The Marketing Response to Recession

(summary of a recent paper by Booz & Co.)

The most common corporate responses to this recession are very clear: quickly cut costs and cancel or defer all but the most essential investments. But in marketing, these actions can negatively affect future revenue, share, and customer relationships —three assets that must be supported and strengthened if companies are to survive the recession and position themselves for recovery.

Accordingly, CMOs need to adopt a more measured approach to quickly and accurately identify and eliminate inefficient marketing, reallocate that spending to build profitable volume in the short term and strengthen brands in the long term, and, whenever possible, return savings to the company.

To make the most of tight budgets and maintain revenue, share, and customer relationships in this environment, CMOs face three significant challenges:

• Realign their marketing efforts to major changes in customer psyches, behaviors, and buying patterns
• Respond to the changes in their distribution channels and geographic markets, and
• Change their marketing mix to improve ROI

Get on the customer’s side

Custom­ers, whether consumers or businesses, in developed or emerging nations, are cash-strapped and worried about the future. Consumers are buying less and want brands that empathize with their plights and remain relevant in changed circumstances. That means offering visible savings and added value and adapting the tone and con­tent of marketing messages. CMOs must show how their brands and products address recession-driven needs and concerns and they should also make sure their brand promises speak to value and some element of reassurance.

Respond to shifts in markets and distribution channels.

CMOs must rethink their spending across different geographies. For some companies this means refocusing their attention on established markets. For others, it may mean additional investment in emerging markets. Distribution channels are also morphing in ways that will likely endure over a relatively long period. Consumers abandon high-priced, premium sellers for aggressive discounters; exurban malls collapse along with real estate development; and all retailers take a hard look at their working capital and make their most focused effort in years to ensure that all products carry their cost.

As a result, CMOs need to manage reduced “shelf space” and this will require that product portfolios continue to cover all price segments but be leaner and more efficient than in the recent past.

Make your marketing dollars work harder (ROMI)

CMOs must direct their spending to the most ef­fective paid media and below-the-line platforms. This means cutting back, at least temporarily, on programs with poor or indeterminate returns, and pushing hard against those elements of their mix that can deliver a mea­surable return on specific objectives. Digital media, which can be sharply targeted, cost-effective, and measurable, are benefiting the most from marketers’ desire to increase their ROMI.

CMOs who are open, permeable, and prepared to follow their customers may discover that this is the best chance in a generation to attract new customers to their brands and build market share.

The original paper can be found at http://www.booz.com/media/uploads/Booz_Memo_to_CMO.pdf