Marketing During an Economic Downturn
by David Phelps-Zink, June, 2008
Fundamental: Without B2B Marketing, Your Company is Hobbled.
In a slowing economy, the value of marketing - in terms of return on investment, growing market share, gaining "mind share", bolstering a competitive advantage - comes under close scrutiny. And well it should. With your company's health on the line, the dollars you spend for marketing are precious, and misspending them is a cardinal sin. But in "fat times" and in lean times, billions of promotional dollars are misspent every year in North America. So why do we pull out our magnifying glasses more often during the lean times?
Unfortunately, some CEOs tie their marketing budgets to the rise and fall of sales volume, the success or failure of market growth forecasts, or trade them against fluctuating operational costs. When adversity looms, marketing budgets are often on the "A-list" for cuts. But history shows this can spell disaster.
Remember Moxie? Few do. In fact, unless you're a hard core New Englander, or a fan of business history, you've probably never heard of it.
"Beverage Moxie Nerve Food" - later simplified to "Moxie" - was at one time the world's pre-eminent soft drink. Introduced in carbonated form in 1884, it outsold every other carbonated drink - including Coca-Cola -- until 1920.
What happened? Skyrocketing sugar prices induced the makers of Moxie - along with most of their competitors - to buy large quantities of sugar to protect against future increases. When prices collapsed, they were forced to sell product at a loss. Along with other budgets, marketing was slashed dramatically.
It was a critical mistake. Coca-Cola maintained their marketing efforts and captured market share. Moxie sales decreased dramatically. They never recovered. (1)
An isolated incident? Hardly. In an analysis of 600 industrial companies covering 16 different SIC industries spanning the period 1980 through 1985, McGraw-Hill Research found that B2B firms that maintained or increased marketing expenditures during the 1981-1982 recession averaged significantly higher sales growth than those who trimmed or eliminated marketing budgets (2).
By 1985, sales of the more aggressive marketers had risen 256 percent over those who didn't sustain marketing.
In fact, the Association of Business Publishers (ABP) has found that this trend holds true of all recessions they've studied post-World War II, including 1949, 1954, 1958, 1961, 1970 and 1974-1975.
During a recession or softening economy, not only can marketing aggressively increase market share and sales, it opens a lead on competitors who have dampened marketing activity. While the business environment appears chaotic, aggressive marketing promotes an image of corporate stability. Now is the time to dominate media.
If you've attended to the fundamentals of building a solid business, skipping this fundamental could be costly long-term. Marketing is the lifeline to your company's healthiest of futures.
The philosophy of one industrial marketer in the ABP study sums it up best: "When times are good, you should invest in marketing. When times are bad, you must invest in marketing."
- (1) A short history of Moxie can be found online at sodafountain.com
- (2) "Advertising in a Recession", Association of Business Publishers, New York, 1990.