Operating In A New Climate

  • by October 4, 2001
Times are tough. As we continue to wade through the economic swamp of abundant layoffs, ever-decreasing budgets and slashed margins, we also have to contend with a psychological layer - affecting both business and consumer confidence.

In this environment, the result is almost always a cost-cutting one. The first budgets to go are usually marketing and specifically advertising dollars.

On the flip side, there is what will become known as the Giuliani factor -- Get on with it. Get back to work. Business as usual. Supporting the need to keep up some level of momentum is a wealth of research that suggests that companies who continue to invest during recessionary times ultimately gain - both during and afterwards.

As usual, it's a case of looking to the past in order to help understand the future. Here is a selection of these reports:

* Advertising executive Roland S. Vaile tracked some 200 companies through the recession of 1923. In the April 1927 issue of Harvard Business Review, he reported that the biggest sales increases throughout the period were by companies that advertised the most.



* Buchen Advertising found that sales and profits dropped off at companies that cut back on advertising during the recessions of the late 40's thru early 60's. It also found that, after the recessions had ended, these same companies continued to lag behind those that had maintained their ad budgets.

* McGraw-Hill research reported "that b2b firms that maintained or increased their advertising expenditures during the 1981-82 recession averaged significantly higher sales growth both during the recession and for the following three years than those which eliminated or decreased advertising."

* MarketSense compared 101 household name brands during the recessionary period 1989-1991. In the beer category, overall spending was down 1% while Bud Light and Coors Light, each spending ahead of the category, saw sales increases of 15% and 16% respectfully. Pizza Hut sales rose 61% and Taco Bell's 40% thanks to strong advertising support, with McDonald's volume down approximately 28%.

* A study recently conducted by Getzler & Co. amongst ailing tech-companies indicated that most organizations experiencing a cash flow pinch are better off reducing operating costs than trimming back on sales and marketing expenditures. Consider the conveyor belt analogy. The conveyor belt symbolizes time. It keeps moving and never stops. The movement or lack of movement symbolizes our bullish or bearish position with respect to marketing budgets. Our options are therefore three-fold: Stand still, move slowly or step up the pace.

By standing still (doing nothing), the net result is a backward movement (losing market share). Clearly, this is the least desirable. For the same reason, maintaining the status quo by doing the bare minimum isn't the answer either. Moving forward at the same rate as that of the conveyer belt will result in stagnation - no change at all. Whilst it may be argued that a holding pattern is a safer option, it tends to negate all the building efforts of the past, as well as opens up the door to competitive inroads.

The third and final scenario is not just to move, but to move forward. This might be looked at as maintaining budget levels or even increasing portions thereof (see below). On one level this could be a forced move in order to ensure survival. On another level, this could be looked at as an opportunity to gain vital market share. So rather than cutting back, the answer may lie in staying the course.

Having said this, dollars do need to work harder. Budgets need to be stretched. Strategies need to be smarter.

Mass media plays a role in keeping the brand on consumers' radars, but in order to go a little further, perhaps this is time to look towards the role of new media in the communications mix.

In these times, interactive's direct-like qualities make it even more attractive. Particularly when being able to be linked with a transaction or measurable end-result. Making media more accountable is certainly not a new trend. Nor really is the concept of "brand response" or ROI-based branding.

However deep the current slowdown goes, it will recover and when it does, the companies that halted their marketing activity may find it rather difficult to play catch up.

I heard the phrase "patriotic investing" the other day. This was followed by the suggestion of patriotic staffing. I wonder - in light of waning consumer confidence - if we might yet see a bit of patriotic ad spending? Just a thought.

P> - Joseph Jaffe is Director of Interactive Media at TBWA\Chiat\Day in New York. His primary focus is to highlight interactive's value and benefit to meeting his clients' business and branding objectives.

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