Take advantage! Economic downturns happen all the time. Severe ones like we’re in right now are a lot more common than most businesses would care to believe. The weak perish, the strong survive, some even thrive. During economic downturns, companies disappear or are swallowed up by rivals. Others emerge stronger than ever. Basic principles apply during downturns. But it’s how those principles are dealt that determine which companies will survive and which companies die. In this blog post we discuss how businesses should market in tough times.
So what should those companies that are looking to advertise do? Lower prices? Ask the automotive sector how rebates worked for them. When sales stalled, the “Big Three” saturated the market with so many low-price deals. No one would buy without a big rebate or a 0% financing offer.
Cut product quality? Remember Schlitz? Just thirty years ago it was America’s second-best-selling brew. Someone decided to trim costs by changing their fermentation process to something cheaper expecting that customers wouldn’t notice. Big mistake… six years later the company was out of business.
How about cutting advertising costs? Netflix began making serious inroads into Blockbuster’s customer base in 2005. But Blockbuster cut its $150 million advertising budget by 2/3 to less than $50 million. Netflix grew from 4.2 million subscribers to 7.1 million in less than 4 years. And how did Blockbuster fare? In 2007, they closed 500 stores. Blockbuster saw a $33.4 million profit turn into a $125 million loss through the third quarter.
Advertisers should go all out in the media that produce quantifiable results. Especially since their messages will be more prominent as competitors reduce spending. But the key is to advertise where you will get QUANTIFIABLE results. To make sure you are measuring those results. After all, if you don’t know what is working and what isn’t then even good advertising dollars are a waste. No matter how deep the recession is or how long it lasts. It’s the perfect opportunity to become aggressive and grab market share as competitors scale back their marketing efforts.
During a recession, you may not see increased sales but you will see an increased market share. If you can go into a recession controlling 10% of the market and come out with 20%. When the public does get back to serious spending you have just doubled your profit margin. An aggressive approach will pay some dividends early but down-the-road rewards are even greater. Companies that gain during a recession tend to maintain consumer loyalty when the recession has ended. Several studies have shown that after a downturn, companies that maintained or increased marketing communications. During the economic slowdown typically experienced 14 times more growth than companies that cut back.
Another trend that is emerging through the recession is that even while consumers are cutting back, they’re not doing so entirely. Consumers want to maintain their quality of life. Even in a time of belt-tightening, North Americans are not giving up on everyday pleasures. In 2008 and 2009 during the toughest part of the recession HDTV sales increased with almost 50% of all households in the US making a purchase. And, despite the expense, consumers are not entirely giving up on vacations. Even in these tough times, more than half of North American households plan to take a trip of 100+ miles in the next six months. To grapple with fuel costs, they just plan on closer-to-home trips… say Florida instead of Florence… and quite frankly, how many ads have you seen for trips to Italy as opposed to Disney World.