MBS Blog

We are in a recession…so what are we going to do about it? As individuals and organizations we have to improvise, adjust and overcome.  The “capitalist tools” over at www.forbes.com know what businesses need to do.

Many companies are thinking: cut expenses to the bone, particularly advertising and marketing expenses. Well…as I mentioned in last week in Recessionary Marketing (http://www.medblacksea.com/blog/2008/11/recessionary-marketing/ )  the best strategy might be to employ some “contrarian” tactics:

Don’t Skimp On Ad Budgets

Knowledge@Wharton, 12.01.08, 05:30 PM EST

Cutting advertising expenses can yield short-term gains–and long-term trouble.

With corporate managers under enormous pressure to control costs and maintain liquidity in the current credit crisis, advertising budgets often appear to be a dispensable luxury in the struggle to survive. Executives who succumb to that temptation, however, put the long-term future of their companies at risk, according to Wharton faculty and advertising experts.

“The first reaction is to cut, cut, cut, and advertising is one of the first things to go,” says Wharton marketing professor Peter Fader, adding that as companies slash advertising in a downturn, they leave empty space in consumers’ minds for aggressive marketers to make strong inroads. Today’s economy “provides an unusual opportunity to differentiate yourself and stand out from the crowd,” says Fader, “but it takes a lot of courage and convincing to get senior management on board with that.”

According to Wharton marketing professor Leonard Lodish, with demand slack for advertising services, the cost of these services goes down, making advertising expenditures all the more defensible in a bad business climate. “If your company has something to say that is relevant in this environment, it’s going to be more efficient to say it now than to say it in better times,” says Lodish.

Research shows that companies that consistently advertise even during recessions perform better in the long run. A McGraw-Hill Research study looking at 600 companies from 1980 to 1985 found that those businesses that chose to maintain or raise their level of advertising expenditures during the 1981 and 1982 recession had significantly higher sales after the economy recovered. Specifically, companies that advertised aggressively during the recession had sales 256% higher than those that did not continue to advertise.

For companies that do stay the course and continue to advertise into a recession or increase their promotional activities, the key is to craft messages that reflect the times and describe how their product or service benefits the consumer. For example, companies might be tempted to emphasize price in a recession, but that only works for companies like Costco(nasdaq: COST - news - people ) and Wal-Mart (nyse: WMT -news - people ) that are built around a core strategy of providing low prices year after year, says Lodish. He points to the current Wal-Mart campaign, “Save Money. Live Better,” as a successful approach to the recession.

Dean Jarrett, senior vice president of marketing at The Martin Agency in Richmond, Va., which developed the Wal-Mart ads, acknowledges the campaign began in 2007 before it was clear a harsh recession was building. “We can’t claim we knew a recession was coming, but ‘Save Money. Live Better’ is dead on-point with who they are and what they want to be.”

Eileen Campbell, chief executive of the Millward Brown Group advertising firm in New York City, says that while companies should probably not dwell on the recession and scare consumers into hoarding their pennies under a mattress, certain products require a straight-up approach–such as financial services. “If you are in the financial services category, to behave as you did a year ago is silly.” At the same time, however, many consumers are weary of negativity generated by the recession and would be receptive to a more upbeat message, she adds. “If you can put a positive spin on how you can genuinely help without invoking doom and gloom, I think that’s going to be more compelling

Technorati Tags: recession, capitalist tools, doom and gloom, financial services, Dean Jarrett, The Martin Agency, Eileen Campbell, Millward Brown Group, New York City, www.forbes.com, advertising, marketing, www.medblacksea.com, recessionary marketing, marketing expenses, liquidity, credit crisis, advertising budgets, The Wharton School, Peter Fader, Leonard Lodish, McGraw-Hill, Anton Olff, Costco, Wal-Mart,

As I wrote on 24 November 2008, the recession in emerging markets provides opportunities for companies to promote, establish, re-establish, and capture market share. The key is looking beyond the short term-which is painful for almost everyone at this moment- and focus on the long haul.

John Rose writes today in “The Moscow Times:” The looming crisis in Russia will cause many marketers to re-evaluate budgets, strategies and relationships. Although there may be many challenges ahead for companies as they face the prospect of slower growth and pressure on margins, there is a silver lining in that black cloud. During the last financial crisis in Russia, a decade ago, some companies took advantage of falling media costs and slow-to-react competition to capture market share and set the stage for strong future earnings.

There are three main opportunities for marketing during a recession.

Opportunity No. 1: Customers generally re-evaluate their brand loyalties during a recession. It is no longer business as usual. Many people will be looking for greater value as their buying power weakens. A recession breaks down barriers that make consumers otherwise resistant to new brand messages. This creates an opportunity for brands that have otherwise been unable to capture significant market share in a crowded category or one dominated by a larger competitor. If you are the No. 2, 3 or 4 brand in your market category and you have a good story to tell, this could be your best opportunity in years to relate your story and receive a positive reception. Reacting to the last financial crisis, Mobile TeleSystems continued advertising, while its competitor Beeline retreated. As a result, MTS substantially raised its subscriber base and overtook, Beeline, to become the top Russian mobile service provider. And MTS still retains the No. 1 spot today, despite Beeline’s ubiquitous advertising campaign.

Opportunity No. 2: Many companies will take a wait-and-see attitude during a recession. They will freeze or cut marketing budgets until they have a clearer picture of what lies ahead. This will have the effect of reducing media costs. The smart companies will become more aggressive while their competitors have their heads in the sand, and they can get more for their marketing expenditures. Now is the time to be creative and grab some attention for your company and brand. Establish yourself as a leader by staying visible through the media, promotion and public relations. Show the world you have a resilient brand and a plan for a sustainable future. Experience shows that market share gained during a recession will return dividends when the economy rebounds. Wimm-Bill-Dann continued to promote and expand aggressively during the last crisis, filling a vacuum left by international competitors, who were still licking their wounds. Today, they are the leading Russian producer of dairy and beverage products. Saint Springs is another example of a company that continued to expand its marketing programs while the market was still contracting. After becoming the leader in the bottled water segment, it was acquired by Nestle Waters in 2002.

Opportunity No. 3: Customers expect a deal during a recession. People know companies are under pressure and will expect them to react to the recession with superior products, special offers and better service to win their business or get them to buy. You don’t want to disappoint them. But unless you run a volume business where you plan to always be the price leader, you shouldn’t feel obliged to lower your prices to win business during a recession. Sure, discounts will move inventory today, but it may come at a high cost in the future through the loss of brand value. The key is to give your customers more rather than charge them less. Value is most important, not price. Expand product features, extend warranties, provide special financing terms and offer enticing rewards for becoming loyal to your superior brand. Electronics retailer M-Video owes much of its success to creative promotions it began during the last crisis to lure customers and build loyalty, which is a practice they continue to this day. Currently, together with Sony Ericsson, they are giving away a card that provides free cinema tickets for one year when you buy select mobile phones. Their customers will be escaping the Russian recession to Hollywood — at least in their imaginations — and will no doubt reward the company with loyalty and future purchases.

It’s easier, of course, to follow the market and do what the other guys are doing during a crisis — that is, very little. But with a better understanding of the short window of opportunity brought on by a crisis — plus a little chutzpah — your company could use this recession to build a stronger brand and a more profitable business in the near future, when Russia bounces back.

Anton Olff

Technorati Tags: recessionary marketing, emerging markets, market share, brand, Moscow Times, marketing budgets, Russia,