Marketing in times of adversity and stress

Roberto Álvarez del Blanco. Professor. IE Business School

1 April 2009

Taking the scissors to the marketing budget is an all too familiar reaction in times of crisis, but it is a mistake that can weaken the brand and hamper attempts to differentiate a product.

The current severe market conditions mean that marketing decisions have to be based on certainty, decision and courage. Avoiding mistakes that imply significant conditioning factors in the mid and long term is as important as managing the crisis. Skilfully solving this new paradox requires fast solutions and consideration of long-term implications. Peripheral vision is also essential to see and interpret the signs, and identify useful solutions for planning a more stable future.

From a marketing viewpoint we are facing vast complexities, but it is also a time of extraordinary opportunity. It’s true that challenges are on the increase, that some models are more vulnerable, or that negative signs can be seen on the horizon, but we have to find a way through the jungle and healthy economic options for the brand must be created, all without dying in the attempt. The pressure of the scant room for error can be relieved a little by remembering an old Spanish saying: be eager when others are being cautious and be cautious when others are being eager.

In times like the present the great temptation is to cut back budgets, and marketing is often the first to suffer. It is vulnerable because of the search for fast results or survival and because it is assumed that reducing marketing efforts does not have any short-term effect. The current climate requires the consideration of a number of priorities to avoid missing out on opportunities or committing irreversible errors and accepting that Lady Luck smiles on the decisive in times of crisis.

Budgetary fallacy

Ever since the 1929 crash, the impact of the reduction of marketing budgets during adverse economic cycles has been the subject of much research. The results clearly show a correlation between “cutting back vs maintaining” and “performance during and after the crisis”. Indeed, there is a clear doctrine that suggests that in times like these, it is best to remain aggressive rather than be on the defensive.

Studies confirm a more favourable correlation between an aggressive marketing standpoint in recessive years and an increase in the market share than when organisations cut back or eliminate their marketing budgets, not only during that period but also in the three years following the cycle. The idea that the brand can withstand a reduction to its budget because others do the same can be a fallacy.

Examples include brands that aspire to low-cost positioning and those that enjoy relative superiority, those that present a new substitute superior concept, those with an effective loyalty programme, or brands with more consolidated results account than their competitors.

Budget productivity

The correct thing to do in this situation would be to have sufficient substance to make the few resources profitable and create a context for the brand that enables increases in the positioning, eliminates inefficiencies and capitalizes on opportunities, such as changes in customer behaviour, perception or relations.

Understanding the real productivity of the marketing budget is much more important than knowing how much it comprises. Improving its implementation, adjusting organisational issues and looking for impacts are great alternatives. In advertising, one objective would be to assume that the message is more important than the means and that the Internet can supply an efficient solution for the brand to maintain its image, distinction, loyalty and energy.

Avoiding the serious danger of a lack of distinction should be an essential focus insofar as brands emphasise low prices and attributes. Protecting the brand from these effects is critical, as is guaranteeing customer loyalty as the most important asset in this situation. Investing to guarantee this through unique experiences and relations will produce great benefits since, when the scenario changes, customers will be the foundations for building on organic growth.

Innovate, innovate, innovate

The key for obtaining uniqueness is to accelerate innovation, which comes from creative thinking and absorbs the organisation, takes in excellent ideas and puts them brilliantly into practice.

One interesting type is “disruptive innovation”, which creates new product categories or subcategories by involving different business models or technology. Enterprise-Rent-Car came out of the dark to become leader in sales and profitability, focusing on the need some insurance companies had for providing their customers with hire vehicles when their own were being repaired.

Another type is “sustained innovation”, which avoids competitors’ advantages or helps to freeze it. Being successful in innovation requires quite a lot more than having an R&D&I budget. The organisation, people, processes and organisational culture must be behind innovation. Much progress is weakened or lost because there is no brand or because the brands do not have sustained management. Innovation requires a real understanding of the customer’s behaviour and market trends.

While these complex times of stress and volatility prevail, many marketing budgets will be unavoidably reduced. However, the real marketing focus should seek to show less aversion to risk and, with patience and discipline, turn to making the most of every opportunity, maintaining its commitment and looking after the real treasure of the brand and the assets that will be useful for the organisation in better times.

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