With any economic downturn every company naturally looks at its outgoings to see where they can make cut backs. Reducing the marketing budget can seem like a quick and easy fix, after all it’s not going to effect sales in the very short term, and can make an instant sizeable saving. Some of the biggest names around including Coca-Cola have reduced budgets in reaction to the current climate. Its surprising that this is the case as history has shown that continuing spending through a recession can reap big rewards when others are pulling back. With less competition the impact per £1 spent will be more effective gaining valuable market share and voice.
Overseas in America and in the UK the likes of Diageo, Kellogg’s and Kleenex have been increasing their marketing expenditures in relation to forecasted sales. The good advice is to keep spending, yes we would say this, but again looking back this can be a wise move in a knee jerk environment. In a downturn consumers think longer and harder about what they expect in order to part with their hard earned money. Brands need to work harder, not pull back, to motivate purchase and build their brand equity. When the bust turns its ugly head back into a boom the brands that have spent smart will be riding high and reaping the rewards – sounds simple right? Okay, it’s not that simple, as many factors determine whether marketing expenditure in a downturn will really reap the rewards. This is when it comes down to the knowledge, insight and understanding of your consumers and the right agency to originate and activate your communications.
The recession can leave consumers tainted and your consumer’s behavior can be very different to what you once knew. With less spending by brands on building equity and consumer’s propensity to question a brands value and consequently their loyalty to it, it can be a real uphill struggle.
Brands such as Kellogg’s have been increasing expenditure with great effects. Even in light of a mild recession in 2001 they continued to spend money and in 2007 spent $1 billion on advertising, a first for them. They increased their price points following increases in higher production (ingredients) costs which many would have advised against in view of the markets. Their second quarter profits were up just over 9% proving that this was a good move. Mark Baynes, Chief Marketing Officer stated, “Brands are much more than flakes in a box. We believe it’s critical, when the economy gets tougher, that people should be seeing the value of our brands constantly.”
Strong spending now feels like a real risk to those holding purse strings but with risk comes potential large rewards. It’s imperative, now more than ever, that a marketing/brand manager has the right ‘real time’ advice and the right agencies in their tool belt.