Marketing Strategies During Recession

8/6/2019 Marketing Strategies During Recession

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Introduction

First, it is important to know that recession is a normal part of the business

cycle. The Indian & U.S. economy will come through a downturn or

recession and then enter a new period of growth. But the hard truth is most

recessions last about 16 to 18 months. This latest one began in December

2007, but will probably last into 2010. And with the government scrambling

to implement dramatic economic policies that will likely because more harm

than good, some economists project that we won't see the end until mid-

2011. Whatever the length, you can increase cash flow and profits now...and

secure a major advantage over your competitors. You can also expand your

market share in the next few years.

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Anticipating economic reality: Knowing the 4 economic trends

Before we look at the recession marketing strategies that you will need to

survive and thrive in this recession, every marketer should be aware of 4

basic economic trends that will affect your campaigns

1. Deflation

A downturn in the economic cycle reflecting declining prices and a credit

contraction. Our current historic deflation was predicted by a number ofeconomists and investment advisors over the past few years. It's not a

recession, but an economic crisis of inflation accompanied by a recession.

2. Inflation

A rise in the general level of prices of goods and services over time caused

by high rates of growth in the money supply. Inflation can be thought of as a

decrease in the value of the unit of currency. It is measured as the rate of

change of a price index. Because of the massive government bailouts anddeficit spending, this will be your marketing enemy in a few years. For

example in USA, Under the Carter administration, inflation shot up over

12%. Under George W. Bush, it was up to 6% by November. Now it's dipped

back to about 3.4% because of deflationary pressure. Expect to see inflation

rise at the start of next year.

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3. Recession

A significant decline in activity spread across the economy, lasting longer

than a few months. It is visible in industrial production, employment, real

income and wholesale-retail trade. The technical indicator of a recession istwo consecutive quarters of negative economic growth as measured by a

country's gross domestic product (GDP). Unemployment is still lower than it

was under Jimmy Carter.

4. Stagflation

A condition of slow economic growth and relatively high unemployment. It

is a time of economic stagnation accompanied by a rise in prices, or

inflation. This could be what we are headed for, lasting for 5 to 10 years.

By anticipating and understanding these economic realities, you can better

adjust your marketing message and strategy. The key is to approach your

challenges strategically and tactically-rather than act out of emotion and fear.

When the late Sam Walton, founder of Wal-Mart, was asked what he

was going to do about the recession years ago, he answered: "We don't

plan to participate."

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MARKETING STRATEGIES:

Strategy #1:RetrospectionRe-examine your current marketing initiatives

Image advertising is a waste of your time and money, especially in a time

like this. If you're not using advertising that provides a measurable,

quantifiable cost per lead, cost-per-sale and lifetime value of a customer,

you're practically throwing your money away.

You absolutely must know your:

Cost per lead

Cost per sale

Lifetime value (LTV) of a customer

In a recession, it is more critical than ever to hold every marketing campaign

accountable. That's the only way to know how you should react in a down

market and get the maximum impact for every single dollar spent. For

example, the lifetime value Publisher's Corner of a customer tells you

exactly how much you can afford to spend to acquire a new customer.

Without these statistics, it is impossible for you to know whether you're

making the most profitable use of your marketing budget. It's the only way

you'll know whether you're getting a positive or a negative return on your

investment.

Strategy #2: Review USPReview your Unique Selling Proposition (USP)

A powerful USP will grab prospects' attention, distinguish you from

competitors and draw them into your story. Now is the time to review and

revise your USP. If it doesn't tell your prospects how they will benefit from

your product in today's downturn and distinguish you from the

competition...chances are you'll become irrelevant. Your USP needs to beprominent, easily found and up-to date in all of your marketing-TV, direct

mail, website, you name it.

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The price of radio and TV time has seen deep cuts-which may be why the

ubiquitous Snuggie(TM) ads aren't confined to late-night TV spots. In

addition to lower costs, you'll find deals and opportunities never seen before.For example, many local newspapers and even The Wall Street Journal are

selling ad space right on the front page.

Strategy #5: Tempt CustomerReevaluate your offer and make it preemptive

in this recession, consumers are hunting for the best way to get more for

their money. It's critical to update your value proposition so that it's powerfuland preemptive: It should answer prospects' questions before they ask them

and overcome their objections. Remember, your offer is not about the

product-it about the prospect and what the prospect gets. The strongest offers

reinforce value. They focus on the deal that the prospect will receive and

present a get-more for-your-money image.

Here are 3 components of a successful offer:

A discount or price reduction. Right now people are looking for value,

and a discount is the simplest way to deliver it. Just look at the most

successful catalogs, emails and mailing pieces. You'll find discounts in everyone, from consumer retailers like J. Crew to B2B marketers like Thermo

Fisher Scientific. Even designer makeup and beauty products are on sale,

which is rare.

A premium. It's a gift, a bribe, a strong enticement: Add value by giving

something away. This can help you justify a higher price if you are unable to

offer a hefty discount.

A guarantee. Reassure your prospects that they have nothing to lose. If youdon't have a guarantee, now is the time to start one.

Convince prospects that they'll be losing out on something big without

accepting your offer - recession or no recession.

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Strategy #6:Concentrate on DatabaseConcentrate on your databasefor most marketers, 20% of your customers represent 80% of your profits.

Any significant loss of this core group could mean a serious hit to your

sales, profits and future. Remember, it is always three to four times cheaper

to up sell or cross sell an existing customer than to acquire a new one.

That's why you should implement these customer-retention strategies:

Up selling and cross-selling. Reevaluate your current process. Are you

being aggressive enough in offering products or services that complement

your prospect's purchases?

Loyalty programs. It is more important than ever to reward your best

customers with extra perks to keep them coming back. Creating an exclusive

club for loyal customers is also effective.

Conversion series. If you offer a free trial, be sure you have a professional

follow-up direct marketing conversion series in place to convert these

prospects to buyers. Many marketers make the mistake of letting qualified,

interested prospects slip away easily. See the chart above for an example of a

conversion series time line.

Retention series. Don't wait around for your customers to renew

subscriptions, reorder products or come in for your services-remind them of

your value, and reinforce their decision to purchase from you.

Database lead management. If you don't convert those hard-earned leads to

sales, you're wasting your marketing efforts.

Reactivation campaigns. Use your improved, preemptive offer, completewith premiums and discounts, to entice former customers to come back.

Craft copy that demonstrates why your product is the best choice right now.

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Strategy #7: Update Corporate WebsiteRevamp your corporate website

Static corporate home pages do nothing to encourage sales or improve your

results. Yet so many marketers still rely on these non-marketing or anti-

marketing sites. Instead, turn to direct marketing micro sites and landing

pages: Individual websites geared toward specific products and promotions.

These sites use only direct response copy and art to sell a product or service.

To improve efficiency and boost response, they don't have navigation

distractions. For example, you may want to create unique pages to capture

leads and sales, or develop a product-specific sales page.

Lastly:

Marketing is all about the 4 Ps which are:-

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Illustration

McGraw-Hill Research published a study of 600 companies in 16 industries

over a 5-year period that included a recession. Researchers concluded that

firms that chose to maintain or increase their marketing budgets experienced

sales growth that was 256% higher than those companies whose advertising

suffered. Furthermore, those who cut back on their advertising realized a

small increase of only 19% in that same time period.

Here is another lesson learned from the last recession: The 25% of

companies that increased their marketing budgets saw an increase in market

share that was 2.5 times greater than competitors who cut back. But that'snot all you need to know. Here's what I've learned from past recessions...

Companies that don't adjust their marketing to the new economic

environment suffer.

Businesses that follow the direct marketing model trump those who rely on

traditional advertising.

Historically, companies maintaining or increasing their direct mail marketing

through economic downturns increase sales and market share during and

after the slow period.Businesses that regard direct response advertising costs as investments

rather than expenses enjoy higher long term dividends.

Companies that stay aggressive in a downturn seize market share from more

timid competitors.

Companies that cut back will lose revenue and opportunities, with fewer up

sells and cross-sells for several years after the recession...profoundly

impacting the bottom line in the long-term.

Lesson learned: Think twice before arbitrarily cutting your budget. With so

many of your competitors cutting back, we'll have new opportunities for

growth.

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Give Your Clients Something More - Customer Delight

If possible, provide additional services to your clients by providing them

with additional warranty on your products and services. Offer on site service

or telephone support. This will not drain your pocket to a large extent, but

will go a long way in pleasing potential and existing clients.

It is during tough times that you need to alter your marketing strategy to

survive to sell another day. The above marketing strategies are not very

costly to implement, but can pay you rich dividends - both during and after

the recession

Businesses and consumers are cutting back on discretionary spending, which

could mean lower response rates for you. On top of that, many marketing

budgets are being cut. This combination has sent many marketers into a

panic. That's why you need to reevaluate your marketing game plan for this

recession.

Research the customer.

Instead of cutting the market research budget, you need to know more thanever 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 todays can-live-without. 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.

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Support distributors.

In uncertain times, no one wants to tie up working capital in excessinventories. 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.

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.

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

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acquiring weak competitors.

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 ofthe 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.

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Conclusion

Even if we arent in a recession, we are in for some tough economic times

and an economic slowdown means a tendency to scale back marketing

spending. However, research shows that a downturn creates opportunity to

accelerate growth faster than your competitors. This means it may be the

best time to step up your marketing at least in quality if not quantity. Themarketers that focus on getting the most out of every dollar spent and on

demonstrating marketings impact on revenue and pipeline will be well

positioned to come out of the slump looking like a star.

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Marketing Strategies During Recession

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