Do opportunities exist in troubled times? Where should marketers be focusing their time and attention in order to survive—and thrive—in this recession? AMA members, commenting recently in the AMA’s SIGs, weigh in on their suggestions for weathering this downturn.
Wendy Flanagan
AMA B2B SIG Chair Leader
Vice President, Murray
Times of economic turbulence add to the challenges of business and marketing approach: strategy in pricing, bundling, message and positioning; tactics for media delivery. The innovative and daring will emerge as the next generation of corporate giants.
Smart marketers know that there is a difference between profitable business and business that simply generates cash flow to break even and keep businesses solvent. A well-known example is practiced in the hotel industry where online discount distributor channels sell rooms at a significantly lesser price than the listing price so that rooms do not sit vacant. The publication industry is known to slash pricing on advertising media placement, typically handled by the sales rep as a personal offer to clients and prospects.
In these times of economic turmoil, many industries are completely re-evaluating pricing to continue operations. Although I have seen the recommendation on marketingpower.com to base pricing on value and what the market will bear, this decision may mean the difference between whether or not a company will survive this downturn. If sales are significantly off and the company has already cut staff where it is impacting operational capacity, discounting might be the push your company needs to nudge volume.
Recommendations for surviving the downturn:
- If you have a good relationship with your agency or printer, discuss how you can maximize your limited resources. You might want to consider your suppliers as partners, choosing those who are willing to go the extra mile.
- Review the solvency of your suppliers, running a D&B to make certain your investment isn’t feeding the company’s Chapter 11.
- Take this time to talk to different suppliers to see what their offer might be – the cheapest is not always the right choice – but you can justify chancing funds on an untried resource when there is a willingness to partner.
- Evaluate your marketing allocations to try different channels (write more press releases, blog, etc.)
- Revise target industries for your offerings to those that have been labeled as growth industries. There is a learning curve to speak their industry-specific language, and a mad rush to adjust your messaging, but the investment in changing your market might prove to be the thing that keeps the company moving forward.
- Open your mind to new and different approaches by simply talking to people. Find out what they are doing differently and consider how this might work well for your initiatives.
Ron Strauss
Brand SIG Chair Leader
Founder and CEO, Brandzone
The opportunity right now is to engage in counter-cyclical thinking. The down part of the cycle is the best time to think about what's needed during the up part of the cycle. This is an historical moment to reconsider all sacred cows, and to rethink business models and offererings.
As Warren Buffett famously observed: "It's only when the tide goes out that you see who's been swimming naked." Events such as we're experiencing now will reveal which of your competitors were overly leveraged. And that could spell opportunity. Companies that depend on large amounts of debt to leverage their operations and price/earnings ratios did relatively well in a growing, expanding environment. In today's deflationary environment, however, that strategy has left them vulnerable to massive deleveraging of debt and equity markets and collapsing stock prices. Their debt is now an albatross around their necks.
To survive, these companies have to cut to the bone. They took on added risk for higher growth rates, and were proven wrong by market events. If they don't have viable brands, they're history. If they have strong brands, they may be able to use their brand equity to ride out the downturn, and survive, depending on the markets they are in, and the exogeneous events impacting their industry and served markets. Or, they may be good candidates for being acquired at fire sale prices.
Those companies with good brands, that are not highly financially leveraged are in the best position of all. They will be the ones who continue to invest in their markets, employees and brands. And when the tide turns and comes back in they will ride high, enjoying greater share of market and stronger margins.
Regrettably, the financial engineering that created the huge amounts of debt leading up to this economic contraction will be responsible for the destruction of some, perhaps many, good brands. This is not an indictment of the value of brands, but is an indictment of highly-leveraged business models based on short-term thinking and a quick buck mentality. Brands reduce risk. Financial leverage heightens risk.
David Sahd
As with stocks or real estate, when the market is low that is the time to buy. While competitors are scaling back, opportunities arise to earn new business and to explore marketing vehicles at a discount. This is a great time for those who are willing to dispell conventional wisdom and find ways to be aggressive in a practical way.
Personally, I am more focused than ever on helping clients pick "low-hanging fruit". We need to make sure that, first and foremost, we are maximizing the basics during these difficult times. This is the type of business practicality that owners and c-level managers can appreciate from their marketing departments and advisors.
Victor Crain
SVP, Lieberman Research Group
Marketing Strategy SIG Chair Leader
Apart from industry consolidation, will the rapid demise of a large number of product brands be the result of this downturn? If large corporations don't have the intestinal fortitude to put up bad numbers for 8 or 10 quarters and let the stock ride down, where are they going to be when the economy finally starts to turn?
Arguably, small and private businesses may have a significant edge for some period of time, if they have access to the financial resources they need. Clearly, a company like Toyota with substantial cash and no debt looks positively brilliant in this environment. .
Is there a market strategy for this mess, or will marketing simply be asked to pick up the pieces again after all of the slashing and burning takes place?
Regarding the kneejerk reaction of layoffs, I was taught years ago that if you have the right amount of staff for your current activities, you cannot expect to accomplish the same activities with fewer people. Either major corporations have been inefficiently overstaffed, or they need to shed markets or products.
Shedding will affect market positioning and what the company is able to do going forward. What’s more, all this is coming at a time when a host of new technologies requiring major investment is emerging including:
- Real-time home health care monitoring systems
- Wireless charging of electrical appliances
- Distributed power generation -- solar, wind, water, and the new Toshiba microreactors (imagine a 12'x20' reactor that makes your plant or hospital entirely energy sufficient for from 20 to 50 years?)
- Hybrid engines for cars, trains, earthmovers and airplanes
- Replacement parts for humans that can effectively increase life expectancy by an additional 25 to 50 years (the keyword is mechatronics)
Robert Myers
Business Director
Haematologic Technologies, Inc.
This is a time of reckoning, a time when only companies that deserve to be around will stay around. While a downturn is not the time to reduce marketing; it will become the target of many a CEO when making cuts due to its “soft” image. Marketing will be more important going forward so that companies that have built a strong brand can maintain that brand so when the turn-around occurs, they have not been forgotten.
How should companies deal with this? Become more efficient. Each department needs to review what they are doing, and how to do it more efficiently. Are all of the people being used to their capacity? Is there a lot of excess built up from the boom times? When the revenue flows in it is easy to add more staff, more equipment, more luxuries that really are not needed. Companies need to focus hard on this, and not look for low-hanging fruit (like perhaps marketing/advertising).
Lynn Hinderaker
Omegapoint Transition Marketing
More suggestions for weathering this downturn include:
· Focus on the prospects and projects you absolutely must win.
· Convert fixed costs into variable costs. That means outsourcing and subcontracting. Move toward the centerless corporation business model.
· Make every plant or business division assume responsibility for its own P&L.
· In-source ideas from outside your industry. Now is the time for innovative thinking and expansive planning.
· If possible, acquire your competitors or their vendors for pennies on the dollar. If not, form alliances and strategic partnerships.
· Rethink your company's destiny. Rethink your core concept. It's not an easy exercise to do when things are good. But now, people are motivated to do exactly this.
· Celebrate small victories with recognition, not cash.
· Negotiate all advertising for the next two years now in return for commitments.
· Stop resisting and whining. It only increases unhappiness, which becomes a barrier to innovation. Adapt to the environment like the silver fox.
Suzy Teele Strategy Consultant, Aceda
As marketers, we need to understand how CEOs and boards operate. Many of these large organizations fill their boards with ex-CEOs and it appears that too many of them are perpetuating the problems they caused in their own companies at the companies they now help govern as a board. For instance, ABC news reported that "In 2007, Wall Street's five biggest firms - Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley - paid out $39 billion in employee bonuses while shareholders lost $74 billion in the same time period." There is something fundamentally wrong in the way public companies are directed when these things happen. I do think that executives should be compensated on more than just short-term financial performance - other factors like employee retention and long-term profitability should come into play. But rather than having the SEC create laws regarding executive compensation, some guidelines or laws around board responsibility, accountability, qualifications, and nepotism are needed. The SEC should also look at some of the accounting rules that now, in effect, punish companies who have a lot of cash on their books. Cash is vitally important to allow a company to retain employees and continue operating as the markets invariably swing back and forth.
During these times, it is more important than ever to be strategic. Too often, we turn to running another ad or direct mail campaign to help boost our sales, when in actuality the customer or customer need has changed. A great resolution for all of us in 2009 is to be more strategic and practical when it comes to spending those precious marketing dollars.
Note: Do you have any ideas for how marketers can weather this downturn or take advantage of opportunities during this recession? Post your comments, suggestions and feedback here.