Marketing in a Recession: Beyond the Obvious

The avalanche of recession advice has begun. Everyone has ideas about how to protect the marketing budget from the business bandits. We at ITSMA decided to try to look beyond the standard advice-refocus marketing strategy on the highest revenue opportunities, renegotiate contracts with suffering contractors, and so on-and come up with ideas we havent seen everywhere else. Like these:

Reevaluate vertical strategy. A recession hits some verticals harder than others. Marketing strategies that don’t take into account these differences will waste dollars on declining areas and miss opportunities in more recession-proof verticals, says Ajit Maira, senior vice president of ITSMA. For example, services marketers have focused heavily on the financial services vertical for the last six or seven years. But expansion in that vertical is clearly over. Meanwhile, healthcare is less likely to suffer and may actually increase spending; a declining economy has a consistent, unfortunate correlation to increased demand for healthcare. This is the time to reexamine your vertical marketing strategy, which may require a bigger investment in research to get beneath the macroeconomic trends to discover the real impact of a recession in particular verticals.

Unfortunately, history tells us that investments in research are among the first areas of marketing to take a hit during a recession. When ITSMA surveyed members in late 2001, 71% said they cut investments in competitive analysis and market research, with only 10% saying they increased spending. Cutting research spending is a quick and easy way to take spending off the books, but a better approach would be to increase the effectiveness of the investment.

Make happy customers even happier. Common wisdom says that in general, 80% of profits come from 20% of customers. In a recession, the 80/20 rule is replaced by the 95/5 rule, says Maira. It’s time to redouble marketing efforts with the best customers to make sure that you don’t lose share but rather, at a minimum, hold steady and perhaps even grow share. Cooperate with sales to offer benefits and incentives that build goodwill with good customers during lean times. They will remember those efforts (or you can remind them) when times improve. The worst thing companies can do is take the short-term view: focusing marketing efforts solely on seeking out new customers or retaining opportunistic customers who threaten to bolt or demand heavy price cuts, while ignoring loyal customers.

Yet past ITSMA research shows that this is exactly what marketers tend to do when times turn sour. In 2001, a whopping 94% of marketers surveyed said they cut spending on customer satisfaction and loyalty programs and research-more than any other marketing spending category. Marketers need to fight harder for their right to keep customers satisfied in tough times.

Exploit competitors’ (relative) weaknesses. If you are lucky enough to have a stronger financial position than your competitors, then a recession is a time to invest in marketing that increases mindshare among competitors’ customers. But these campaigns should not be ham-fisted competitor bashing. That could alienate potential customers and make them even more loyal to their existing providers, who start to look like sympathetic underdogs compared to the aggressive interloper. Rather, a recession is a time to educate competitors’ customers about products and solutions designed to reduce spending-preferably in areas that competitors cannot serve. It’s also the time to develop a clear roadmap for replacing competitors’ products and services with your own-in ways that reduce overall costs.

Increase opportunities to show short-term payback. In a recession, marketing will have to defend its budget. That is easier to do when payback from programs is not buried within long-term timelines. Rather than cutting or scaling back these longer-term programs, it makes sense to reexamine them to see if they can be broken up into chunks that show payback sooner than originally planned. “Look for marketing programs where you can see potential revenue coming in a three- to six-month horizon,” says Bob Baginski, senior vice president of ITSMA.

Start permanent cost-cutting programs. One of the worst aspects of recessions is the sudden emotional responses they elicit. Stockholders sell in a panic and business leaders demand unthinking, across-the-board cuts in spending. The suddenness of these edicts eliminates the opportunity to make changes in a more thoughtful, rational way. They force marketers to cut good programs along with the under-performing parts of the portfolio to meet the short-term demand for reductions.

Marketers could bring more rationality to the process if they identified areas for reduction on an ongoing basis without affecting overall marketing effectiveness. Business leaders never get tired of seeing cost cutting, even in good times. Having such a program in place gives marketing cover for its most effective (though perhaps most expensive) programs.

For example, consider a program to reduce spending on printed materials by 10% per year, replacing them with lower-cost digital versions. With the overarching trend toward digital that is occurring independently of economic fortunes, the goal should be easy to achieve. Another example: Reduce the travel budget by 10% per year by investing in virtual meeting technologies.

By establishing clear goals and making the programs permanent, marketing can fend off the emotional responses in bad times and burnish its image in good times.

Collaborate with partners and customers. Before cutting programs or headcount, consider whether those costs could be partially underwritten by partners or even customers with a shared interest in success, says 5, senior vice president of thought leadership at ITSMA. Partners and customers may be facing the same need to reduce costs, yet a shared program could enable everyone involved to save staff and perhaps even add new capabilities. It’s also a great way to build customer loyalty by institutionalizing the need to work closely together. “Such programs could have impact beyond the partnership,” adds 9, president and CEO of ITSMA, “by reinforcing your reputation as a collaborative company, a company that is flexible and open with its customers.”

How are you approaching new customers in a down economy? Do you have best practices to share? Contact me at ckoch@itsma.com.

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ITSMA specializes in helping companies market and sell services and solutions more effectively. We work with the world's leading technology, communications, and professional services providers to generate increased demand, strengthen customer relationships, and improve brand differentiation. ITSMA annual program clients include business leaders such as AT&T, Cisco, Deloitte, EMC, Fujitsu, Hewlett-Packard, IBM, Microsoft, SAP, and Tata Consultancy Services, among others. Our comprehensive research, consulting, and training on topics including ITSMA Account-Based Marketing℠, Brand Positioning, and Solutions Development provide the insight and experience companies need to improve business results. ITSMA is based near Boston, and has offices in London and Tokyo. Learn more at www.itsma.com.