The Recession and Your Business
We’ve all seen the newspaper headlines and heard about it on the evening news…we are quite obviously in a recession; there’s no question about it. The question that remains is: How will your business survive the tough economic climate?
There are two ways for a business to approach a recession. The first option is to cut corners and trim the fat in as many places as possible and hope to merely survive until things get better. To many, this may seem like the best (and safest) of all options; to simply “ride it out.” Unfortunately for the believer of this theory, during a recession is when there is the most opportunity to gain market share over your competition, and increase your profits once the economy begins to improve.
The second option is to view the tough times as an opportunity to take advantage of greater media buying power, and use that to increase your market share over the competition. Research has shown that companies who choose to increase their marketing budgets during a recession have emerged from that recession having taken the lead over the competition.
Know Your Target
During times of financial instability, knowing your target audience becomes vital not only to the success of your marketing campaign, but also to the survival of your business. After all, a recession is no time to risk wasting your marketing budget with “blanket” advertising.
When developing a marketing strategy, every business must answer the question “Who are we trying to reach?” If you’re selling dish detergent, you’re obviously going to target a completely different audience than if you’re promoting motor oil. Knowing who you’re trying to reach must always be your first step in developing a marketing strategy. If your target is off, it will throw the rest of your efforts off as well.
After you’ve figured out who you are targeting, you must also figure out where your target audience is (in terms of viewing, listening, browsing, and readership habits.) If your target audience doesn’t tend to read the daily newspaper, you can run the best print ad possible in your local newspaper, and you’re wasting your money.
Lastly, you must be able to figure out the mindset of your customer. Advertising messages should always speak to the consumer in a way in which it relates to their current state of mind. With the current state of the economy, are you customers worried about losing their jobs? Have they already lost their jobs, and are worried about how to survive until things improve? Are they worried about losing their retirement with the sudden plummet of the stock market? No matter what is on their mind, to have an effective advertising message, it must speak to speak to them directly.
Identify Your Advertising Objectives
For each company there is a different objective, or set of objectives, for their marketing communications. For one company, the objective might be to simply increase top-of-mind awareness in a market. For another, the goal might be to increase their overall profits within a market. No matter what the goal of your advertising, you must identify it before you have any hope of knowing how to accomplish it.
Another thing to be considered when setting marketing goals is measurability of those goals. After your campaign has completed, you should always conduct a post-analysis of the effectiveness of the campaign. Only specific quantitative goals can be accurately measured and evaluated. For example, say you decide your objective is to increase profits. If after the campaign has ended you compare the new figures to the old and find that you’ve increased your overall profits by 1%. To be technical, you’ve accomplished your goal, but depending on the size of your business, and the duration and expense of the campaign, 1% might not be the increase you originally had in mind when the plan was set. If you had set a goal of increasing overall company profits by 10% by the end of 4th quarter, you would know if you reached that goal, and exactly how much you fell short of or surpassed it. At that point you can evaluate the success of your marketing efforts, and make any necessary adjustments before you release the next round of communications.
Promote Your Strengths
Researchers say that during a recession, consumers will usually change their behavior by: buying fewer goods outright, looking for deals, or trading quality for quantity (buying less expensive goods.) With consumers changing their behavior at such a rapid pace, it leaves the door open for a new player to take over the market share from the leader. If you’re the company gaining market share this is good news – play your cards right, and you might take the lead. However, if you’re they key player in the market, this is potentially bad – miss an opportunity, send the wrong message, or choose to do nothing and you could lose your market share.
At this point the best thing a company can do to either maintain their position as the leader, or gain market share is identify their strongest selling point; what differentiates them from the competition, and promote it. Is your strongest point you price? Product quality? The guarantees you offer? Whatever your strength, there’s a way to promote it in a way that speaks to your customer.
Kellogg’s vs. Post: A recession case study
In past recessions, forward-thinking businesses have used the opportunity presented to them to jump ahead of their competitors in the market. One of the best examples is Kellogg’s and Post cereals. Through the 1920’s, Kellogg’s and Post were neck-and-neck in the breakfast cereal market, but when the recession of the 1930’s hit, Post cut their advertising budgets while Kellogg’s increased theirs. When the smoke cleared and the recession lifted, Kellogg’s emerged as the dominant player in the breakfast cereal market. They have since maintained their positions as “the world’s leading producer of cereal and convenience foods.”
As easy as it sounds in the case of Kellogg’s and Post, it’s not as simple as increasing your marketing dollars and watching the profits roll in and your market share increase. There are a few points all businesses must take into consideration:
1) During a recession, media outlets are starving for business.
· You can usually negotiate a better rate and/or package than they would give you under normal circumstances.
· If you aren’t familiar with media buying, you may not know what you are actually getting for your money (i.e. percentage of audience reached, share, market and viewing trends, etc.)
2) You competitors may cut their advertising budgets.
· This leaves the door wide open for your business to take market share from them.
· If you allocate the wrong amount of budget, use a plan that isn’t properly researched, or go with the wrong message, your advertising may have an adverse effect on your business.
3) People are more likely to try different brands during times of financial uncertainty.
· If handled correctly, this gives you an opportunity to acquire new customers through promotions and offers.
· Not only do your competitors have the same opportunity, but if you go too far with your promotions and/or discounts, your product may become viewed as sub-standard or a discount brand.
Don’t Go it Alone
Yes, you are probably capable of placing an advertising campaign on your own. However, are you truly capable of fully understanding the market, consumer perception, consumer behavior, and the ins-and-outs of media? Probably not to the extent that an advertising professional does. Think of it this way, if your car begins making a ticking noise under the hood, are you going to dive in and begin tearing apart your engine, or will you take it to a trained mechanic to ensure it’s done correctly so that your car will function properly? Most people will probably choose the latter of the two – and rightfully so!
It’s no different in the world of advertising and marketing. By using a recognized agency rather than trying to handle the buys and the media reps on your own you gain:
· Unbiased advice – An advertising agency is capable of standing back and evaluating your business, your current market situation, and your goals. They have no commitment to any particular media outlet, so they are in a position to tell you what is truly best for your business.
· Access to Consumer Research – Not only do advertising professionals have knowledge and experience in the industry, but they also use consumer research to back up their recommendations.
· Media Leverage – Advertising agencies work with the media on a daily basis and purchase thousands, and sometimes millions, of dollars in placements per year for their clients. While the agencies aren’t purchasing the advertising for themselves, they are in control of the profits for the media and are in a sense getting a “bulk” discount for the amount they purchase. In short, they are in a position to negotiate cheaper rates, more bonuses, and also to make sure you’re actually getting what you pay for.