When recession strikes, most companies cut their expenses and usually the first to go is the marketing budget. Most Finance guys do not believe in marketing, specifically advertising, and see it as an expense rather than an investment or a profit generator. As a marketer, I find this very difficult to believe. In the first place, we are able to determine expected revenue by setting the marketing budget. When you get the word out there about your product or brand, you get higher expected revenue vs just waiting for customers to discover you (if they ever do).
A recession calls for a much needed housecleaning.
Many companies impose drastic cost-cutting measures during the recession. Whatever measures are taken, two things must be remembered:
1. Do not compromise your customer value proposition.
Customers buy from you with a certain set of expectations about product quality and service. Don’t reduce the experience that they have come to expect.
2. Don’t arbitrarily shift the cost burden to your suppliers and dealers without consultation.
If you hurt your partner value proposition, partners will start shifting their alliances to competitors. This is very dangerous territory.
Companies should consider temporarily lowering their prices, even though this will hurt their margins. Based on experience, I find this very tricky – you may acquire immediate sales/profits but you may bring down the industry’s product cost. Do not treat your products as commodities or this will be your downfall and eventual death. It is good to hold on to your customers than let them switch and sample your competitors. Customers are highly price sensitive during the recession and price concessions are warranted but remember to consider all other options that you have to keep loyalty in check and profits afloat.
There are companies who, instead of cutting down costs, actually increase their marketing budgets to grab market share from competitors who are reducing their budgets. If a company has resources, it may see the recession as an opportunity to grow its business at the expense of its competitors.
Other companies build a cost-conscious culture not just when recession strikes but all the time. In a previous company I worked it, this was indeed the corporate culture, we practiced a lean business all the time – with ROI in mind at every marketing campaign or project so that when recession strikes only minor surgery is called for.
