Marketing in a Recession

June 2008

...is about turning something which is seen as a negative...

...into a positive more revenue / sales, greater share of voice and better consumer relationships

...the questions a marketing manager may be asking

What does my CFO want? What can I do to protect my budgets? Can we hibernate to save costs? How will my competitors respond? Does this mean we have to cut our prices? How will consumers change? Is there some kind of opportunity that we can leverage from this? How will my brand manage?

And the general answer is:

Lay off workers SLASH the Marketing/Advertising Budget

...put simply...

You can turn the engine off and feel like you re gliding...

...put simply...

You can turn the engine off and feel like you re gliding...

...but you re actually falling...

...put simply...

You can turn the engine off and feel like you re gliding...

...but you re actually falling...

...and it takes more power ($) to get back up to your previous height, let alone go higher than before

Why not Reduce???

Advertisement shows that your company is healthy Garner consumer trust Stable company Slowdown of consumer spending, but not a complete halt Less advertising clutter for consumers to wade through BRAND Image and loyalty

When we look at a recession we tend to only focus on the threats

Threats
1. Spiralling price war 2. Competition for share of SMALLER wallet 3. Consumers confidence reduces less money in the market 4. Consumers hunting bargains 5. Competitor activity difficult to predict

but there are also huge opportunities

Opportunities
There are several opportunities we can discuss, but we have focused on two in this section 1. The cost of communications deflate meaning your money can go further 2. Cheaper CPT channels with better ROI help with the CFO!

Five tips
1. Press for better media deals 2. Reflect the consumer mindset with a resonant message Wendy's - Message: "Look, I know you have less to spend these days, but that doesn't mean you have to eat less." IKEA - Message: "What recession? Sure the country's going through a recession. That doesn't mean you have to."

3. don t ignore your current customers It takes five times more money, time and effort to acquire a new customer than it does to keep an existing one. - Frederick Reichheld, The Loyalty Effect (1996)

4. Go for direct marketing 5. Test Test Test Innovative methods and new tools of advertising

Last recession
Hindustan Unilever Ltd (HUL) is planning to increase its ad expenditure this year. Godrej Industries Ltd is tripling its ad budget to gain high visibility for all its products. Last year, the Godrej Group s advertising budget was around Rs 60 crore. Tata Tea and Marico Industries have also hiked their advertising budget to pump up volumes. Emami, the Rs 700-crore FMCG major, is targeting Rs 300 crore, ensuring a 30 per cent growth in sales from its summer care brands. Emami, which owns brands such as Boroplus and Navratna, has declared a 25 per cent growth in FY09. Emami will invest Rs 60-70 crore on advertising and promotions for its brands. In spite of a slow year for consumer electronics industry in 2008, LG Electronics India managed to clock revenues of Rs 10,730 crore, a 15 per cent growth over 2007, in line with its 2006 growth rate. The net profit margin was at 4 per cent of sales despite severe pressure on raw material costs. LG will increase ad and marketing budget by 10 per cent to Rs 400 crore in 2009. In line with its strategy, LG grew by 20 per cent in January and February. The company hopes to save $384 million through cost cutting and efficiency-improvement measures in 2009.

Historical Examples

Recession Born Legends

IBM 1981 iPod 2001

 P&G During the Great depression they pushed their Ivory soap Intel during 1990-1991 pushed the campaign Intel Inside Walmart launched everyday low prices campaign during 2000-01

1974
Connecticut's Stanley Works, one of the world's largest manufacturers of hand tools In the heart of the recession, it launched the biggest advertising campaign in its history-a blitz of network TV and magazine ads aimed at driving home the Stanley name to the consumer market. The campaign worked, giving the company a large sales and profit increase in 1974 and preventing a substantial decline in 1975. Additionally, its hand tool business has continued to grow at an 8 percent annual rate-twice that of its competitors.

GM
Another example is General Motors' Chevrolet division, which faced mounting inventories in 1975 due to the recession and high fuel prices. The company abandoned its traditional practice of setting its advertising expenditures as a fixed percentage of sales. While volume fell 10 percent because of the economic slowdown, Chevrolet maintained its ad budget and actually increased advertising for its fuel-saving economy models. Ford Motor Company, on the other hand, slashed advertising by 14 percent in an attempt to shore up profits. That may have achieved its goal, but it permitted Chevrolet to increase its market share by 2 percent.

Kellogs
During the Great Depression, Post was the leading cereal brand. In fact it was the only cereal brand people would have thought of at the time. But, due to the Depression, money was tight and sales were falling. Post figured they did not need to continue advertising because they owned the market (for cereal) and they needed to cut expense. Cereal was considered a luxury anyway.

 Kellogg s, on the other hand, took advantage of the economy that was suffering. They created a positive ad campaign featuring Tony the Tiger and the very positive and enthusiastic Kellogg s slogan They re GREAT! They DOUBLED their ad budget, and bought ad spots in newspapers and radio time across the nation. Americans loved Tony the Tiger and the positive message he sent during a very negative time. Kellogg s brand bucked the trend, and grew quickly, in a time when money was tight by keeping their brand top-of-mind.

 During a recession people shop value stores to save money and pick value brands for their essential needs. Nike refused to sell its shoes in Target, fearing that shelf presence in a big-box retailer might damage its brand and reputation. So, they bought Converse for $305 million because Converse had a lower price point to begin with. Converse sold so well at Target and other retailers, Nike made back its entire investment in one year.

Selective example
Intel Inside case study bucking the trend altogether

Intel launched its iconic campaign amidst recession At a time when the rest of their category was competing on price alone. Intel took their premium positioning directly to consumers.

Intel took advantage of a soft competitive market to aggressively deliver its message

Results
63% increase in sales world wide Became the third most valued brand in the world (behind Marlboro and Coca-Cola). Within two years, preference for the brand had risen to 80% and the company claimed more than 75% of the microprocessor market
Source: Encyclopaedia of Major Marketing Campaigns

Conclusion
Advertising builds strength: Companies that invest more in advertising over a period of years experience faster growth than those that spend less. Advertising speeds recovery: Companies that have increased their advertising during a recession have recovered more rapidly than their counterparts that have maintained or reduced advertising. Advertising affects sales: Organizations that have continuously increased their advertising investment have enjoyed similar increases in sales.

Thank you