by Andrew Ballard
No doubt we are experiencing tough economic times. The credit crisis, a housing glut and Wall Street in shambles are all extending the impact of our current slow down. And we all know it will get worse before it comes back around. All that being said, it’s a business cycle, more intense than most of us have ever experienced, but we’ll come out of this one as before.
My biggest concern is the typical self fulfilling prophecy that intensifies the affect of a slowing economy. Trust me, this is no time to get weak in the knees and cut back on marketing activities. Studies have proven it leads to an unnecessary and lengthy sales drought.
Still, many are tightening their belts. Typically, the marketing budget is first to get chopped. There are two very good reasons why lowering the ax on marketing can have a devastating (and long-term) effect.
First, it would cost you far more than the amount you’d save to regain the ground you’d lose. Brand recognition (recall) has a very short shelf life in the mind of a consumer. In other words, if your market presence diminishes, so will your customers.
A study done by McGraw Hill Research concluded that “at the end of 1985, those firms that had maintained or increased their advertising during the 1981-1982 recession could boast an average sales growth of 275% over the following five years. Those who cut advertising realized a paltry increase of only 19%.”
Secondly, it is much easier to gain ground during tough times than during a boom cycle. Why? Because your competitors are cutting back. Stay the course…you’ll have less market noise to contend with and your share of market will likely grow with a greater share of voice.
I subscribe to the long-term investment strategy. Many of my closest colleagues harassed me in the late ’90s for being “too conservative” in the stock market. These are the same geniuses who want to borrow money from me now.
I have the same philosophy about marketing. If you look at your marketing budget as an expense item, it’s much easier to cut. Think of it as an investment, a long-term investment, and your dividends should be much higher.
If you have to cut look to other line items than your marketing and advertising budgets:
- Look at you operating expenses line by line
- Look for areas you can improve productivity and supply chain
- Look into ways to restructure your debt
- This is a good time to renegotiate vendor and media contracts
Peter Drucker (undisputed management guru of the 20th century) said, “Business has only two basic functions: marketing and innovation. Marketing and innovation produce results. All the rest are costs.” Times may be tough, but don’t cope by cutting costs that are associated to business development.