketing is responsible for producing sustainable revenue necessary to maintain and develop the business. It is therefore the responsibility of marketers to demonstrate their contribution to the business and show how investment should be used to produce the required income.
The first requirement of the chief marketing officer (CMO) is to reappraise the current marketing and business situation. What is the financial state of the company? What is the cash flow position? What is the ratio of current assets to liabilities? By doing this the marketer will know what financial resources will be available for future business development. All this information should be readily available but it could also provide an opportunity to demonstrate an interest and understanding of the necessary financial affairs of the business.
As in previous recessions, marketers are required to do more with less and in the past, most managed to muddle through. However, the changes that the economic environment has undergone since the last recession and the nature of the present one, suggest that relying on past survival actions may not be enough. In previous recessions, marketers often concentrated on customers and markets that had been historically profitable. However, now that the world’s economic situation is often affecting customers and markets in unexpected and different ways, this approach may prove unreliable.
Marketing has evolved rapidly over the past decade, with traditional media declining in importance as the Internet and social networking have increased in size. CMOs, trying to rationalize their media spending, need to consider this new balance when redrawing their media plans, rather than just relying on the more traditional press and television.
A common approach in the past has been for marketers to cut costs by cutting the office sales support overhead, while maintaining the outside sales staff. However, an increasing number of companies are now relying on more integrated sales operations, including internet sales, direct mail, and other methods, as well as a direct sales team. Simply cutting the staff overhead may damage customer relationships and ultimately the revenue stream.
If marketers are to survive this or any recession, they will need to clearly identify the profitable customers and markets before prioritizing the most effective marketing methods for reaching them. In the current situation of the global economy, demands are changing with unprecedented speed, for example in many parts of the world the demand for new cars has collapsed in a matter of months. Such uncertainties require the constant attention of the marketer, with strategies that anticipate and respond to changing market conditions. It may no longer be sufficient to concentrate only on those customer groups and market areas that were previously profitable. Multinational companies will need to reassess their business, country by country, as almost every country is affected to a greater or lesser extent by the world economic situation, and any forecast made, even in the last six months, is likely to need revision.
For many national and international consumer companies, the profitability of different regions has changed rapidly, forcing many of them to reallocate marketing resources, accordingly. CMOs of business-to-business (B2B) companies will also need to re-examine the opportunities and risks of every one of their customers, especially regarding their long term cash reserves and liquidity.
Marketers should be aware of how the economic climate affects all aspects of their business, whatever its size. In the current business climate, marketers must ask themselves a number of questions:

* Which market segments provide most of the business?
* Are the main customers of the past likely to remain as important in the future?
* Have the demands of the market changed or are they likely to do so in the foreseeable future?
* Where are the best customers likely to be?
* How are prime customers to be qualified?
* Is the product or service suitable to the current customers?
* Does the product or service meet the economic requirements of the current market?
* How do we know?
* What is the media mix for advertising and promotion?
* How has it changed?
* Is the traditional mix still suitable for the present situation?
* The current pricing policy suitable for current market conditions?
* Would cutting price stimulate demand?
* Are the credit and payment terms suitable for the present time?

As professional marketers we are again in what the Chinese call “interesting times”. By staying alert and responding accordingly to the rapidly changing opportunities and threats posed by a volatile economic situation, marketers will provide the key to business survival and future growth.

© N.C.Watkis, Contract Marketing Service 21Apr 09
Contract Marketing Service, (Marketing Performance Consultants)

April 21, 2009   Posted in: marketing management

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