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marketing and advertising during a recession

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skategeezer
Posted: Wed Mar 05, 2008 12:25 pm Reply with quote
Joined: 03 Jul 2003 Posts: 1227 Location: Toronto
This is for all skateboard companies BIG or small�

There is obviously a lot of talk about the economy these days. I did a little bit of research to find out what people say about advertising and innovating during a recession. I have collected three articles that give you some insights. The key points:

Brands that increase advertising during a downturn can improve market share and return on investment.

Early-buy allowances, extended financing, and generous return policies motivate distributors to stock your full product line.

In tough times, price cuts attract more consumer support than promotions.

CEOs must spend more time with customers and employees.

Marketing Your Way Through a Recession
Published:
March 3, 2008

Author:
John Quelch

Executive Summary:
In a recession, consumers become value oriented, distributors are concerned about cash, and employees worry about their jobs. But a downturn is no time to stop spending on marketing. The key, says professor John Quelch, is to understand how the needs of your customers and partners change, and adapt your strategies to the new reality. Key concepts include:

Editor�s Note: Harvard Business School professor John Quelch writes a blog on marketing issues, called Marketing Know: How, for Harvard Business Online. It is reprinted on HBS Working Knowledge.

The signs of an imminent recession are all around us. The spillover from the subprime mortgage crisis is weakening both consumer confidence and the consumer spending�much of it on credit�that has been buoying the U.S. economy.

Companies should bear eight factors in mind when making their marketing plans for 2008 and 2009:

1. Research the customer. Instead of cutting the market research budget, you need to know more than ever how consumers are redefining value and responding to the recession. Price elasticity curves are changing. Consumers take more time searching for durable goods and negotiate harder at the point of sale. They are more willing to postpone purchases, trade down, or buy less. Must-have features of yesterday are today�s can-live-withouts. Trusted brands are especially valued and they can still launch new products successfully, but interest in new brands and new categories fades. Conspicuous consumption becomes less prevalent.

2. Focus on family values. When economic hard times loom, we tend to retreat to our village. Look for cozy hearth-and-home family scenes in advertising to replace images of extreme sports, adventure, and rugged individualism. Zany humor and appeals on the basis of fear are out. Greeting card sales, telephone use, and discretionary spending on home furnishings and home entertainment will hold up well, as uncertainty prompts us to stay at home but also stay connected with family and friends.

Now may be the time to drop your weaker distributors and upgrade your sales force.

3. Maintain marketing spending. This is not the time to cut advertising. It is well documented that brands that increase advertising during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times. Uncertain consumers need the reassurance of known brands, and more consumers at home watching television can deliver higher than expected audiences at lower cost-per-thousand impressions. Brands with deep pockets may be able to negotiate favorable advertising rates and lock them in for several years. If you have to cut marketing spending, try to maintain the frequency of advertisements by shifting from 30-second to 15-second advertisements, substituting radio for television advertising, or increasing the use of direct marketing, which gives more immediate sales impact.

4. Adjust product portfolios. Marketers must reforecast demand for each item in their product lines as consumers trade down to models that stress good value, such as cars with fewer options. Tough times favor multi-purpose goods over specialized products, and weaker items in product lines should be pruned. In grocery-products categories, good-quality own-brands gain at the expense of national brands. Industrial customers prefer to see products and services unbundled and priced separately. Gimmicks are out; reliability, durability, safety, and performance are in. New products, especially those that address the new consumer reality and thereby put pressure on competitors, should still be introduced, but advertising should stress superior price performance, not corporate image.

When economic hard times loom, we tend to retreat to our village.

5. Support distributors. In uncertain times, no one wants to tie up working capital in excess inventories. Early-buy allowances, extended financing, and generous return policies motivate distributors to stock your full product line. This is particularly true with unproven new products. Be careful about expanding distribution to lower-priced channels; doing so can jeopardize existing relationships and your brand image. However, now may be the time to drop your weaker distributors and upgrade your sales force by recruiting those sacked by other companies.

6. Adjust pricing tactics. Customers will be shopping around for the best deals. You do not necessarily have to cut list prices, but you may need to offer more temporary price promotions, reduce thresholds for quantity discounts, extend credit to long-standing customers, and price smaller pack sizes more aggressively. In tough times, price cuts attract more consumer support than promotions such as sweepstakes and mail-in offers.

7. Stress market share. In all but a few technology categories where growth prospects are strong, companies are in a battle for market share and, in some cases, survival. Knowing your cost structure can ensure that any cuts or consolidation initiatives will save the most money with minimum customer impact. Companies such as Wal-Mart and Southwest Airlines, with strong positions and the most productive cost structures in their industries, can expect to gain market share. Other companies with healthy balance sheets can do so by acquiring weak competitors.

8. Emphasize core values. Although most companies are making employees redundant, chief executives can cement the loyalty of those who remain by assuring employees that the company has survived difficult times before, maintaining quality rather than cutting corners, and servicing existing customers rather than trying to be all things to all people. CEOs must spend more time with customers and employees. Economic recession can elevate the importance of the finance director�s balance sheet over the marketing manager�s income statement. Managing working capital can easily dominate managing customer relationships. CEOs must counter this. Successful companies do not abandon their marketing strategies in a recession; they adapt them.

Another article:
Recessions Provide a Perfect Opportunity for
Advertising to Do Its Job
Recessions are different from other economic periods and need to be looked at differently to benefit your business. There are two focuses that you should have when looking at marketing and advertising in a recession:

Increasing Short- and Long-Term Profits.
Increasing Market Share.
If you focus in this way, you�ll be better off in almost every case both during and after the recession. Recessions clearly reward the aggressive advertiser and penalize the timid one.

Increasing Short and Long Term Sales and Profits.
In a study of U.S. recessions, McGraw-Hill Research analyzed 600 companies covering 16 different SIC industries from 1980 through 1985. The results showed that business-to-business firms that maintained or increased their advertising expenditures during the 1981-1982 recession averaged significantly higher sales growth, both during the recession and for the following three years, than those that eliminated or decreased advertising. By 1985, sales of companies that were aggressive recession advertisers had risen 256% over those that didn�t keep up their advertising.

Sales for the companies studied were relatively even before the recession, but varied sharply during and after it. Companies that cut advertising during both of the recessionary years maintained flat sales during the period and only modest sales growth in he following two years. In contrast, the companies that maintained their advertising experienced significant sales growth throughout the four-year period.

In analysis of the 1990-91 recession, Penton Research Services, Coopers & Lybrand, in conjunction with Business Science International, found that better performing businesses focused on a strong marketing program enabling them to solidify their customer base, take business away from less aggressive competitors, and position themselves for future growth during the recovery.

Increasing Market Share.
A recessionary market can provide an opportunity for businesses to build a greater share of market through aggressive advertising. This according to The Strategic Planning Institute of Cambridge, MA. Correspondingly, businesses that reduce media expenditures suffer loss of market share. It was demonstrated that aggressive businesses can accomplish these gains through greater expenditures without reducing short-term profitability.

Advertising can skillfully reposition a product to take advantage of new buying concerns, give an advertiser a stable image in a chaotic environment, and give an advertiser the chance to dominate the advertising media.

Conclusion
A series of six studies conducted by the research firm of Meldrum & Fewsmith showed conclusively that advertising aggressively during recessions not only increases sales but increases profits. This fact has held true for all post-World War II recessions studied by American Business Press starting in 1949.

One major business-to-business advertiser summed it up best. �When times are good, you should advertise. When times are bad, you must advertise.�

Innovate in a Recession? Yes
It Can Be Done: If Anything, the Economic Downturn Creates a Unique Opportunity for Marketers
By Hal Fass

Published: February 25, 2008

Since the Dec. 10 editorial in Advertising Age recommended �Your Job For �08? Forget the Recession and Innovate,� it�s become pretty clear that it won�t be �if� we go into a recession, but �when� we go into a recession. Certainly, the underlying message of the catchy headline remains worthy of your attention, especially when it asks you to consider the great brands born in recession years, such as FedEx, People magazine and iPod.

However, even in good times, the process of innovation can get bogged down in bureaucracy and overall resistance to change. When a looming recession is on the horizon, with the accompanying belt-tightening and spending cuts, the risks associated with innovation seem to magnify, often leading to innovation paralysis.

And that�s just looking at it from the marketer�s perspective. What about consumers? Their confidence in the economy is falling lower and lower. They�re worried � about their jobs, about the value of their homes, about the cost of gasoline. And it all takes its toll on how much they spend and plan to spend.

But the fact is that Ad Age was right. Recessionary times provide ripe opportunities for innovation, especially product innovation. If we are indeed entering into a recessionary cycle, remember it�s just that: cyclical. There will be an end, and you�ll want to be well positioned when times turn around. Profit Impact of Market Strategy, a British study of 1,000 businesses during the past 30 years, found that companies that spent more on innovation during the downturn saw return on capital employed rise 23.8% during the recovery, compared with 0.6% for those that slashed spending.

�Innovation dormancy�
And remember, a recession can actually provide an opportunity to break away from the pack. During boom times, money flows freely and fuels start-ups and new competitors. Companies are forced to innovate just to stay current. During a recession, the little players tend to shake out, and many established companies go into innovation dormancy. It�s precisely this moment when a touch of strategic innovation can mean a big marketplace advantage.

So, how can you overcome the paralysis and innovate triumphantly in a recessionary environment? How can you create success while others sit on the sidelines, waiting it out?

The answer is to bring speed, insight and focused innovation to the product-innovation process � or, as we call it, to Spinnovate.

Speed is the overall guiding principle to ensure that you can quickly move to maximize the innovation opportunity. You need to be fast, scrappy and economical.

Digging for truth
Insight is the truth that can unlock opportunities. Sometimes there are unfulfilled needs and desires that have been sitting under our noses for some time to which we�ve failed to respond. Others are directly connected to the recession and the economic pain consumers are feeling. In a recession, you want to get those answers quickly and inexpensively. So, be open to new research techniques and don�t be afraid to leave the focus-group facility behind. Do grass-roots research � whatever it takes to uncover those essential truths.

And to get the right answers, you need focused innovation: clearly defined, strategically driven goals, a focus on key insights and a nuts-and-bolts understanding of technologies. It�s up to management to set the focus and to make sure the right people are involved � both from within the organization and from qualified, creative outsiders who can bring a fresh perspective to the process. What�s important is that you consider several ideas, even those that have been considered before. It should also mean that not every idea has to be a home run. A few well-placed doubles can be equally successful and get to market more quickly.

Opportunities for successful innovation in a recessionary economy are indeed out there. But rather than �forget the recession� as Ad Age suggested, �understand the recession and its impact on your consumer, and act quickly� might now be better advice.
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slob-air
Posted: Wed Mar 05, 2008 12:34 pm Reply with quote
Site Admin Joined: 27 Oct 2001 Posts: 63452 Location: S&B HQ
skategeezer wrote:

One major business-to-business advertiser summed it up best. �When times are good, you should advertise. When times are bad, you must advertise.�


This is poignant in terms of skateboarding and where skateboarding is on its cycle. We're about to see the weak flung from the wheel�those that shrink risk the same, those that go big will be the new kings of the industry 10 years from now.

And they all should know this as we've gone through the cycle several times at this point.

But the dumb seem to remain dumb.

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Cappy
Posted: Wed Mar 05, 2008 1:46 pm Reply with quote
Joined: 13 Sep 2005 Posts: 11580 Location: Cloud cuckoo land
skategeezer wrote:
There is obviously a lot of talk about the economy these days. I did a little bit of research to find out what people say about advertising and innovating during a recession. I have collected three articles that give you some insights. The key points:

A recession is a problem of the free market, which itself has created it.
skategeezer wrote:

Brands that increase advertising during a downturn can improve market share and return on investment.

Buy bankrupt brands and sell your same shit under a different name!
skategeezer wrote:

Early-buy allowances, extended financing, and generous return policies motivate distributors to stock your full product line.

We are living in a just-in-time world, why i should pay to stock all that shit that doesn't sell tomorrow anymore? Just a trick to get people in long term contracts, what will be the dead for small shops!
skategeezer wrote:

In tough times, price cuts attract more consumer support than promotions.

If a product is shit, price cuts doesn't make them more attractive.
skategeezer wrote:

CEOs must spend more time with customers and employees.

It's the ceo mud slice, aslong you don't want to go down, you can't fall down. You want to go down?
skategeezer wrote:

Marketing Your Way Through a Recession
Published:
March 3, 2008

Author:
John Quelch

Uh well, i save the rest for another day, to much text and to easy to rip off!

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skategeezer
Posted: Wed Mar 05, 2008 2:03 pm Reply with quote
Joined: 03 Jul 2003 Posts: 1227 Location: Toronto
ouch!
it's getting tough out there
BUT
as Blair noted, there are patterns...

those folks that innovate, service their customers and advertise effectively during a recession, do come out better.

shit is definitely hitting, though!
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Cappy
Posted: Thu Mar 06, 2008 9:52 am Reply with quote
Joined: 13 Sep 2005 Posts: 11580 Location: Cloud cuckoo land
I'm sure even in a recession Ferrari can bring out a new model, without a new marketing idea and they will sell it with no problem. See, everything above written from this clever guys means nothing.

Kick out all the marketing/researcher folks and better spend the money to make your product better. Make a pic of your final product and send it to a magazine or the product for a review. That's all you have to spend. The best product will always have it's customers even in a recession, bad products always have to beg for customers, they are always in a recession.

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