Necessity is the mother of invention

There is nothing like necessity to concentrate the mind. Whether or not the economy is still technically in recession is irrelevant to most businessmen and marketers in particular.

Regardless of what either government or economist may say about the state of the economy, the chief marketing officer (CMO) is still responsible for producing the financial income on which the business depends and is faced with the realities of the market in the level of demand, the volume of orders, number of customer creditors, and the rate of cash flow.

Experience shows that the effects of recession are manifested in a slowdown of orders as customers defer their decision-making and an increase in payment times. Fewer orders and slower payments can seriously reduce the level of cash flow, and panic a business into a hasty and ill thought out round of cost cutting. Advertising and promotion costs are easy to cut , but research has shown that companies that continue to advertise during a recession do better than those that don’t. Reducing corporate advertising may have little direct effect on sales, but a reduction in product advertising may be counter productive.

It is a general observation that in a recession, work gets harder and results take longer to achieve. In this situation, what can and should the marketing manager do? Cutting budgets is a crude but effective way of making savings, but it does not increase revenue or cash flow. Alternatively, improved efficiency may produce cost savings, which may in turn improve the return on investment and the overall level of profitable revenue.

If key orders have not arrived as scheduled, the initial action of the CMO should be to refer to the marketing plan and consider the contingency actions that should already have been prepared for just such an event. In the absence of a working contingency marketing plan that would take immediate effect, the CMO will have to prepare a reappraisal of the marketing situation, and a new plan of action, which will take time.

The CMO should first consider at all the elements that form the marketing budget. In many businesses, what is described as the marketing budget in fact only relates to a part of all those elements involved in anticipating and satisfying customer demand. In such circumstances, the CMO may not have complete authority over all those budgetary elements that relate to marketing, but it should not preclude a necessary interest in those budgetary elements outside the CMO’s immediate responsibilities. Each area of the budget needs to be assessed to ascertain where the money goes, to what purpose, and to what result. In every case, CMOs should be asking:

* Are we doing this right?
* Could we do this better?
* If so, – how?
* Has anything changed?
* What has changed?
* How has it changed?

It may be the case that there is little that can be done to hasten customer decision making in the short term. Special offers and credit options may be helpful in converting slow customers, but they should generally be avoided if the results do not contribute to overall profitable income. If the current customers are not producing enough income, then ways to increase the potential customer base may need to be considered, including diversifying into other markets, products and services. Before embarking on new sales activities, it is important to get the opinions of those directly in contact with the customers, in order to understand their problems, and to encourage their ideas to save money, cut waste and increase productivity. Some ideas may be radical, and some may require investment, but if valid ideas and suggestions which emanate from the sales team are implemented, they are more likely to be successful than those imposed by management who are not directly acquainted with the problems.

The operating costs of running a sales force can be some of the most expensive in the marketing budget; therefore efficiency and effectiveness are all important. Sales managers who must organize and motivate their sales teams to maximize sales, while minimizing the costs involved. CMOs should be prepared to reappraise the role and activities of a sales force and should:

* Know which areas produce the most income, and which are the most costly to service.
* Consider whether some of the customer base can be served by other means.
* Look for alternative ways for increasing the number of enquires including seeking new markets.
* Consider whether current methods of selling are still suitable for the current market conditions or could others be considered as an addition or alternative?

Necessity is the mother of invention. A slowdown in demand can bring new opportunities by enforced radical thinking. Being responsible for producing the profitable revenue for the business, CMOs should not be afraid to question what they do and how they do it and look for new ways to improve efficiency in producing their financial contribution.

March 15, 2010  Tags: , , , , , , ,   Posted in: marketing management

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