Not news any more. We are in the deepest economic recession since the Great Depression, affecting every country in the world and no industry is immune to it. Corporate leaders are slashing their budgets across the board. And marketing is often the first in line for cuts.

No doubt this recession is much more severe than originally anticipated, so the main challenge for many companies will simply be survival. Most will lower their marketing budget and spend it on initiatives that are easier to justify or at least more strategic for brand building. Experts predict that we will see an increased emphasis on measurable and relationship-based strategies such as direct marketing and online advertising. On the other hand, some with strong brands may even see this recession as an opportunity to enhance their competitive edge.

What You Should Consider For This Recession

It is critical to understand the new dynamics of your company’s market environment. Notwithstanding all the uncertainties about the magnitude and length of this recession, a lot of valuable information is available that will help you market your brands more prudently and help you build different business scenarios.

As a first step, it will be important to research your customer. Any new analysis should go beyond general information, typically obtained in industry-syndicated studies. What you ideally want to learn is exactly how they are responding to the recession and particularly how they are re-defining “value” for brands like yours. This includes new behavior such as trading down to different price levels, sizes, switching to similar products in a different category (water vs. soft drinks), etc. Typically, for example, consumers take more time searching for durable goods and negotiate harder at the point of sale. They are usually more willing to postpone purchases, seek value brands, or buy less. Product features that were deemed essential before are now considered optional. Trusted brands are especially valued and line extensions can still be launched if they enhance product performance. Conspicuous consumption becomes less prevalent.

Here are some specific steps that most of our clients consider important for businesses facing the uncertainties of this recession (many also offered by John Quelch, a Professor from the Harvard Business School):

1.- Protect the Brand – There is a serious danger that the market will evolve toward a state of commoditization because all brands will be emphasizing discounts, price and attributes. It is important to find new ways to communicate value without hurting the brand. At the same time, it is essential to maintain a loyal customer base, the most important brand asset. Investing in their satisfaction will pay long-term dividends because when things turn around, they will be the base on which the brand will build. Resist efforts to compromise the experience and especially the quality of the offering. Use loyalty programs to focus on them, including surprise awards that will support their relationship with the brand and the firm.

2.- Focus on Family Values – History shows that when economic hard times loom, uncertainty will prompt consumers to stay at home and connect with family and friends more. Advertising will show more cozy family scenes at home rather than images of extreme sports, adventure and rugged individualism. Zany humor and appeal on the basis of fear are out. Household products, telecommunications (telephone and internet), and discretionary spending on home entertainment are likely to hold up well.

3.- Adjust Marketing Support - As mentioned, this may not be the time to cut advertising and marketing initiatives particularly if the equity of your brand is strong. Instead, an increase when competitors are cutting back can improve market share and return on investment at a 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. If you have to cut marketing investment, evaluate different marketing and media mix alternatives to insure maximum visibility for your brand.

4.- Modify Product Portfolios and Offers - It is important to re-forecast demand for each item in your product lines as consumers trade down to models that stress good value, such as cars with fewer options or size down to products that can help stretch the household budget. Tough times favor multi-purpose goods over specialized products, and weaker items in product lines should be pruned. When disposable income is limited, customers prefer to see products and services unbundled and priced separately. Gimmicks are out; reliability, durability, safety, and performance are in. Another tactic is to bundle services to provide extra value at the same price or slightly higher, such as free shipping by Amazon or McDonald’s Happy Meals.

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, many of our client’s participating in this survey agreed that 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 – It is inevitable that 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. Be cautious, too much emphasis on price deals can create the perception that the brand is not worth the normal price.

7.- Leadership and Core Values - Although most companies are making employees redundant, you can cement the loyalty of those who remain by assuring employees that the company has survived difficult times before, by maintaining quality rather than cutting corners, and servicing existing customers rather than trying to be all things to all people. The general consensus is that top marketing executives must spend more time with customers and employees. Unfortunately economic recessions 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 and focus on consumers. Successful companies do not abandon their marketing strategies in a recession; they adapt them.

In summary, this recession will be a real challenge for many companies to survive and maintain their traditional business model. At the same time it can be a good opportunity to re-focus on their core values and brand strategies that have made them so successful to date, and to create new marketing practices that will enable them to do more with less in the months to come.

Jay Gronlund
Latin Pulse USA
(212) 697-3181
jayg@latin-pulse.com

Mario Quiñones
Latin Pulse
(513) 688-3032
marioq@latin-pulse.com