Why Slashing Marketing Spend in an Economic Downturn May Not Be The Best Idea
With cost cutting a painful but often necessary measure in difficult economic times one of the first areas to feel the 'cut' is Marketing spend. It almost becomes a natural target as 'we can't afford to promote' is the usual mantra when business takes a dip.
It is worth considering a few points before taking the 'knife' to this area and consider what will happen to the following as a result of your action:-
- Your current customers
- Your potential customers
- Your competitors
- Your prospects of emerging from the downturn in better shape than the rest
Let's look at these areas separately:-
You may be banking on customer loyalty but that only goes as far as your customers' belief in your business and your brands. When times are hard customers seek reassurance that 'some things never change' and that there are still solid businesses around that they can support and 'invest in'. Disappearing from the spotlight because of your own internal needs only shows itself to your customer by your absence from the usual message media – the result? Your customer asks 'what's going on and who can I now rely on?' They may possibly 'change horse' as a result. Advertising keeps reassuring people that some things remain strong and as a result they remain loyal.
If you stop targeting new potential customers while things recover, when they do they will probably have gone elsewhere. It is important to retain new business development initiatives – if your competitors have 'pulled back' you may have some 'low hanging fruit' at your disposal!!
Your actions could be the opportunity they are waiting for. Think about how your competitors will react if the gaps appear in your promotional message – put yourself in their shoes – what would you do? Consider this carefully before you act.
Recent research has shown that the Companies who emerged in the top quartile from the last downturn had outspent their competition by almost 10%. Further research has shown that Companies who increased their spend during a recession recover three times more quickly than their competitors when economic conditions improve.
So what conclusions should you draw? Our advice…
- Take a good look at what you are spending on Marketing of course. Eliminate any waste. In any marketing budget under close scrutiny you can find no value added spend – if it is not adding value you should cut it.
- Keep promoting your business, your brands, products or services. 'Out of sight out of mind' is an adage to remember when thinking on how your customers see things. Slashing selling prices is a poor alternative and a potentially costly one to consistent brand building activity. Cutting price digs a hole that you may find it difficult to get out of when things improve.
Finally do take a look at how effectively your sales team are communicating the message when in front of customers. The best Marketing efforts can be wasted if the 'sell' is not persuasive and influential.
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