CMC- InsightExec 10 Mar 09
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)