Are You First In Line? Marketing during Recession

How often have you heard the question “should we increase or decrease our marketing and selling expenditures when the economy softens?” We’re in recession. The politicians may not use the word, but it’s clear that the market has slowed and growth has stalled. Today, with business orders soft for many companies, there is concern about how long the economy may be in the doldrums. The value of the dollar remains weak (and I have a trip to Paris in a month!), Bear Stearns is getting a bailout, and 8% of mortgage holders can’t make their monthly payments. Many project a protracted slowdown before a recovery. So what do you do with your marketing budget as you try to protect your profits?

You may be looking in the wrong place for the answer. The answer may well lie in the state of your balance sheet rather than your income statement. We’ve all seen it: sales are soft and in order to achieve our net profit for the fiscal year we reduce expenses. When sales soften, marketing and advertising budgets are among the first to go. It’s the easiest, least painful expense reduction in the income statement. It typically means the fewest reductions in labor costs as well. At the same time (how often have you heard this?) business leaders will say “I know I am mortgaging future sales and wish we could have kept our marketing spending at current levels. I wish we could spend even more.”

Take a look at your balance sheet. The answer to your approach to marketing and sales spending during this soft economy may be answered, in part, by the health of your overall business as indicated by your assets and liabilities, not your revenue and annual profit lines. If the economic slowdown has strained your existing capital resources and you’ve taken on additional debt burdens to fund your operations or growth plans it may make sense to hold back on marketing and sales expenses. But if you’ve been taking care of business and your balance sheet remains relatively healthy despite a near-term slowdown, and if you believe the economy will eventual begin to heal, accelerated (or at least maintaining) marketing spending may be an advisable strategy.

Why? As the market turns and returns from negative growth businesses will experience increases in orders and production requirements, inventories will build, labor requirements will begin to increase and the flow of dollars through the economy will increase. Whether your business delivers goods and/or services to consumers or businesses, those customers will begin to increase demand for your needed product. You need to be first in line when that demand occurs. You need to be positioned so that the customer reaches out to you to meet that need at the very moment that they are ready to return to the market. Be prudent, but stick with your customers through the tough times and they will stick with you through the good times.

Marketers talk of being first in “mind share”. You want to be in position to be the first among your competitors to be contacted. Better yet, you want to be in contact with your customers when they recognize their need to place an order. If you’ve taken care of your balance sheet, now may be the time to use efficient, effective marketing strategies to tighten relationships with your customers.

Are you first in line?

If this was interesting, take a look at Seth Gdin's comments about how to craft your story during a recession.

Marketing Witz: Spiral of Expectations

Marketing Witz: Spiral of Expectations

Proof of Retailer Power in Packaged Goods

Is here any doubt about how the power has shifted from manufacturer to retailer in consumer packaged goods? Just look at what happened to Cott's stock when it was reported that Wal-Mart was shifting shelf space away from it's Sam's Choice brand produced by Cott's in favor of Cadbury Schweppes beverage brands. Cott's stock dropped 20% in one day and 38% the next day when the change in shelf space was rumored. What's so striking is that the market reaction was base on the anticipated impact of a change in allocated shelf space alone, not a delisting. Smart markets, yes. Powerful retailer, absolutely.
Here's the story as reported in the Financial Post.

Marketing Strategy Must Guide Media Tactics

I was a guest speaker at class of college students in a Media course. I was speaking about the changing media environment and the challenges of measuring return on investment in both traditional and online media (note: isn't it time to stop calling online media 'non-traditional'?). It struck me as I watched the faces of these students that, as talented as they may be, how difficult (and interesting) their future careers in marketing and media will be.

"The media" is fracturing into finer and more granular targeting opportunities and tactics.
1. The media opportunites are more measurable than ever before.
2. Measuring the right thing is critical for each and every media vehicle.
3. There will be more and more data available for analysis.
4. Availability of analytical tools and resources to crunch the proliferating data will continue to increase.

This may seem overwhelming. How will marketers handle all of the potential data and information? The answer lies in staying strategic. Solid strategy will dictate what to measure and how to approach the mutlitude of media opportunities. Without solid strategy to guide decisions, the media space is a huge toolbox of tactics. Only solid strategy can define the task and guide which of these tools to use.

Marketing Metrics - The Old and The New

As the year comes to an end it is a good time to ponder what is old and what is new. My previous post focuses on what is new, looking at some of the top marketing trends for 2008. Today I want to make a brief comment about making the distinction between the old and the new.

I read an a recent article in Chief Marketer which discusses "a new way to allocate marketing resources". The article focuses on an excellent description of an approach that suggests three key stages of marketing optimization: 1. Campaign optimization, 2. Contact optimization (using predictive analysis on your customer data to optimize communication over a business cycle), and 3. Market Mix optimization (correlating sales data with marketing efforts across the enterprise). The approach outlined makes sense, but is it really new? Haven't marketers been pursuing the Holy Grail of market mix optimization for more than 40 years? The theoretical approach isn't new. It's old. What is new is the advancement of technology, allowing more sophisticated databases, data anaysis and insight development. The theory and the stages aren't new, our improving capabilities to achieve them are.

Top 10 Marketing Trends - Another List for 2008

Everyone's got to have one. Here's mine. It's brief.

In no particular order, watch these trends in 2008:
10. Mobile Marketing. We're still in the experimentation mode. Look for more advanced promotional marketing, and movement beyond the test and learn stage. Cellfire has been doing some cool promotions - I tried it just to prove to my teenagers that I could download a coupon on my cell and get a free burger...

9. Green. Continued enthusiasm for a green world. See earlier post on Sustainability and the Spiral of Expectations.

8. Creativity. It's time to get creativity back in our marketing programs. Not just great creative (the art) but creativity as marketers, bringing new approaches and ideas to the market. There's so much untapped potential with the capabilities marketers have today versus just a few short years ago. Let's make s--t happen!

7. Investment Thinking. Marketing measurement is ready to hit the mainstream and move beyond lip service. Of course, this is a theme of this Blog so of course I believe this to be true. It's not that creativity doesn't matter - it matters a lot. But as a means to an end, and the end must be measurable.

6. Mass Is Dead. We've all heard it. It's true. The writer's strike, if it lasts, will be the proof. No one will miss network or even major cable shows after a while.

5. Direct is Alive. Online or offline, direct connection with consumers is where the action will be. The ability to converse with your customer in a 1:1 opt-in world is like finding a haystack full of needles.

4. Integrate. Integration of marketing processes into the selling process. Integration of all marketing element from strategy through execution, across media, web, promotion, packaging, etc.. It's all about marketing systems. Connect the dots so it all makes sense, then measure every step.

3. Narrowcast. Such a cool trend. Micro-media networks are like micro-breweries. You may not always like the taste, but you have to experience them. Look for targeted messaging to grow rapidly as networks expand and begin to appear in places you've never thought of -- how about your local bank or dry cleaner?

What, no #2 or #1? I told you I'd try to keep it short. And leaving out #1 and #2 might spark your own creativity. What else will happen in 2008?

Maximize Marketing Investment By Understanding Tool Interactions

[Click the Image above for a Larger View.]

I’ve previously discussed the importance of aligning CMO goals with CEO objectives to maximizing return on marketing investment for the organization. Now, assuming the CMO has ensured alignment, the challenge remains to maximize the marketing mix to deliver on those goals. Maximizing marketing return on investment requires a deep understanding of the often elusive interplay between marketing variables. Whether you define you marketing toolkit as the traditional 4 P’s or as a more comprehensive kit of tools, do you understand how they work together? Understanding the interaction between variables can allow the marketer to enhance the overall return of the marketing investment spend by combining efficiencies with effectiveness. The less the guesswork about the interactions, the lower the inherent risk of any selected set of tactics.

A simple interaction grid shows that the 4 Ps impact one another. Not very helpful, though.

A deeper analytical staircase grid structure provides deeper insight and challenges the marketer to ask the questions appropriate for each cell of the grid. For example, in the grid above (click the image above for a larger view), let P1= Product. Column 1, Row1 is the intersection between Product/Product. Evaluate this cell by asking all of the traditional Product marketing questions to determine if the product is optimized to meet customer needs and profitability requirements. Let P2=Price. The cell below, Column1, Row2, reflects the interaction between Price and Product. Here, the marketer asks questions about the tradeoffs between product features and price points. Are there high end product opportunities? Are there opportunities to introduce lower priced products with a different set of features or services? Let P3=Place. Column1, Row 3 addresses the interaction between Place and Product. Are all products in the portfolio sold in the same channels? Do product features differ by channel?

Note that the questions in each cell can be modified to address situations and challenges specific to any business. By completing the grid with the questions relevant to your business you have a dynamic set of marketing questions to be addressed. Then, assess your ability to answer the questions in each cell. You will quickly determine the degree of knowledge that you have about the performance of the key elements of your marketing mix. Where the data is insufficient and a gap exists, further research may be warranted. Your ultimate goal is to understand the mix tradeoffs to maximize ROI against the marketing goals which are aligned with the business objectives of the CEO.

Note that while this example used the “4 Ps”, the same interaction analysis can be conducted against a deeper list of marketing tools, and it is a simple steps (but a lot of effort) to evaluate interactions at a deeper level with any given element. For example, you might construct a similar interaction analysis against each major element of the Promotion mix, evaluating the impact of print media and sponsorships or between coupon discounts and trade marketing.

Outlive the 23-Month CMO Hurdle.

In an earlier post MarketingWitz notes a report that CMOs are short-lived, lasting 23 months on average. Marketing Witz: Marketing Executives are Short-term. How can Markerting survive? Are CMOs performing that poorly across the board or are they just performing the wrong role? Return on the marketing investment is as much a function of defining the return as measuring the investment. If the CMO is measuring return on the role differently than the CEO then the inevitable turnover will continue.

As CMO, do you view your role to be the prinicpal driver of profitable new growth via new customers and increased sales among current customers? Do you define your role as steward of the brand, enforcing brand positioning and brand communication consistency? Do you view your role as advisor to various constituencies across the organization? Are you the face of the company with the media? If you answered "yes" to most or all of the these questions you are in good company with other CMO's. But CEOs are likely to view the first question as the only truly meaningful measure of marketing return. The other functions are simply marketing approaches to help deliver on the objective of increasing sales and profits. Measuring marketing results based on increased brand awareness or level of internal brand consulting activity is merely an internal marketing process metric while delivering increased sales and profits is the focus of the CEO. Be sure your CMO objectives are clearly defined and in line with the goals of the CEO, and outlive the 23 month hurdle.

Brand Paradigms Harming CMOs?

There is a very thought provoking article recently published on Brand Channel, titled "The End of the Master Brand" which challenges the core paradigms that brand marketers have used to organize thinking about brand portfolios for the past 20+ years. Going beyond a critique of brand architecture as we know it and a suggested alternative way to view portfolios, the article suggests that the forced structure of brand architectures alienates marketers and may inhibit marketers from gaining a seat at the C-Level strategic table. Do you agree? I think that may be going a bit far, but it certainly raises an interesting question about whether force-fitting paradigms is harming strategic marketers, and we know that average tenure of CMOs is remarkably short. Linking those two thoughts - perhaps there is more here than meets the eye.

How to Maximize Competitive Intelligence

There is a simple thing you can do as a marketer to generate greater return on investment from your market research and competitive intellegence efforts. Marketers spend countless hours optimizing research methodologies, survey questions and analytics (rightfully so, too.) Competitive intelligence can come from many sources, extending beyond formal research to include press tracking, and even simple hearsay from the sales force. So what's the single most powerful thing you can do to improve return? Create an organized central clearinghouse to capture the information. Great insight results from crossing data points from multiple sources. Market analysis indicates Competitor X may be boosting short term sales, HR hears that a key executive from Competitor X may interviewing in the market, and your Regional Sales Manager say the CFO of Competitor X golfing with the President of Competitor Y. Acquisition or merger? You'll need to learn more, but clearly there is a situation to be explored, and only by crossing these points of information are you able to gain the insight. So...create a central repository of competitive information (paper or digital) and review it often.

Good competitive intelligence reads: Society for Competitive Intelligence, Primary Intelligence

Tale of 2 Books - Marketing Metrics

I read two books this month, both focused on metric marketing issues. The first was "Return on Marketing Investment" by Guy Powell. The second book was "Measure What Matters" by Laura Patterson of Vision Edge Marketing. While both authors share a common goal of guiding CEOs and CMOs to measure marketing more effectively to achieve desired outcomes, the two authors approach the topic in decidedly different manners. Powell argues that marketing investment should be evaluated like any other business investment - calculate the expected return on various marketing investments and compare the returns against defined hurdle rates. Apply high hurdle rates for more risky investments such as advertising versus more known marketing tactics such as direct marketing. While Powell's approach is logical and the quantitative model mathematically correct, he fails to fully address an effective way to set hurdle rates or how to effectivey define expected returns on new marketing efforts, other than to say that the hurdle should be higher for higher risk or less known programs.

In comparison, Patterson breaks the role of marketing into three core performance areas that link to business objectives: acquisition, retention, and monetization. She then proceeds to offer specific marketing metrics for each area that can be measured to determine how marketing programs contribute to these fundamental objectives. I particularly like her reference to those metrics that measure business output versus those that measure marketing activity. See my earlier comments about process v. results marketing metrics.

Both share the goal of linking marketing to business results. Patterson's book is an easier read and will be more palatable to most marketers. Powell's book is more academic and by it's very nature feels more like your Finance 101 text, yet offers relevant thinking. Read both and see what you think. Both believe in my favorite line, "Facts Find Funding"(sm).

iPhone Marketing

It will be interesting to follow the marketing of the iPhone and competitive products over the coming months. I took at look at the iPhone more than once this past week, including the first evening that it went on sale. Lots of great features, although my wife calls it just another gadget. It's pricey, but it should be as a first entrant. Is is really a first entrant? I think so. The combination of multiple functions with the level of integration and the new functional features is enough to consider it new. Pricing should be at a premium to capture the demand. Scale is essential, but there has been enough (too much!) pre-launch hype to generate significant early adopter demand. Over time, will Apple bring price down to compete with other new entries? Perhaps, but I wouldn't expect that any time soon. The partnerships created between wireless providers and software developers to create competitors will also be an interesting strategic marketing scenario to watch as it unfolds.