blog

cutting back without killing your brand

Five Tips for Managing Your Ad/Marketing Budget in Recessionary Times

Let’s face it, 2008-2009 hasn’t been fun. Sales have stalled, unemployment is now at a 26-year high, consumer confidence is shaky at best, and no one really knows how to fix any of it. As a result, many marketing managers are being given the same directive by their respective management – cut the budget.  But if you’re like most companies, you cut out the “fat” in your budget a long time ago to bolster quarterly earnings. So what do you cut next?

As an advertising agency executive, my first inclination is to remind you that every study (and I mean every study) of advertising during recessionary times has shown that companies who maintain consumer awareness and build brand value come out ahead of their competitors when the economy improves. Even during the Great Depression, companies that advertised the most reported the biggest sales increases. In the 1991 recession, brands that increased share of spending voice within their respective categories grew and maintained market share when the economy turned around. And in 2009, a recent study by Ad-ology Research discovered that a majority of consumers think businesses that continue to advertise are competitive and/or committed to doing business. On the other hand, when advertising ceases during tough times, consumers think those businesses are struggling.

But those stories don’t help when the boss says you must find a way to cut spending.  And many clients still suspect agency motives, even when they have moved away from commission compensation to fee-based systems.

As a retail-based, results-oriented agency, we never lose sight of the fact that advertising must be accountable, regardless of marketplace conditions. We measure our work by its effectiveness in meeting weekly sales goals. No surprise, then, that “Sales over night, brand over time” has been our highly effective clarion call – and not just in recessionary times. That said, here are a few more thoughts to help you come out ahead in these toxic times:

Don’t make an across-the-board cut.

Before cutting anywhere, make a careful assessment of every program you are currently running or are planning to run.  How important is each program to reaching the sales and/or profit goals you must now reach with a reduced budget?

I know this sounds pretty basic, but too many clients arbitrarily cut 10% or 15% across the board and end up sacrificing the effectiveness of their entire program when selective cutting would be less devastating. Maybe you can cut the television rating point levels across the board, but it might make more sense to keep those point levels as high as you can during the times you advertise, and cut back on the number of weeks. That way, your advertising will work harder for you during the times you can afford to advertise because you are breaking through the clutter and getting noticed.

Re-evaluate and re-state your objectives.

Before you cut anywhere, revise your goals to guide your next steps. If your advertising goal has been to broaden top-of-mind awareness among a new target group, maybe you should revise that objective to do a better job of maintaining awareness among your current target customers. Whatever you do should be based on your new ROI objectives, not the ones agreed upon in a different market environment.

Protect your current franchise.

Protect your current customer base. Customer acquisition is more costly than customer retention, so take a close, hard look at your media mix and spending strategy to see if you are missing an opportunity to remind your current customers why your brand is a choice they should continue to make.

Should direct marketing or e-marketing to your current customer base take a more prominent role in the mix? What about promotion? Should your strategy re-focus on making current customers more profitable instead of offering wide (and expensive) incentives to attract new customers?

In an economic downturn, customers will be more vulnerable to competitive solicitation, especially if it involves discounting. Unless you can easily afford to match the lower prices of your competitors, you must maintain your brand’s value to protect your margins. And that is more easily done among current satisfied users than among those who have never tried your brand.

Seek advice from all key stakeholders.

Ask your agency for their assessment of how to cut your budget without harming your brand long-term. Ask your sales force to evaluate and prioritize promotional tactics. And, by all means, ask your customers how they feel about your brand before you do anything. Does your brand have a strong enough value proposition to allow you to divert from your current efforts without significant damage? How do your current customers rate your brand versus the competitor’s?  Will they be more susceptible to brand switching if you cut back marketing pressure?

Over the years, we have seen many companies make decisions on the basis of what is easy to cut, rather than ask the tough questions that should really be guiding this decision.

Where do you want to be when the economy rebounds?

We know the economy will rebound. The question is when. You just need to make sure that the marketing decisions you make today don’t inadvertently de-rail any past or future branding and sales efforts. For example, some clothing retailers may buy overstocks or cancelled orders from national brands and sell them at heretofore unheard of prices. But if these retailers aren’t careful, they will be hard-pressed to convince consumers to pay full price when the economy rebounds. Your brand can come out of this business climate as strong as ever with the right approach to cost-cutting and future planning.

One final thought is to challenge your agency to help you come up with creative ways to make your marketing investment work harder. If they are smart, their goal is the same as yours – to build your brand long-term. Especially these days, when everyone is being asked to do more for less.  Plus, agency people often have the advantage of being able to look at your brand and your marketing programs with complete objectivity. We also have the ability to transfer learning from other clients’ efforts that might be applied to your brand.

We are all in this together.  Let’s find a way to solve it together.

talk to us.