Given economic cycles, there will always be tough times, such as the recession of 2008-2009 and the slow recovery that has followed. Despite reduced funding for marketing programs and intense pressure to justify them as cost effective, some marketers have survived—or even thrived—in tough economic times. Here are five guidelines for improving the odds for marketing success in a slow-growth economy.93
1. EXPLORE THE UPSIDE OF INCREASING INVESTMENT
Forty years of evidence suggests those willing to invest during a recession have, on average, improved their fortunes more than those that cut back.94 Marketers should consider the potential upside of increasing investment to exploit a marketplace advantage like an appealing new product, a weakened rival, or a neglected target market to develop. Here are two companies that did.
- General Mills increased marketing expenditures for the 2009 fiscal year by 16 percent, increased revenues by 8 percent to $14.7 billion, and increased operating profit by 4 percent. As CEO Ken Powell explained, “In an environment where you have consumers going to the grocery store more often and thinking more about meals at home, we think that is a great environment for brand building, to remind consumers about our products.”95
- UK supermarket giant Sainsbury launched an advertising and point-of-sale campaign called “Feed Your Family for a Fiver” that played off its corporate slogan, “Try Something New Today,” to encourage shoppers to try new recipes that would feed families for only £5 (or $9).
2. GET CLOSER TO CUSTOMERS
Consumers with leveling incomes may change what they want and where and how they shop. A downturn or slow-growth period is an opportunity to learn even more about what consumers are thinking, feeling, and doing, especially the loyal base that yields so much profitability.96
Firms should characterize any changes as temporary rather than permanent shifts.97 In explaining the need to look forward, Eaton CEO Alex Cutler noted, “It is a time when businesses shouldn’t be assuming that the future will be like the past. And I mean that in virtually every dimension whether it is economic growth, value propositions, or the level of government regulation and involvement.”98
A recent Booz & Company survey of 1,000 U.S. households found 43 percent were eating at home more and 25 percent were cutting spending on hobbies and sports activities; respondents said they would likely continue to do so.99 Spending has shifted in many ways, and the potential value and profitability of some customers may change. As one retail analyst commented, “Moms who used to buy every member of the family their own brand of shampoo are buying one big cheap one”100
3. REVIEW BUDGET ALLOCATIONS
Slowed growth provides an opportunity for marketers to review their spending, opening promising new options and eliminating sacred cows if they don’t yield results. It can be a good time to experiment. In London, T-Mobile created spontaneous “happenings” to convey its brand positioning that “Life’s for Sharing” and generate massive publicity. Its “Dance” video, featuring 400 dancers getting subway riders to dance, was viewed millions of times on YouTube.101
Firms as diverse as Century 21 realtors and Red Robin gourmet burgers have increased online marketing activities.102 Dentists are turning to marketing, communicating with patients via e-mail newsletters, calling to set up appointments, and sending Twitter messages about new products or services.103
4. PUT FORTH THE MOST COMPELLING VALUE PROPOSITION
Focusing heavily on price reductions and discounts can harm long-term brand equity and price integrity. Marketers should increase—and clearly communicate—their brands’ value, conveying all the financial, logistical, and psychological benefits.104 GE changed its ad messages for the $3,500 Profile washer-and-dryer set during the downturn to emphasize its practicality—it optimizes the use of soap and water per load and is gentle on clothes, extending their life.105
Marketers should ensure pricing has not crept up unduly over time.106 Procter & Gamble adopted a “surgical” approach during the recession, reducing prices in some categories while communicating about innovation and value to support premium prices in others. Ads for Bounty claimed it was more absorbent than a “bargain brand”; ads for Olay Professional Pro-X’s Intensive Wrinkle Protocol called it as effective as prescription “at half the price.”107
Discounting successful brands is not a good option because it tells the market two things: your prices were too high before, and your products won’t be worth the price once the discounts are gone. Appealing to frugal customers with a new brand at lower prices avoids alienating those still willing to pay for higher-priced brands.
5. FINE-TUNE BRAND AND PRODUCT OFFERINGS
Marketers can review product portfolios and brand architecture to confirm that brands and sub-brands are clearly differentiated, targeted, and supported based on their prospects. Luxury brands can benefit from lower- priced brands or sub-brands in their portfolios. Armani is an example.108
ARMANI Armani differentiates its product line into three tiers distinct in style, luxury, customization, and price. In the most expensive, Tier I, are Giorgio Armani and Giorgio Armani Prive, custom-made couture products selling for thousands of dollars. In Tier II are Emporio Armani—young, modern, more affordable styles—and Armani jeans. In lower- priced Tier III are youthful and street-savvy versions, AIX Armani Exchange, sold exclusively at 268 retail locations. Each extension lives up to the Armani brand’s core promise without diluting the parent’s image. But clear differentiation minimizes consumer confusion and brand cannibalization. During slow growth, the lower end picks up the slack and helps maintain profitability. In 2011, the Giorgio Armani line accounted for 32 percent of total sales, Emporio Armani for 27 percent, and Armani Exchange for 14 percent.
Brands and sub-brands targeting the lower end of the socioeconomic spectrum may be particularly important during slow growth. Value-driven companies like McDonald’s, Walmart, Costco, Aldi, Dell, E*TRADE, Southwest Airlines, and IKEA may benefit most. Spam, the oft-maligned can of spiced ham and pork, found sales soaring during the recession.109
Slow times also are an opportunity to prune products with diminished prospects. In the post-9/11 recession, Procter & Gamble divested stagnant brands including Comet cleanser, Folgers coffee, Jif peanut butter, and Crisco oil and shortening to concentrate on higher-growth opportunities.
Source: Kotler Philip T., Keller Kevin Lane (2015), Marketing Management, Pearson; 15th Edition.