The global economy is in something much bigger than a “slump”. Consumers (wisely) aren’t spending, so company revenues are plummeting. But despite this very clear reality, and many indicators that this will last for quite some time, I am still reading calls to marketers to NOT cut spending. Of course, these pleas come from advertising firm execs.
The primary rationale given is the old: if you invest while everyone else cuts spend, you will gain share. “My tip for advertisers is to be bold and maintain your spend if you can. That way, you will increase your share of voice as your competitors reduce theirs,” says Guy Phillipson, chief executive, Internet Advertising Bureau. Well, you won’t necessarily gain share, so that strategy a pretty big gamble unless you are sitting on a whole lot of cash. And most of the examples cited by proponents of the “spend more” strategy (Heinz in 2001, Hersey this year) are actually examples of portfolio companies with multiple brands (or markets) who increased spend on a few flagship brands (or markets) while sacrificing the budgets of others. I see those as examples of overall cost decreases and tough decision-making, not permission to spend like crazy.
Then there’s the argument: well, it just kinda makes sense. “You
still need to advertise. Consumers are still living and breathing and they still need to buy products,” says Brendan Condon, managing director, international, Platform-A (a “one-stop advertising shop” by AOL).
Puleeze. If your revenues are dropping, your costs should drop too. That means think critically about every marketing dollar you spend, and maybe even change up your strategy for revenue creation:
- Make sure that demand creation / acquisition is really the right place to invest right now. To hit your revenue targets, you could pour money into getting more people into the marketing funnel. But would your money be better spent this year investing more heavily in improving the product, thereby improving your conversion rate among the people who come and try? Here’s one prescient advertising exec that I do agree with — David Roddick, commercial director, Northcliffe Media, who said, “Make sure you’re absolutely focused on delivering value and then that you are maintaining your audiences,”
- Make the most of the customers you have. You already did the hard (and expensive) work of winning them as customers. Consider investing in loyalty programs and cross-sell / up-sell initiatives.
- Insist on doing more with less. Look for lower-cost marketing solutions and hunt for advertising bargains. Consider bringing in-house functions that you used to outsource. Marketing doesn’t have to be expensive to be effective.
Skyrocketing oil prices earlier this year caused a massive shift in consumer behavior (driving less and buying fewer Hummers) that was extremely rapid and likely permanent. If we marketers are forced to get smarter about how we spend marketing money and start building better products, there is at least a silver lining to this recession.
